1031 EXCHANGE INVESTMENT STRATEGIES
Delaware Statutory Trust (DST) Properties
Invest alongside leading institutions in diversified portfolios of properties, tailored to your investment goals, income needs, and 1031 exchange requirements.
What is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust (DST) is a legal entity created under Delaware law as a trust that holds title to 100% of the interest in real property. Investors acquire a beneficial interest in the trust, with limited personal liability for the underlying assets.
DSTs allow multiple investors to own fractional interests in a single property or portfolio of properties, providing access to institutional-quality properties that may otherwise be out of reach. Beneficial interests in DSTs are considered “like-kind” property for purposes of 1031 exchanges.
Jerry Baker and the Baker 1031 Investments team source and vet DST offerings to match your portfolio goals, timelines, and risk tolerance.
What types of properties are DST investments?
DSTs can be structured in two primary ways depending on the sponsor's strategy:
Single-Asset DSTs: These hold one high-value property (e.g., a $50 million Amazon fulfillment center or a large apartment complex). These are straightforward but carry "concentration risk"—if that one tenant leaves or the local market dips, the entire investment is affected.
Multi-Property Portfolios: These bundle several properties into a single trust. For example, a "NNN Grocery Portfolio" might include 10 different Kroger Grocery locations across five states. This structure provides built-in diversification, as the failure of one tenant or location is buffered by the others.
While DSTs are generally "commercial" in nature, they span a wide variety of specific asset classes:
Multifamily: Luxury apartments, student housing, senior living. Stable, recession-resistant demand for housing.
Industrial: Distribution centers, warehouses, "last-mile" logistics. Boosted by e-commerce; often feature long-term leases.
Retail: Grocery-anchored centers, NNN (Triple Net) retail. Focuses on "essential" retail that resists online competition.
Healthcare: Medical office buildings (MOBs), outpatient clinics. Driven by aging demographics, very high tenant retention.
Specialty: Self-storage facilities, data centers. Niche markets with low overhead or high technical barriers.
Key DST Information
DST stands for Delaware Statutory Trust
DSTs qualify for 1031 exchanges
DSTs are fractional shares in large, institutional real estate investments
DSTs can be singular properties or portfolios of properties
DST properties can be located anywhere in the USA and are available in all real estate asset classes.
Explore Benefits of DST Properties
Complete a 1031 Exchange
The primary use for a DST is as "like-kind" replacement property. Because the IRS treats DST interests as direct ownership in real estate, you can sell a traditional property (like a rental home or commercial building) and roll the proceeds into a DST to defer 100% of your capital gains and depreciation recapture taxes.
1031 Exchange into a REIT
Some DSTs are structured with an "UPREIT" option. After holding the DST for a period (typically 2+ years), the sponsor "rolls" the property into a REIT. You exchange your DST interest for REIT shares tax-deferred under Section 721, gaining increased diversification, income, and liquidity.
Estate Planning
DSTs are a favorite for legacy planning. Upon the owner's death, heirs receive a "step-up in basis" to the current market value. This effectively wipes out all the capital gains taxes that were deferred over the decades. Heirs can then choose to sell the DST interest tax-free or continue the 1031 cycle.
Replace 1031 Debt
To fully defer taxes, you must replace the debt you had on your old property. Many DSTs come with pre-packaged, non-recourse debt. If you sold a property with a 40% loan-to-value (LTV), you can simply select a DST with a similar LTV to satisfy the IRS "equal or greater debt" requirement without having to apply for a new bank loan yourself.
1031 Cash-Out Refi
Some DSTs have the capability to use a pre-arranged permanent loan to distribute a portion of the loan proceeds back to the investors as a return of capital. Because this is structured as a return of principal (and the DST is taking on the new loan), the cash investors receive is typically not taxable.
Diversification
Instead of putting all your proceeds into one building, you can split your exchange across multiple DSTs. You could put 25% into Texas Multifamily, 25% into Florida Industrial, and 50% into a National Hospital Portfolio, significantly lowering your risk profile.
Eliminate 1031 "Boot"
If you find a replacement property but still have $50,000 or $100,000 in leftover cash (known as "boot"), that amount is taxable. You can use a DST to "mop up" that remaining balance by investing the exact dollar amount needed into a fractional interest, ensuring a zero-tax exchange.
Passive Investment
For investors tired of "tenants, toilets, and trash," DSTs offer a 100% passive experience. All management, leasing, and maintenance are handled by a professional institutional sponsor.
Explore Available DST Deals
Access available Delaware Statutory Trust (DST) investment opportunities from Baker 1031 Investments.