Delaware Statutory Trusts (DSTs) have become a popular tool for 1031 investors who want passive replacement real estate — but their popularity has also bred persistent myths that can lead investors astray. Some believe a DST's distributions are guaranteed income; others assume they can sell whenever they like, that DSTs are reserved for the ultra-wealthy, or that one sponsor is as good as another. Each of these beliefs is false, and acting on them can lead to disappointment or poor decisions. The truth is more nuanced: DST distributions are projections that depend on performance, DSTs are illiquid and generally held to full cycle, accreditation (which many real estate owners meet) is required but is not the same as being ultra-wealthy, and sponsors vary enormously in quality. This guide debunks four common myths — guaranteed income, sell anytime, only for the wealthy, and all sponsors are the same — and closes with the reality investors should know. DST interests are securities offered through a broker-dealer to accredited investors after a suitability review; Baker 1031 does not provide tax or legal advice — verify the current rules with your tax advisor, and treat distributions as projections, not guarantees.
Myth: DSTs Are Guaranteed Income
Perhaps the most common and most dangerous myth is that a DST provides guaranteed income. It does not. The distributions a DST pays are projections based on the property's expected net rental income, not promises — and they can be reduced or suspended if the property underperforms. A DST is a real estate investment, not a fixed-income product like a bond or a CD, so its income depends entirely on how the underlying property performs over the hold.
Many things can cause actual distributions to fall short of the projection: a tenant might default or vacate, occupancy might drop, operating expenses might rise, or debt service might increase on a floating-rate loan. Any of these can squeeze the cash flow available to distribute. The projected distribution shown in an offering — sometimes presented as an attractive annual yield — is an estimate the sponsor believes is reasonable, but it carries no guarantee, and the offering documents (the PPM) say so explicitly in the risk factors. Investors who treat a DST like a bond, counting on a fixed payment, are setting themselves up for disappointment if the property hits a rough patch. The income is real but variable, and it sits behind real estate risk.
So the reality is that DST distributions are projections that depend on the property's performance, not guaranteed income — a DST is a real estate investment, not a fixed-income product. The first myth — that DSTs are guaranteed income — is false: distributions are projections based on expected net rental income, and they can be reduced or suspended if a tenant defaults, occupancy falls, expenses rise, or debt costs increase, because a DST is a real estate investment subject to real estate risk, not a bond-like fixed payment. The PPM's risk factors say so explicitly. Understanding that DST income is real but variable, and not assured, is the first correction every investor needs, and it sets the pattern for the myths that follow.
A DST is real estate, not a bond — the headline yield is a projection the sponsor believes is reasonable, not a payment anyone has promised to make.
Myth: You Can Sell Anytime
A second widespread myth is that you can sell a DST interest whenever you want. You generally cannot. DSTs are illiquid: there is no meaningful secondary market for DST interests, so once you invest, you can't simply list your interest and sell it on demand the way you'd sell a stock. Instead, you're typically committed until the sponsor sells the underlying property at full cycle, which commonly happens after five to seven or more years.
This illiquidity is a fundamental feature of the structure, not a temporary inconvenience. While a limited, informal market sometimes exists for reselling DST interests, it's thin and unreliable — you may not find a buyer, and if you do, it may be at a meaningful discount to value. So you should never invest in a DST with capital you might need during the hold, and you shouldn't assume an early exit will be available. Investors who believe they can get out anytime are often surprised to learn, after the fact, that their capital is effectively locked up until the property sells. The illiquidity is the trade-off for the passive, packaged structure, and it's disclosed plainly in the offering documents — it should be taken seriously when deciding how much to invest and from what funds.
So the reality is that DSTs are illiquid and generally held to full cycle (often five to seven-plus years), with no real secondary market — you can't reliably sell anytime. The second myth — that you can sell a DST anytime — is false: there's no meaningful secondary market, so you're generally committed until the sponsor sells at full cycle, and any informal resale market is thin and may require a steep discount. Illiquidity is a defining feature, not a temporary inconvenience. So DST capital should be money you won't need during the hold. Recognizing that a DST is a multi-year, illiquid commitment, not a liquid holding you can exit at will, is the second essential correction, and it directly shapes how much, and from what funds, you should invest.
Myth: DSTs Are Only for the Wealthy
A third myth is that DSTs are exclusive products reserved for the ultra-wealthy. This is misleading. It's true that DST interests are securities offered under Regulation D to accredited investors, so there is a financial threshold — but accreditation is not the same as being ultra-wealthy, and many ordinary real estate owners meet it. The accredited-investor standard is generally income over $200,000 individually (or $300,000 jointly) in each of the last two years, or net worth over $1 million excluding your primary residence.
That net-worth test, in particular, is met by a broad range of people — including many long-time real estate owners. An investor who bought a rental property years ago and has built up substantial equity through appreciation and paydown may easily exceed $1 million in net worth excluding their home, qualifying as accredited even if they don't consider themselves wealthy in the everyday sense. DSTs also have relatively low minimums — often around $25,000 to $100,000 — which is far from the multimillion-dollar entry some people imagine. So while DSTs aren't open to absolutely everyone, the idea that they're only for the ultra-rich misrepresents who actually invests in them: they're commonly used by everyday property owners completing a 1031 exchange, not just by the wealthy elite.
So the reality is that DSTs require accredited status, which many real estate owners with substantial equity meet — they aren't only for the ultra-wealthy. The third myth — that DSTs are only for the wealthy — is false: DST interests are limited to accredited investors (income over $200,000 individually or $300,000 jointly, or net worth over $1 million excluding the home), but that standard, especially the net-worth test, is met by many ordinary real estate owners who've built up equity, and DSTs' low minimums (often $25,000 to $100,000) keep entry accessible. So accreditation is a real but broadly met requirement, not a marker of being ultra-rich. Understanding that DSTs serve everyday accredited property owners, not just the wealthy elite, corrects a misconception that needlessly discourages eligible investors.
- Myth: DSTs are guaranteed income — false. Distributions are projections that depend on property performance and can be reduced or suspended.
- Myth: You can sell anytime — false. DSTs are illiquid, with no real secondary market, generally held to full cycle (five to seven-plus years).
- Myth: DSTs are only for the wealthy — false. They require accredited status, which many real estate owners with substantial equity meet.
- Myth: All sponsors are the same — false. Sponsors vary widely in track record, fees, and quality, so due diligence is essential.
Myth: All Sponsors Are the Same
A fourth myth, and a costly one, is that all DST sponsors are essentially the same — that one offering is as good as another. This is false, and believing it can lead to poor outcomes. Sponsors vary enormously in track record, financial strength, full-cycle history, fees, and transparency, and because a DST is passive and the sponsor controls every decision, the sponsor's quality is one of the biggest determinants of how your investment performs.
Consider the range: some sponsors have decades of experience, have managed billions in assets across multiple market cycles, and have a long record of full-cycle DSTs that performed in line with or close to their projections. Others are newer, more thinly capitalized, or have only launched offerings during favorable markets, with little or no full-cycle history to evaluate. Fees differ from one sponsor to the next, as does the conservatism of their underwriting, the quality of the properties they acquire, and how transparently they communicate. A strong sponsor is better able to support a property through a soft patch, fund reserves, and avoid forced decisions; a weak one may overpay, over-leverage, or manage poorly. So treating all sponsors as interchangeable ignores the single factor that diligence is most able to assess — and most able to protect you on.
So the reality is that sponsors vary widely in track record, fees, and quality, so due diligence matters — they are emphatically not all the same. The fourth myth — that all sponsors are the same — is false: sponsors differ enormously in track record, financial strength, full-cycle history, fees, underwriting conservatism, property quality, and transparency, and because the sponsor controls every decision in a passive DST, that quality heavily drives outcomes. A strong sponsor weathers trouble; a weak one can sink a deal. So vetting the sponsor is the most important due diligence step. Recognizing that sponsor quality varies widely, and that diligence can assess it, is the fourth correction — and the one most directly within an investor's power to act on before committing capital.
In a passive investment where the sponsor makes every decision, treating all sponsors as interchangeable throws away the single factor your due diligence can most effectively assess.
A Few More Myths to Avoid
Beyond the big four, a few other misconceptions are worth correcting. One is that a DST issues a complicated K-1 like a partnership — in fact, because a DST is a grantor trust, you receive a simpler substitute 1099 and grantor-trust statement, reporting your share of the property's income and depreciation much as you would for property you owned outright. Another is that a DST is the same as a REIT; it isn't — a DST interest is 1031-eligible like-kind real property, while a REIT share is a security that is not 1031-eligible, a distinction that matters enormously for tax deferral.
A third lingering myth is that DSTs are risk-free or low-risk because they're passive and professionally managed. Passivity is not the same as safety: a DST carries the same market, tenant, and financing risks as any real estate, plus illiquidity, sponsor risk, and fees, and you can lose principal. A fourth is that you can keep deferring forever with no consequences — while you can chain exchanges (including DST to DST, or DST into a REIT via a 721 exchange) to keep deferring, and a step-up in basis at death can ultimately eliminate the deferred gain for heirs, the rules are technical and require careful planning with your tax advisor. Clearing away these smaller myths, alongside the big four, leaves a realistic picture of what a DST is and isn't.
So a few more myths to avoid include the K-1 confusion, conflating DSTs with REITs, assuming passivity means safety, and misunderstanding deferral — each correctable with the facts. More myths to avoid — that a DST issues a K-1 (it issues a 1099 as a grantor trust), that a DST is the same as a REIT (a DST is 1031-eligible real property while a REIT share is not), that passivity means safety (a DST carries full real estate risk plus illiquidity, sponsor risk, and fees, and can lose principal), and that deferral is consequence-free (chaining exchanges and the step-up are real but technical) — round out the corrections. Clearing these, with the big four, leaves an accurate picture. Avoiding these additional myths completes the realistic understanding a 1031 investor needs before considering a DST.
The Reality Investors Should Know
Stripping away the myths leaves a clear and balanced reality. A DST is a passive, illiquid, fractional real estate investment that can be an excellent fit for the right 1031 investor — but it is a real estate investment, with real risk, not a guaranteed or liquid product. Its distributions are projections that depend on performance; its capital is committed until full cycle; it requires accredited status that many property owners meet; and its outcome depends heavily on a sponsor whose quality varies widely and must be diligenced. None of these realities makes a DST bad — they simply describe what it actually is, so you can decide with clear eyes.
The practical implication is that informed investors approach DSTs realistically: they treat projected distributions as estimates, not promises; they invest only capital they can leave committed for years; they confirm their accredited status and let a suitability review test the fit; and they do real due diligence on the sponsor, property, debt, and fees rather than assuming offerings are interchangeable or risk-free. Approached this way, a DST can deliver exactly what many 1031 investors want — passive, diversified, tax-deferred real estate — without the disappointment that comes from acting on myths. The goal isn't to be discouraged by the realities but to understand them, so a DST that fits your goals and situation can do its job.
So the reality is that a DST is a passive, illiquid, accredited-only, sponsor-dependent real estate investment with projected (not guaranteed) income — genuinely useful for the right investor who approaches it informed. The reality investors should know — that a DST is passive, illiquid, accredited-only, and sponsor-dependent, with distributions that are projections rather than guarantees and real estate risk that diligence reduces but never eliminates, yet can be an excellent fit for the right 1031 investor who treats projections as estimates, commits only capital they can leave invested, confirms suitability, and does genuine due diligence — replaces the myths with an accurate, balanced picture. Understood this way, a DST is neither a guaranteed windfall nor a trap. The reality, clearly grasped, is what lets a suitable investor use a DST well.
How Baker 1031 Helps You Separate DST Myth From Reality
Baker 1031 Investments helps investors separate DST myth from reality — that distributions are projections rather than guaranteed income, that DSTs are illiquid rather than sellable anytime, that they require accredited status (which many property owners meet) rather than being only for the wealthy, and that sponsors vary widely rather than being all the same — so you can make informed decisions with clear eyes.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review of your financial situation, goals, liquidity needs, and risk tolerance. We give you the facts, not a sales pitch: we explain that projected distributions are estimates that depend on performance and can be reduced or suspended, that a DST is illiquid and generally held to full cycle, that accreditation is a real but broadly met requirement, and that sponsor quality varies widely and must be diligenced — and we help you do that diligence on the sponsor, property, debt, and fees. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific tax situation, including how deferral, the step-up, and reporting (a 1099, not a K-1) apply to you. We're candid that a DST carries full real estate risk plus illiquidity, sponsor, and fee risk, and that it's right for some investors and wrong for others — neither yields nor returns are promised, and past performance doesn't guarantee future results. Our role is to replace myths with reality so you can invest, if at all, fully informed.
Frequently Asked Questions
Are DST distributions guaranteed?
No — this is one of the most common and most dangerous DST myths. DST distributions are projections based on the property's expected net rental income, not guarantees, and they can be reduced or suspended if the property underperforms. A DST is a real estate investment, not a fixed-income product like a bond or CD, so its income depends entirely on how the underlying property performs over the hold. Many things can cause actual distributions to fall short of the projection: a tenant might default or vacate, occupancy might drop, operating expenses might rise, or debt service might increase on a floating-rate loan. The projected distribution shown in an offering — sometimes presented as an attractive annual yield — is an estimate the sponsor believes is reasonable, but it carries no guarantee, and the PPM's risk factors say so explicitly. So investors who treat a DST like a bond, counting on a fixed payment, are setting themselves up for disappointment. The income is real but variable, and it sits behind genuine real estate risk.
Can I sell a DST interest whenever I want?
No — you generally cannot sell a DST interest on demand, and believing you can is a common myth. DSTs are illiquid: there's no meaningful secondary market for DST interests, so you can't simply list your interest and sell it the way you'd sell a stock. Instead, you're typically committed until the sponsor sells the underlying property at full cycle, which commonly happens after five to seven or more years. While a limited, informal resale market sometimes exists, it's thin and unreliable — you may not find a buyer, and if you do, it may be at a meaningful discount to value. This illiquidity is a fundamental feature of the structure, not a temporary inconvenience, and it's disclosed plainly in the offering documents. So you should never invest in a DST with capital you might need during the hold, and you shouldn't assume an early exit will be available. Recognizing that a DST is a multi-year, illiquid commitment is essential to deciding how much, and from what funds, to invest.
Are DSTs only for wealthy investors?
No — this is a misleading myth. It's true that DST interests are securities offered under Regulation D to accredited investors, so there is a financial threshold, but accreditation is not the same as being ultra-wealthy, and many ordinary real estate owners meet it. The accredited-investor standard is generally income over $200,000 individually (or $300,000 jointly) in each of the last two years, or net worth over $1 million excluding your primary residence. That net-worth test, in particular, is met by a broad range of people — including many long-time property owners who've built up substantial equity through appreciation and loan paydown, and who may not consider themselves wealthy in the everyday sense. DSTs also have relatively low minimums, often around $25,000 to $100,000, far from the multimillion-dollar entry some imagine. So while DSTs aren't open to absolutely everyone, the idea that they're only for the ultra-rich misrepresents who actually invests in them — they're commonly used by everyday property owners completing a 1031 exchange.
Are all DST sponsors the same?
No — treating all DST sponsors as interchangeable is a costly myth. Sponsors vary enormously in track record, financial strength, full-cycle history, fees, underwriting conservatism, property quality, and transparency, and because a DST is passive and the sponsor controls every decision, the sponsor's quality is one of the biggest determinants of how your investment performs. Some sponsors have decades of experience, have managed billions across multiple market cycles, and have a long record of full-cycle DSTs that performed in line with projections. Others are newer, more thinly capitalized, or have only launched offerings in favorable markets, with little full-cycle history to evaluate. A strong sponsor is better able to support a property through a soft patch, fund reserves, and avoid forced decisions; a weak one may overpay, over-leverage, or manage poorly. So vetting the sponsor's track record and full-cycle history is the most important due diligence step. Recognizing that sponsor quality varies widely — and that diligence can assess it — is one of the most actionable corrections an investor can make.
Does a DST issue a K-1?
No — a DST generally issues a substitute Form 1099 and a grantor-trust statement, not a Schedule K-1, and the belief that it issues a complicated K-1 is a common misconception. This is because a DST is structured as a grantor trust for tax purposes, which means each beneficial owner is treated as owning a direct, proportionate share of the underlying real estate and its income — so you report your share of the trust's rental income, expenses, and depreciation directly, much as you would for property you owned outright. By contrast, a partnership issues K-1s to its partners. The grantor-trust treatment is part of what makes a DST interest qualify as like-kind real property for a 1031 exchange. For you, it means simpler, more familiar real estate tax reporting and the ability to claim your share of depreciation to shelter part of your distributions. So expect a 1099 and grantor-trust statement, not a K-1. Your CPA handles the specifics, since Baker 1031 does not provide tax advice; confirm the current treatment with your advisor.
Is a DST the same as a REIT?
No — a DST and a REIT are different, and conflating them is a frequent misconception. The most important difference is 1031 eligibility: a DST interest is treated as a direct interest in like-kind real property, so it qualifies as replacement property in a 1031 exchange and preserves your tax deferral, while a REIT share is a security that is not 1031-eligible — you can't exchange directly into a REIT and defer your gain. Beyond that, a REIT (if publicly traded) offers daily liquidity that a DST lacks, and a REIT typically holds a large, diversified portfolio, while a DST holds a specific property or small portfolio. So if your goal is to defer gain from a property sale, a DST works and a REIT generally doesn't; if you want liquidity and don't need 1031 treatment, a REIT may suit you. Some investors eventually move from a DST into a REIT via a 721 exchange, combining deferral with later liquidity. So the two are related but distinct vehicles serving different purposes — don't assume they're interchangeable.
Are DSTs low-risk because they're passive?
No — this is a dangerous myth. Passivity is not the same as safety. A DST is professionally managed and passive for the investor, but it carries the same market, tenant, and financing risks as any real estate, plus illiquidity, sponsor risk, and fees — and you can lose principal. The underlying property's value can decline, tenants can default or vacate, occupancy can fall, leverage can amplify losses, and debt can be hard to refinance at maturity. Distributions are projections, not guarantees, and can be reduced or suspended. Because a DST is illiquid, you generally can't exit early to limit a loss. So the fact that you don't manage the property yourself doesn't make the investment low-risk; it just changes who makes the decisions. A DST can be a sound investment for the right investor, but it should never be mistaken for a safe or guaranteed one. Due diligence reduces these risks but cannot eliminate them, so size your investment and diversify accordingly, treating a DST as the real estate investment it is.
Can I keep deferring taxes with DSTs forever?
You can potentially keep deferring for a long time, but the idea that deferral is unlimited and consequence-free is an oversimplification. You can chain 1031 exchanges — including exchanging from one DST into another when a DST goes full cycle, or moving from a DST into a REIT via a 721 exchange — to keep deferring the gain. And if you hold qualifying investment real estate (or interests treated as such) until death, your heirs generally receive a step-up in basis to fair market value, which can eliminate the deferred capital-gains tax entirely for them. So in practice, disciplined exchanging plus the step-up can defer and ultimately erase the gain. But the rules are technical: each exchange must satisfy the 1031 requirements and deadlines, 721 exchanges have their own rules, and estate and tax laws can change. So while long-term deferral is real and powerful, it requires careful planning. Baker 1031 does not provide tax or legal advice — work with your CPA and attorney to structure and confirm any deferral strategy, since the details matter and the rules can change.
Do DSTs have high minimums?
No — relatively low minimums are actually one of the more accessible features of DSTs, and the belief that they require enormous sums is a misconception. DST minimums are often around $25,000 to $100,000, which is far below the multimillion-dollar entry some people imagine and well below the cost of buying most replacement properties outright. These low minimums are part of what makes DSTs practical for diversification: rather than placing an entire exchange in one property, you can split it across several DSTs — different sponsors, property types, and geographies — to spread your risk. So the minimums are accessible, especially relative to direct real estate. The real gating factor isn't the minimum but the accreditation requirement, since DST interests are securities limited to accredited investors. So while you do need to be accredited, you don't need to commit a fortune to a single DST — the low minimums keep the entry point reasonable and enable sensible diversification across multiple trusts within one exchange.
Is a DST a good way to avoid taxes?
A DST defers taxes rather than avoiding them outright, and understanding that distinction matters. By using a DST as replacement property in a 1031 exchange, you defer the capital-gains tax (and depreciation recapture) you would otherwise owe on the sale of your relinquished property — the tax isn't eliminated, but postponed, and your full equity keeps working in real estate. If you continue exchanging and ultimately hold until death, your heirs may receive a step-up in basis that can eliminate the deferred gain for them, so deferral can become permanent avoidance across generations through the step-up — but that's an estate-planning outcome, not something the DST itself guarantees. So a DST is a legitimate, IRS-sanctioned tax-deferral tool, not a tax-avoidance scheme, and it should be used as part of a sound investment and estate plan, not purely to dodge tax. The deferral is real and valuable, but a DST should also make sense as an investment on its own merits. Baker 1031 does not provide tax advice; confirm the treatment with your CPA, as the rules are technical and can change.
Why do these DST myths persist?
DST myths persist for a few reasons. First, DSTs are relatively complex securities, and complexity breeds oversimplification — it's easier to think of distributions as 'income' or a DST as 'just like a REIT' than to grasp the nuances. Second, some marketing emphasizes the benefits (passive, tax-deferred, attractive projected yields) more than the risks, which can leave investors with an overly rosy impression. Third, investors sometimes hear about DSTs secondhand and absorb misconceptions without reading the offering documents, where the realities — that distributions are projections, that the interest is illiquid, that risk factors apply — are disclosed plainly. And fourth, the accreditation requirement can create a mistaken impression that DSTs are exclusive, ultra-wealthy products. So the myths persist through complexity, selective marketing, secondhand information, and misunderstanding of the rules. The antidote is to read the PPM, ask questions, work with a representative who gives you a balanced picture, and approach a DST as the real estate investment it is. Informed investors who do this rarely fall for the myths.
What's the single most important thing to know about DSTs?
If there's one thing to take away, it's that a DST is a real estate investment with real risk — not a guaranteed, liquid, or risk-free product — and its outcome depends heavily on the specific property and sponsor. That single understanding dissolves most of the myths: it tells you distributions are projections that depend on performance (not guaranteed income), that your capital is committed for years (not sellable anytime), and that sponsor and property quality vary and must be diligenced (not all the same). It also frames the accreditation requirement correctly — as a real but broadly met threshold, not a marker of being ultra-wealthy. Approached as the real estate investment it is, a DST can be an excellent fit for the right 1031 investor: passive, diversified, and tax-deferred. The key is to treat projected returns as estimates, invest only capital you can leave committed, confirm suitability, and do genuine due diligence. So the most important thing is to see a DST clearly for what it is, then decide whether it fits your goals and situation.
Should I avoid DSTs because of these risks?
Not necessarily — the point of debunking the myths isn't to discourage you from DSTs, but to help you approach them realistically. A DST carries genuine risks — illiquidity, sponsor risk, market and tenant risk, fees, and unguaranteed distributions — but those risks are manageable and may be well worth it for the right investor. A DST can deliver exactly what many 1031 investors want: passive, diversified, tax-deferred real estate without the burdens of direct management, and debt replacement without personally qualifying. The investors who do best with DSTs are those who understand the realities — treating projected distributions as estimates, committing only capital they can leave invested for the full hold, confirming their suitability, and doing real due diligence on the sponsor, property, debt, and fees. So you shouldn't avoid DSTs simply because they carry risk; you should evaluate whether a specific DST, from a quality sponsor, fits your goals, passivity preferences, and liquidity needs. A suitability review and good due diligence help you decide. Informed, the risks become trade-offs you can weigh rather than surprises.
How can I tell DST fact from marketing hype?
The best way to separate DST fact from marketing hype is to go to the source documents and ask hard questions rather than relying on a glossy pitch. Start with the PPM — the Private Placement Memorandum — and read the risk factors closely, because that's where the realities are disclosed plainly: that distributions are projections rather than guarantees, that the interest is illiquid, that you have no control, and that you could lose principal. Compare any headline projected yield against the durability of the income behind it — the tenants, lease terms, occupancy, and market — and against the fees and leverage in the deal. Scrutinize the sponsor's actual track record and full-cycle history, not just its marketing claims, since sponsors vary widely in quality. Be skeptical of language that implies safety, guarantees, or easy liquidity, because none of those describe a DST accurately. And work with a representative who gives you a balanced picture and answers questions candidly. So read the documents, test the projections, vet the sponsor, and watch for overstated claims — informed investors rarely fall for hype.
How does Baker 1031 help me separate DST myth from reality?
We help investors separate DST myth from reality — that distributions are projections rather than guaranteed income, that DSTs are illiquid rather than sellable anytime, that they require accredited status (which many property owners meet) rather than being only for the wealthy, and that sponsors vary widely rather than being all the same — so you can make informed decisions with clear eyes. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review of your financial situation, goals, liquidity needs, and risk tolerance. We give you the facts, not a sales pitch: projected distributions are estimates that can be reduced or suspended, a DST is illiquid and held to full cycle, accreditation is broadly met, and sponsor quality varies and must be diligenced — and we help you do that diligence. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation, including deferral, the step-up, and reporting (a 1099, not a K-1). We're candid that a DST carries full real estate risk plus illiquidity, sponsor, and fee risk — neither yields nor returns are promised, and past performance doesn't guarantee future results.
Glossary
- Delaware Statutory Trust (DST)
- A trust holding income-producing real estate, with 1031-eligible beneficial interests.
- Distribution
- Your share of the DST's net rental income — a projection, not a guarantee.
- Projection
- An estimate of expected returns, not a promised outcome.
- Illiquidity
- The inability to readily sell a DST interest before full cycle.
- Secondary Market
- A market to resell interests — thin and unreliable for DSTs.
- Full Cycle
- When the sponsor sells the DST property, ending the investment.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Regulation D
- The SEC exemption under which DST interests are offered.
- Low Minimum
- A DST's typical entry point, often around $25,000 to $100,000.
- Sponsor
- The company that acquires, structures, and manages a DST.
- Sponsor Risk
- The risk that the controlling sponsor performs poorly.
- Grantor Trust
- The tax status under which a DST issues a 1099, not a K-1.
- REIT
- A real estate company whose shares are not 1031-eligible.
- 721 Exchange
- Contributing property to a REIT for OP units, preserving deferral.
- Step-Up in Basis
- The basis reset to fair market value for heirs at death.
- Suitability Review
- Assessing whether a DST fits the investor's situation.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts)
- U.S. Securities and Exchange Commission. Investor.gov — Updated Investor Bulletin: Accredited Investors
- FINRA. Real Estate Investments
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
