What Is a Delaware Statutory Trust (DST)? A Plain Guide

A Delaware Statutory Trust (DST) is a legal trust that owns real estate and lets many investors each hold a fractional share of property that a professional firm manages. Under IRS Revenue Ruling 2004-86, DST interests can qualify as replacement property in a 1031 exchange, and in my offering records the median minimum investment is $100,000.

Key takeaways

• A DST is a trust formed under Delaware law that holds one or more properties. Investors buy "beneficial interests," which are shares of the trust, not deeds to the building.
• The IRS said in Revenue Ruling 2004-86 that a properly structured DST is treated as a trust for tax purposes. That is why DST interests can count as like-kind real estate in a 1031 exchange.
• To keep that tax treatment, the trustee must follow strict limits. People in the industry call them the "seven deadly sins." They make DSTs passive and hands-off, but also rigid.
• DSTs can help with the hard parts of a 1031 exchange: the 45-day and 180-day deadlines, and replacing both your equity and your debt.
• DSTs are securities. Most are sold only to accredited investors. They are illiquid, you have little control, distributions are not guaranteed, and you can lose your entire investment.
• In my offering records as of October 2026, 47% of the 76 DST offerings I track use no debt at all, and 58% offer an optional path into a REIT through a 721 exchange.

What is a Delaware Statutory Trust, in plain English?

Picture a large apartment complex worth $80 million. Very few people can buy that alone. A DST lets a few hundred investors pool their money and own it together.

The trust holds the title to the property. Each investor owns a slice of the trust. If you put in 1% of the equity, you own a 1% beneficial interest. You get 1% of the net income and 1% of the sale proceeds when the property sells.

A "beneficial interest" is a legal term. It means you get the benefits of ownership, like income and a share of the sale, without holding the deed yourself. The trust holds the deed for you.

The word "Delaware" comes from the state law that creates these trusts. Delaware's statutory trust law is found in Title 12, Chapter 38 of the Delaware Code. It defines a statutory trust as "an unincorporated association" where trustees hold or manage property for the benefit of the owners. You do not need to live in Delaware to invest. The property can sit in any state.

Delaware law also gives DST investors some protection. Under that same chapter, beneficial owners generally get "the same limitation of personal liability extended to stockholders of private corporations for profit." In plain terms, if the property is sued or the loan goes bad, your personal assets are generally not on the hook beyond what you invested. You can still lose all of the money you put in.

What a DST is not

A DST is not a fund that buys and sells properties over time. Most DSTs buy their property up front and then hold it. A DST is also not a stock you can sell on an exchange. And it is not the same as owning a rental. You will not pick tenants, fix roofs, or approve leases. That is both the appeal and the trade-off.

Why did DSTs become popular for 1031 exchanges?

A 1031 exchange is a tax rule. It lets you sell investment real estate and buy new investment real estate without paying capital gains tax on the sale right away. The tax is deferred, not erased. The rule comes from Section 1031 of the Internal Revenue Code.

The law says no gain is recognized when "real property held for productive use in a trade or business or for investment" is exchanged for like-kind real property held the same way. "Like-kind" means property of the same nature. For real estate, that is broad. You can generally trade a rental house for an apartment building, a warehouse, or a share of a DST.

Before 2004, many investors used tenancy-in-common, or TIC, deals. In a TIC, each investor gets a deed to a fractional share of the property. The IRS set rules for TICs in Revenue Procedure 2002-22. Those rules capped a TIC at 35 co-owners. They also required unanimous approval from all co-owners for big decisions like selling, leasing, or refinancing.

Getting 35 people to agree on anything is hard. Lenders also disliked lending to dozens of separate owners. So the industry looked for a better structure.

In 2004, the IRS issued Revenue Ruling 2004-86. It looked at a DST that held rental property under a loan and a lease. The IRS concluded that the DST "is an investment trust" that "will be classified as a trust for federal tax purposes." It also said investors could exchange real property for interests in that DST under Section 1031, as long as the other rules of the section were met.

That ruling opened the door. A DST has one trustee making decisions. The lender deals with one borrower. And the number of investors is not capped at 35 the way a TIC is under Rev. Proc. 2002-22.

What does Revenue Ruling 2004-86 actually say?

The ruling is short and worth reading. Here are the key points in simple words.

First, the IRS said the DST is a separate entity under Delaware law. But because the trustee's powers are so limited, it is an "investment trust" and not a business. That matters. A business entity would usually be taxed like a partnership, and partnership interests cannot be used in a 1031 exchange.

Second, the IRS said the investors are treated as "grantors" of the trust. A grantor trust is a trust where the owners are treated as owning the assets directly for income tax purposes. The ruling says each investor "is considered to own an undivided fractional interest" in the property. That is why your share of a DST can count as real estate for your 1031 exchange.

Third, the ruling describes a lease where the tenant pays "all taxes, assessments, fees, or other charges," plus "all insurance, maintenance, ordinary repairs, and utilities." That is a net lease. A net lease shifts most of the property's costs to the tenant.

What are the "seven deadly sins" of a DST?

The ruling lists things the trustee may not do. The industry nickname is the "seven deadly sins." That phrase is not IRS language. It is just a handy way to remember the limits. Here they are in plain terms:

1. No new money. Once the offering closes, the trust cannot take in more cash from current or new investors.
2. No new loans or loan changes. The trustee cannot renegotiate the existing loan or borrow new money.
3. No reinvesting sale proceeds. If the trust sells the property, it cannot use the cash to buy something else. It must distribute it.
4. Only limited repairs. The trustee can make normal repairs and minor non-structural changes. It cannot make big structural changes unless the law requires them.
5. Cash must sit in short-term holdings. Between distributions, cash can be held only in short-term U.S. government obligations or bank certificates of deposit that mature before the next distribution date.
6. Cash must be paid out. All available cash, minus reasonable reserves, must be distributed on a regular schedule. In the ruling's facts, that is quarterly.
7. No new or changed leases. The trustee cannot renegotiate the lease or sign new leases, except if the tenant goes bankrupt or becomes insolvent.

The ruling also says the trustee has no power to "vary the investment" of the owners to profit from market changes. Its job is mostly to collect and pass along income.

Why do these limits matter to you?

These limits protect the tax treatment. They also create real risks. If the property needs a new roof, a big new loan, or a new tenant, the trustee's hands are tied.

Sponsors plan for this in two ways. One is the master lease, which I explain below. The other is a "springing LLC" clause. The trust agreement may let the trustee convert the DST into a limited liability company if the property gets into trouble. An LLC can raise money and renegotiate loans. But an LLC interest generally is not real estate for 1031 purposes. So a conversion can limit your ability to do a future 1031 exchange with that investment. Ask your CPA and attorney how a conversion would affect you.

Who runs a DST? The sponsor, trustee, and master tenant

Every DST has a cast of players. Knowing who does what helps you read an offering document.

The sponsor

The sponsor is the real estate company that finds the property, arranges any loan, sets up the trust, and raises the money. The sponsor usually also hires or acts as the asset manager. The sponsor's track record and financial strength matter a great deal. When something goes wrong, the sponsor is the one that has to fix it within the trust's limits.

The trustee

The trustee is the party that holds legal title and acts for the trust. Many DSTs have a Delaware trustee to meet state law, plus a signatory trustee, often affiliated with the sponsor, that handles the actual decisions the trust is allowed to make. The trustee's powers are narrow because of the seven limits above.

The master tenant

Many DSTs, especially apartment and self-storage deals, use a master lease. Here is how it works. The DST leases the whole property to a single company called the master tenant. The master tenant is usually tied to the sponsor. The master tenant then runs the property day to day, signs leases with the actual residents or tenants, and pays rent to the DST.

This setup solves a big problem. The trustee cannot sign new leases. But an apartment complex signs new leases every week. The master tenant can sign them because it is a separate company, not the trust.

The master tenant pays the DST a base rent and sometimes extra rent tied to how well the property does. That rent is what funds your distributions. If the property struggles, the master tenant may not be able to pay full rent. Then your distributions may drop or stop.

The property manager

The property manager handles tenants, repairs, and rent collection on the ground. It may be the sponsor, an affiliate, or a third party. You will not deal with the property manager directly.

The lender

If the DST uses a loan, the lender holds a mortgage on the property. Most DST loans are "non-recourse." That means the lender can take the property if the loan defaults but generally cannot come after the investors personally. Non-recourse loans usually have "carve-outs" for things like fraud, and the sponsor typically signs for those, not you.

The broker-dealer and your advisor

DST interests are securities, so they are sold through registered broker-dealers. In 2005, the regulator now called FINRA issued Notice to Members 05-18. It said fractional real estate interests sold for 1031 exchanges "generally are securities." It told member firms to do real due diligence, not just rely on what the sponsor says, and to weigh suitability, including whether the fees outweigh the tax benefits.

That is the job my team and I take on. Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments is independent of Aurora.

How does a DST fit into a 1031 exchange?

A DST is one kind of replacement property. You still have to follow every rule of a regular 1031 exchange. Here are the pieces that matter most.

The qualified intermediary

A qualified intermediary, or QI, is a company that holds your sale money during the exchange. It is sometimes called an exchange accommodator. Under the Treasury rules in 26 CFR 1.1031(k)-1, the QI signs a written exchange agreement with you, takes the sale proceeds, and uses them to buy your replacement property.

The QI matters because you cannot touch the money. The IRS's like-kind exchange fact sheet warns that taking control of the cash before the exchange is done can disqualify the whole deal. It also says you cannot act as your own facilitator. Neither can your real estate agent, accountant, or attorney, or anyone who served you in those roles in the past two years.

The same fact sheet notes that some intermediaries have gone bankrupt or failed to meet their duties. Choose your QI carefully. Ask how it holds funds and what protections it has.

The 45-day and 180-day deadlines

The clock starts the day you close the sale of your old property, called the relinquished property.

• 45 days: You must identify your replacement properties in writing within 45 days. Section 1031(a)(3)(A) treats property not identified "on or before the day which is 45 days after" the sale as not like-kind.
• 180 days: You must close on the replacement property within 180 days, or by your tax return due date for that year (with extensions) if that comes first.

The IRS fact sheet says these deadlines cannot be extended for hardship, except in presidentially declared disasters. If you miss them, the whole gain can become taxable.

Here is where DSTs can help. A DST has usually already bought its property before it opens to investors. So there is no inspection period, no loan approval for you, and no seller backing out at the last minute. In my practice, once paperwork, funding, and approvals are complete, closing can often take two to three business days. That speed can rescue an exchange when a planned purchase falls through on day 40.

DSTs can also be a backup. Many investors list one or two DSTs on their 45-day identification form alongside a property they hope to buy directly.

The identification rules

The Treasury rules let you identify replacement properties under one of these tests:

• Three-property rule: Up to three properties of any value.
• 200% rule: Any number of properties, as long as their total value does not exceed 200% of what you sold.
• 95% exception: If you go over both limits, you must actually acquire at least 95% of the total value you identified.

Because DST minimums can be low, some investors split their money across several DSTs. That spreads risk across properties, sponsors, and regions. Just be sure your list fits one of these tests.

Replacing both your equity and your debt

To defer all of your tax, you generally need to do two things:

1. Reinvest all of your net cash from the sale.
2. Buy replacement property worth at least as much as what you sold, net of selling costs. That usually means replacing the debt you paid off, too.

Cash you keep is called "boot." Debt you do not replace can also be treated like boot. The IRS fact sheet explains that receiving cash, relief from debt, or property that is not like-kind can trigger taxable gain in the year of the exchange.

DSTs can help with debt. If a DST has a loan, your share of that loan counts toward your replacement debt. This is one reason some investors pick a leveraged DST. You do not have to qualify for the loan yourself. Others choose all-cash DSTs to avoid debt risk. It depends on your numbers and your comfort with risk.

A worked example: replacing equity and debt

This is a hypothetical example with simple numbers. It is not tax advice. Your CPA should run your real numbers.

Say you sell a rental building for $1,000,000. You pay $40,000 in selling costs. You also pay off a $400,000 mortgage.

• Net sale price: $1,000,000 − $40,000 = $960,000
• Cash to your QI: $960,000 − $400,000 = $560,000

To defer all of your gain, you generally need replacement property worth at least $960,000, and you need to reinvest all $560,000 of cash. That means you need about $400,000 of new debt, or extra cash from your own pocket, to fill the gap.

Now look at three plans.

Plan A: All-cash DST only. You put all $560,000 into a DST with no loan. Your replacement value is $560,000. That is $400,000 short of $960,000. You did not replace your debt. Unless you add $400,000 of outside cash, that shortfall could be taxable.

Plan B: One DST with 50% loan-to-value. Loan-to-value, or LTV, is the loan amount divided by the property value. At 50% LTV, every $1 of your equity buys $2 of property. You invest $560,000. Your share of the property is $1,120,000 and your share of the loan is $560,000. Both numbers beat what you need. Full deferral may be possible.

Plan C: A mix. You put $300,000 in a 50% LTV DST and $260,000 in an all-cash DST.

In Plan C you replaced all your cash, but your total value is $860,000. That is $100,000 short of $960,000. That $100,000 could be taxable unless you adjust the mix.

The lesson: in a DST exchange, look at both the equity and the debt. I build these mixes with clients all the time, and I always have their CPA check the math before we commit.

How do income and depreciation flow to DST investors?

Because a DST is a grantor trust, you report your share of its income and expenses on your own tax return. It is close to how you would report a rental you own directly. Many investors report their DST on Schedule E, but ask your CPA how it applies to you.

Income

The property collects rent. The trust, or the master tenant in a master lease structure, pays operating costs and any loan payments. What is left, minus reserves, gets distributed to investors. Distributions are often paid monthly, though the schedule depends on the offering.

Here is a hypothetical. Say you invest $500,000 in a DST that projects a 5% year-one distribution rate. That works out to $25,000 for the year, or about $2,083 a month. That is a projection, not a promise. Actual distributions can be lower, can change, or can stop entirely.

Depreciation

Depreciation is a tax deduction for the wear and tear on a building. It lets owners deduct part of the building's cost each year, even though they did not spend that cash that year. As a DST owner, you generally get your share of the property's depreciation.

Depreciation can offset some or all of the taxable income from your distributions. Say your share of rental income is $25,000 and your share of depreciation and interest is $15,000. You might report about $10,000 of taxable income instead of $25,000. That is just an illustration. The real numbers depend on the property, the loan, and how your basis carried over from your old property.

In a 1031 exchange, your tax basis generally carries over from your old property. That affects how much depreciation you can take. Some sponsors provide cost segregation studies, which can speed up depreciation on certain building parts. These are complex topics. Your CPA should handle them.

Reporting the exchange

You report a 1031 exchange on IRS Form 8824. The IRS says the form is used to report "each exchange of business or investment property for property of a like kind." IRS Publication 544 also covers like-kind exchanges and the qualified intermediary safe harbor.

A California note

Many of my clients live in California. If you exchange California property for property in another state, including a DST that owns property elsewhere, California's Franchise Tax Board requires Form FTB 3840. The FTB says it "must be filed for the taxable year of the exchange and for each subsequent taxable year" until the deferred California gain is recognized. Keep that on your CPA's checklist every year.

How do you invest in a DST, step by step?

Here is how the process usually works with my team and me.

Step 1: Start early, ideally before you sell

Plan before your sale closes if you can. Talk to your CPA about your gain, your debt, and your goals. Line up a qualified intermediary. Your QI must be in place before the sale closes.

Step 2: Confirm you qualify

Most DSTs are private placements under Regulation D, and most accept only accredited investors. Under the SEC's accredited investor rules, an individual generally qualifies with:

• Income above $200,000 in each of the past two years ($300,000 with a spouse or spousal equivalent), and an expectation of the same this year, or
• Net worth above $1 million, alone or with a spouse or spousal equivalent, not counting your primary home, or
• Certain professional licenses held in good standing, such as the Series 7, 65, or 82.

Step 3: Have an introductory call

On our first call, I want to understand your situation. How much equity and debt are you replacing? Do you want monthly income, growth, or both? How long can you hold? How do you feel about debt? Are you planning for your heirs? This conversation shapes everything after it.

Step 4: Review opportunities together

Next, we look at the offerings I currently have available together. I tell you why I am considering each one, what I like about it, and where I have reservations. I would rather you hear the concerns from me than discover them later. You also get the private placement memorandum, or PPM. That is the legal document that describes the deal, the fees, and the risks. Read the risk section closely.

Step 5: Identify your properties within 45 days

You send your written identification to your QI by day 45. We make sure your list fits the three-property rule, the 200% rule, or the 95% exception.

Step 6: Subscribe and close

You sign the subscription documents. My team coordinates the paperwork with the sponsor and your QI. The QI wires the funds directly to the DST. Because the property is already owned, closing can often take two to three business days once paperwork, funding, and approvals are complete.

Step 7: Hold, monitor, and plan your exit

After closing, you receive distributions and regular reports. You file Form 8824 for the year of the exchange. Our due diligence does not stop at closing. It is continuous. And we start thinking about the exit long before the sponsor sells.

What are the fees and costs in a DST?

DSTs cost money to put together and run. Fees vary a lot from one offering to the next, so I will describe them in general terms. Every fee is disclosed in the PPM.

Upfront costs

These are paid out of the money investors put in. They can include:

• Selling commissions paid to the broker-dealer and its representatives.
• Offering and organization costs for legal, accounting, and marketing work.
• Acquisition fees paid to the sponsor for finding and buying the property.
• Financing fees if the DST has a loan.
• Reserves set aside for future repairs or vacancies.

Upfront costs mean that not every dollar you invest goes into the property itself. One simple way to see this is to compare what the sponsor paid for the property with the total amount investors put in, plus any loan. The gap is mostly fees, costs, and reserves.

Ongoing costs

• Asset management fees paid to the sponsor each year.
• Property management fees, usually a percentage of rent collected.
• Trustee and administrative costs.

In a master lease structure, the master tenant may keep income above the base rent and any bonus rent. That is another form of compensation to the sponsor.

Costs at the end

• Disposition fees paid to the sponsor when the property sells.
• Profit splits, sometimes called a "promote," where the sponsor gets a share of profits above a certain return to investors.

Why fees matter so much

Fees reduce the money that compounds for you. FINRA's 2005 guidance told firms to consider whether fees outweigh the tax benefits. I agree. A DST with high fees has to perform better just to break even. When I review an offering, I look at the total fee load, not just the headline distribution rate.

How do you get out of a DST? Liquidity and exit

This is the part many investors underestimate. A DST is meant to be held until the property sells. You generally cannot cash out early on your own schedule.

The planned exit: the property sells

The sponsor decides when to sell. Most DSTs project a hold of several years. The sale timing depends on the market, the loan, and the sponsor's judgment. When the property sells, you get your share of the net proceeds.

At that point you have choices:

1. Do another 1031 exchange. You can roll your share into another DST or a property you buy directly. Many investors repeat this over the years.
2. Take the cash and pay the tax. The deferred gain and any depreciation recapture generally come due.
3. Hold until death. Under current law, heirs may receive a "step-up" in basis, which can reduce or eliminate the deferred gain for them. Tax laws can change. Talk with your estate attorney and CPA.

The 721 exchange option

Some DSTs plan to exit through a 721 exchange, also called an UPREIT. Here, the DST's property is contributed to a real estate investment trust's operating partnership. In return, investors get operating partnership units, or OP units.

Section 721 of the tax code says "No gain or loss shall be recognized" when property is contributed to a partnership in exchange for an interest in it. So the contribution itself is generally tax-deferred.

There are trade-offs. OP units are not real estate. Once you are in, you generally cannot do another 1031 exchange with them. If you later convert OP units to REIT shares or cash, that is generally a taxable event. Some DSTs make the 721 exit optional. Others make it mandatory. Read this part of the PPM closely, because it decides your future options.

Selling early

There is no public market for DST interests. The SEC's bulletin on private placements says most private placement securities are restricted and hard to resell, and investors "should be prepared to hold the investment indefinitely." Some sponsors may help find a buyer in a hardship, but usually at a discount, and there is no promise they can.

What are the risks of investing in a DST?

I believe every investor should understand the risks before the benefits. Here are the main ones.

You can lose money

Real estate values go down as well as up. A tenant can leave. Rents can fall. Expenses can rise. If the property loses value, you can lose some or all of your investment.

Distributions are not guaranteed

A projected distribution rate is just that, a projection. Distributions can be cut or stopped. Some offerings may pay part of distributions from reserves rather than property income. Ask where the money comes from.

Illiquidity

You generally cannot sell when you want. Plan to hold for the full term, and possibly longer if the sponsor delays a sale.

Limited control

You have no vote on day-to-day decisions. You cannot fire the property manager. You cannot force a sale. You rely entirely on the sponsor.

Rigid structure

The seven limits mean the trust cannot raise new money, refinance, or make big changes. If the property needs a major fix, the options are limited. A springing LLC conversion may help the property but can affect your future 1031 options.

Debt risk

Leverage helps when values rise and hurts when they fall. If a loan comes due when values are down or rates are high, the sponsor may struggle to refinance or sell. A property with high LTV has a thinner cushion.

Concentration risk

If you put all your exchange money into one DST, your outcome rides on one property, one market, and one sponsor. FINRA's 2005 guidance specifically told firms to weigh "the risks of over-concentration" against tax benefits.

Sponsor risk

The sponsor's skill, honesty, and financial health matter. A weak sponsor can hurt a good property. Look at how the sponsor's past programs have done, especially in hard markets.

Tax risk

If an offering is not set up correctly, or tax laws change, the deferral could be challenged. Your own exchange can also fail if you miss a deadline or receive boot.

Fraud risk

The SEC's bulletin warns that fraudsters use unregistered offerings, and that a Form D filing "does not mean" SEC approval. Work with a registered representative and check them on FINRA BrokerCheck.

DST vs. TIC vs. direct ownership vs. REIT

Here is how a DST compares with the other common choices. These are general features. Every deal is different.

A few notes on the REIT column. Investor.gov explains that non-traded REITs "are illiquid investments" and may carry upfront fees that often total about 9 to 10 percent. Publicly traded REITs trade on an exchange and are much easier to sell. Neither can be the direct target of a 1031 exchange. A 721 exchange is the path some DSTs use to move into a REIT later.

Who is a DST a good fit for, and who should avoid one?

DSTs may fit you if:

• You are tired of being a landlord. You want to keep owning real estate without tenants, toilets, and late-night calls.
• You need a 1031 replacement fast. Your deal fell through, or your 45-day window is closing.
• You need to replace debt but do not want a personal loan. A leveraged DST's non-recourse loan can help.
• You want to split your money. You want to spread your exchange across several properties, regions, or property types.
• You are planning your estate. DST interests can be easier to divide among heirs than a single building. Talk with your attorney about this.
• You are an accredited investor who can hold for years and can afford to lose the investment.

DSTs may not fit you if:

• You might need the money soon. DSTs are illiquid.
• You want control. If you like making decisions, a DST will frustrate you.
• You have a small gain. If your tax bill would be small, the fees may outweigh the deferral benefit.
• You want to add value. If you enjoy renovating and raising rents, direct ownership fits better.
• You are not accredited. Most DSTs are not open to you.
• You cannot handle a loss. If losing this money would hurt your life, do not invest it in a DST.

Mistakes to avoid with DSTs

I have seen investors make these mistakes. Most are easy to avoid with a little planning.

1. Waiting until day 44. Late planning leads to rushed choices. Start before your sale closes.
2. Chasing the highest distribution rate. A high projected rate can mean more risk, more debt, or a weaker tenant. Ask why the rate is high.
3. Ignoring the debt you need to replace. As the worked example shows, an all-cash DST alone may leave you short. Run both equity and debt numbers.
4. Not reading the PPM. The fees, risks, and exit terms are all in there. Read the risk factors at least twice.
5. Overlooking the exit plan. Know whether a 721 exit is optional, mandatory, or not offered. It shapes your future choices.
6. Putting everything in one deal. Consider spreading your money across properties and sponsors, within the identification rules.
7. Touching the money. If sale cash comes to you, the exchange can fail. Let the QI hold it.
8. Skipping your CPA and attorney. A DST is a tax decision and a legal decision as much as an investment one.
9. Forgetting state rules. California's FTB 3840 is an annual filing for out-of-state exchanges. Other states have their own rules.
10. Picking a sponsor on marketing alone. Look at full-cycle results, meaning programs that have actually sold, not just projections. My guide to choosing a DST covers what else to check.

How I review a DST before I show it to you

My background is in applied mathematics and applied statistics, which I studied at Babson College. I spent years in real estate acquisitions, management, and development at firms including ValueRock Realty Partners, Faris Lee Investments, Westport Capital Partners, and Arbor Bay Capital Partners. I have been involved in more than $10 billion of real estate investment activity. That experience shapes how I look at DSTs.

My due diligence covers five areas, and I partner with outside auditors in each:

1. Broker-dealer review. We look at how the offering has been vetted through the securities side.
2. Investment manager audit. We study the sponsor's track record, team, and financial strength.
3. Investment offering review. We read the PPM, fee structure, and legal terms.
4. Real estate assessment. We look at the property, the market, the tenants, and the physical condition.
5. Institutional underwriting. We stress-test the numbers the way an institutional buyer would.

This review is continuous, not a one-time check. I offer DSTs from more than 20 institutional sponsors, and I track more than 1,100 full-cycle 1031 DST investments for performance. Full-cycle means the property has been bought, held, and sold, so we can see what really happened, not just what was projected.

What my data shows

Numbers help cut through the noise. Here is what my offering records as of October 2026 show. The set includes 76 DST offerings from 38 sponsors. These figures describe the offerings I track. They are not a forecast or a promise about any future offering.

Nearly half of DSTs use no debt

The most useful number for many investors is this one: 36 of 76 offerings (47%) are all-cash, with no loan at all. Another 16 offerings (21%) have loan-to-value above 50%. Among the offerings that do use debt, the median LTV is about 49%.

That spread matters for your exchange. If you need to replace debt, you may lean toward leveraged DSTs. If you want to avoid loan risk, you have plenty of all-cash options. Many investors blend the two, as in the worked example above.

Minimums are lower than many people expect

Lower minimums make it easier to split an exchange across several DSTs.

Property types

Some net lease offerings on the platform are energy royalty programs. These hold mineral and royalty interests in oil and gas. For example, one portfolio holds 14 royalty properties with 27 producing wells in Oklahoma's Anadarko Basin and Texas's Permian Basin. Another holds about 1,277 net royalty acres with interests in more than 200 producing wells, roughly 90% natural gas, in the Permian Basin and the Haynesville Shale. Third-party operators run the wells. The owner receives a share of production revenue and does not pay drilling or operating costs. Royalty income rises and falls with energy prices and production, so these carry their own risks.

Projected distributions

Among the 71 offerings that published a projected year-one distribution rate, the median was 4.7%. The range ran from 4.0% to 9.0%. Remember, these are projections. They are not guaranteed, and actual results can differ a lot.

Exit paths

More than half of the offerings give investors a choice to move into a REIT. About one in six makes that move mandatory. If you want to keep doing 1031 exchanges for life, a mandatory 721 exit may not suit you.

Hold periods, size, and location

A projected hold of 10 years is the most common, at 31 offerings. Others project 5 to 10 years or 7 years, and a few are 2-year programs. The median offering raises about $65 million of total capitalization. The properties sit in 33 states. The most common are Florida (14), Texas (13), North Carolina (8), and Georgia (7).

Where the offerings stand

I include the five I passed on for a reason. Saying no is part of the job. Not every offering that reaches my desk meets my standards.

Frequently asked questions

Is a DST a good way to do a 1031 exchange?

It can be, depending on your goals. DST interests can qualify as like-kind replacement property under Revenue Ruling 2004-86, and they can close quickly. But they are illiquid, carry fees, and give you little control, so talk with your CPA and advisor first.

How much money do I need to invest in a DST?

Minimums vary by offering. In my offering records as of October 2026, the median minimum is $100,000, and 28% of offerings start at $25,000. Most DSTs also require you to be an accredited investor.

Do I have to be an accredited investor to buy a DST?

Most DSTs are sold only to accredited investors. For individuals, that generally means income above $200,000 ($300,000 joint) for the past two years, or net worth above $1 million not counting your home. Certain licenses, like the Series 7, 65, or 82, can also qualify you.

Can I lose money in a DST?

Yes. Property values can fall, tenants can leave, and loans can cause trouble. You can lose some or all of your investment, and distributions can be reduced or stopped.

How long do I have to hold a DST?

Usually until the sponsor sells the property. In my records, a projected 10-year hold is the most common, but some are 5 to 7 years and a few are shorter. Actual hold periods can run longer than projected.

Can I sell my DST interest early?

Generally not easily. There is no public market, and the SEC warns private placement investors to be ready to hold indefinitely. A sponsor may help in a hardship, but often at a discount.

Do I get depreciation from a DST?

Generally yes. Because a DST is a grantor trust, you are treated as owning a share of the property, so you usually get your share of depreciation. Your CPA will figure the amount based on your carried-over basis.

What happens when the DST property sells?

You receive your share of the net proceeds. You can then do another 1031 exchange, take the cash and pay the tax, or, if the DST offers it, move into a REIT through a 721 exchange.

What is a 721 exchange, and should I want one?

A 721 exchange moves the DST's property into a REIT's operating partnership in return for OP units, generally without current tax. The catch is that you usually cannot do another 1031 exchange after that. Whether you want one depends on your long-term plans.

What is the difference between a DST and a TIC?

In a TIC, you get a deed to a fractional share, co-owners are capped at 35, and major decisions need a unanimous vote. In a DST, you own a share of a trust, a trustee makes the limited decisions allowed, and the 35-person cap does not apply.

Can a DST help me replace the debt from my old property?

Yes, if it uses a loan. Your share of a DST's loan generally counts toward the debt you need to replace. You do not have to qualify for the loan yourself, but debt adds risk.

Do I pay taxes on DST income?

Yes, in most cases. A 1031 exchange defers tax on your gain; it does not erase it. Distributions are generally taxable, though depreciation may offset part of them, and the deferred gain generally comes due when you finally sell for cash. Confirm the details with your CPA.

This article is for education only. It is not tax, legal, or investment advice. Please confirm every decision with your CPA, attorney, and qualified intermediary. DST interests are offered only by private placement memorandum to qualified investors.

Sources

• IRS Revenue Ruling 2004-86
• IRS Revenue Procedure 2002-22
• 26 U.S.C. § 1031, Cornell Law School Legal Information Institute
• 26 U.S.C. § 721, Cornell Law School Legal Information Institute
• 26 CFR § 1.1031(k)-1, Treatment of deferred exchanges
• IRS Fact Sheet FS-2008-18, Like-Kind Exchanges Under IRC Code Section 1031
• IRS, About Form 8824, Like-Kind Exchanges
• IRS Publication 544, Sales and Other Dispositions of Assets
• Delaware Code, Title 12, Chapter 38, Subchapter I (Domestic Statutory Trusts)
• FINRA (NASD) Notice to Members 05-18
• Investor.gov, Updated Investor Bulletin: Accredited Investors
• Investor.gov, Private Placements under Regulation D, Updated Investor Bulletin
• Investor.gov, Real Estate Investment Trusts (REITs)
• California Franchise Tax Board, 2025 Instructions for Form FTB 3840