If you're researching Delaware Statutory Trusts for the first time, you probably have a short list of practical questions: What is a DST, really? Does it work for a 1031 exchange? What kind of return should I expect? Can I get my money out early if I need to? And do I even qualify to invest? This FAQ-style guide answers those core questions in plain language. In short: a DST is a trust that owns income-producing real estate, in which you buy a fractional beneficial interest and own a slice passively; a properly structured DST interest qualifies as like-kind real property for a 1031 exchange under IRS Revenue Ruling 2004-86; distributions vary by offering and are projections, not guarantees; DSTs are illiquid and generally held to the end of a multi-year cycle; and they're available to accredited investors through a Regulation D offering. The sections below expand on each. DST interests are securities offered through a broker-dealer after a suitability review, and Baker 1031 does not provide tax or legal advice — verify the current rules with your advisors. This is educational information, not investment advice.
What Is a DST in Simple Terms?
In the simplest terms, a Delaware Statutory Trust (DST) is a trust that owns income-producing real estate, and when you invest in one, you buy a fractional beneficial interest — a slice of ownership — and receive your share of the income, all without managing the property yourself. Think of it as a way to own a piece of a large, professionally managed building (or portfolio) passively: the trust holds title to the real estate, a professional sponsor manages it, and you collect your proportional share of the rental income.
The 'Delaware Statutory Trust' name comes from the fact that the trust is formed under Delaware law, which provides a well-established legal framework for these structures. The key idea is fractional, passive ownership: instead of buying a whole property yourself — and dealing with tenants, maintenance, and financing — you own a fraction of a trust that owns the property, and the day-to-day work is handled for you. Your stake is a beneficial interest in the trust, and that interest entitles you to your share of the income and any eventual proceeds when the property is sold.
So in simple terms, a DST is a trust that owns income-producing real estate in which you buy a fractional beneficial interest and own a slice passively, collecting your share of the income. So that's the core idea. A DST in simple terms — a trust formed under Delaware law that holds title to income-producing real estate, professionally managed by a sponsor, in which investors buy fractional beneficial interests and receive their proportional share of the rental income without managing the property — is fractional, passive real estate ownership. You own a slice of the trust, not the whole building. Understanding this core idea frames everything else. A DST is a trust that owns income-producing real estate; you buy a fractional beneficial interest and own a passive slice, collecting your share of the income while a professional sponsor manages the property.
Do DSTs Qualify for a 1031 Exchange?
Yes — DSTs qualify for a 1031 exchange, and this is the single most important reason most investors use them. Under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST is treated as a direct interest in real property — meaning it counts as like-kind real estate for a 1031 exchange. So when you sell appreciated investment real estate, you can reinvest the proceeds into a DST as replacement property and defer the capital-gains tax you'd otherwise owe.
This 1031 eligibility is what distinguishes a DST from many other passive real estate investments. A REIT share, for example, is a security, not like-kind real property, so it can't be used to complete a 1031 exchange — but a DST interest can. For the exchange to work, the DST must be structured in compliance with Revenue Ruling 2004-86's requirements (often called the 'seven deadly sins,' a set of restrictions on what the trustee can do), which is why DSTs are professionally structured by sponsors. When those requirements are met, the DST interest is treated as like-kind real property and qualifies as a 1031 replacement.
So yes, DSTs qualify for a 1031 exchange — Revenue Ruling 2004-86 treats a properly structured DST interest as like-kind real property, letting you defer capital-gains tax. So 1031 eligibility is a DST's defining feature. Do DSTs qualify for a 1031 exchange — yes, because IRS Revenue Ruling 2004-86 treats a beneficial interest in a properly structured DST as a direct interest in real property (like-kind real estate), so you can reinvest property-sale proceeds into a DST and defer capital-gains tax, unlike a REIT share, which is a non-qualifying security — is the question that drives most DST investment. The DST must meet the ruling's structural requirements. Understanding this explains why DSTs exist. Yes, DSTs qualify for 1031 exchanges: Rev. Rul. 2004-86 treats a properly structured DST interest as like-kind real property, letting you defer capital-gains tax — unlike a non-qualifying REIT share.
The whole reason a DST exists in the 1031 world: Revenue Ruling 2004-86 says a beneficial interest in a properly structured trust is like-kind real property, so you can defer your gain.
What Returns Do DSTs Offer?
DSTs are generally used for income, so the most visible part of the return is the regular distribution — your share of the property's net rental income, typically paid monthly or quarterly. But it's important to be clear: distribution rates vary by offering and are projections, not guarantees. A sponsor may project a distribution based on the property's expected rents and expenses, but actual distributions depend on real performance — occupancy, rent collection, expenses, and market conditions — and can be lower than projected, or interrupted.
Beyond current distributions, a DST's total return can also include appreciation (if the property is sold for more than was paid) and the effect of debt paydown over the hold, though these too are uncertain and depend on how the property and market perform. No part of a DST return is promised. The figures sponsors publish are projections and targets, not commitments — and past performance of a sponsor or property type doesn't guarantee future results. So while DSTs are designed to produce income (and potentially appreciation), the returns are non-promissory and carry real risk, including the possibility of loss.
So DST returns center on regular income distributions (projections, not guarantees), with potential appreciation and debt paydown adding to total return — all uncertain and non-promissory. So returns are projected, never promised. What returns DSTs offer — regular distributions of net rental income (typically monthly or quarterly, but as projections that vary by offering and can fall short or be interrupted), plus potential appreciation and debt paydown over the hold, none of it guaranteed and all of it carrying real risk including loss — should be understood as projected, not promised. Distributions depend on actual performance. Understanding this sets realistic expectations. DSTs offer regular income distributions (projections, not guarantees) plus potential appreciation and debt paydown — but no part of the return is promised, and DSTs carry real risk including possible loss.
Can I Sell a DST Early?
Generally, no — you can't readily sell a DST early. DSTs are illiquid investments designed to be held for the full investment cycle, which is commonly around five to seven years (sometimes longer). You remain invested until the sponsor sells the underlying property, at which point you receive your share of the proceeds. There is no established secondary market for DST interests, so you can't simply list your interest and sell it the way you'd sell a publicly traded security.
This illiquidity is a fundamental feature of DSTs, not a temporary condition — and it's one of the most important trade-offs to understand before investing. A DST is appropriate for capital you can commit for the duration of the hold; it's not suitable for money you might need in the near or medium term. While there may occasionally be limited, informal options to exit early in certain circumstances, you should never count on being able to sell before the property is sold. Plan to hold a DST to the end of its cycle, and size your investment accordingly so you're not relying on early access to your capital.
So generally no — DSTs are illiquid, held to the end of a multi-year cycle (commonly five to seven years or more), with no established secondary market for early sale. So plan to hold for the duration. Can you sell a DST early — generally no, because DSTs are illiquid investments designed to be held for the full cycle (commonly around five to seven-plus years) until the sponsor sells the property, with no established secondary market, so you shouldn't count on exiting early — is a critical question to settle before investing. Illiquidity is a defining feature. Understanding this ensures you commit only capital you can leave invested. Generally no — DSTs are illiquid and held to the end of a multi-year cycle (commonly five to seven-plus years) with no established secondary market, so plan to hold for the full duration.
- A DST is a trust that owns income-producing real estate; you buy a fractional beneficial interest and own a passive slice.
- DSTs qualify for a 1031 exchange — Rev. Rul. 2004-86 treats a properly structured interest as like-kind real property, deferring capital-gains tax.
- DST returns center on income distributions that are projections, not guarantees, plus potential appreciation and debt paydown — all non-promissory.
- DSTs are illiquid, held to the end of a multi-year cycle, and available only to accredited investors through a Regulation D offering.
Who Can Invest in a DST?
DSTs are available only to accredited investors, because DST interests are securities offered under Regulation D (typically Rule 506(c)). Accredited-investor status is based on income or net-worth thresholds — broadly, an individual income over $200,000 (or joint income over $300,000) in each of the past two years, or a net worth over $1 million excluding your primary residence, among other qualifying criteria. So not everyone can invest in a DST; you have to meet these financial qualifications.
Beyond accreditation, investing in a DST involves a suitability review conducted through the broker-dealer offering it. The review considers your financial situation, investment goals, liquidity needs, and risk tolerance to confirm that an illiquid, longer-term DST is appropriate for you. This gatekeeping exists because DSTs are illiquid, complex, fee-bearing securities — they're not meant for everyone, or for capital you might need soon. So the path to investing runs through both an accreditation check and a suitability review, after which you can subscribe to a suitable offering through the broker-dealer.
So DSTs are available to accredited investors, through a Regulation D offering, after a suitability review confirms the investment fits your situation. So accreditation and suitability are the gates. Who can invest in a DST — accredited investors (meeting income or net-worth thresholds) who pass a suitability review conducted through the broker-dealer offering the DST, since DST interests are Regulation D securities not meant for everyone or for near-term capital — is governed by both an accreditation check and a suitability assessment. Both gates must be cleared. Understanding this shows whether a DST is open to you. DSTs are available to accredited investors through a Regulation D offering, after a suitability review confirms the illiquid, longer-term investment fits your financial situation and goals.
Two gates stand between you and a DST: you must qualify as an accredited investor, and the investment must pass a suitability review confirming it actually fits your situation.
How Do I Invest in a DST?
Investing in a DST follows a fairly defined path. First, because DST interests are securities, you access them through a broker-dealer rather than buying them on an exchange. You'll confirm your accredited-investor status and go through a suitability review that considers your financial situation, goals, liquidity needs, and risk tolerance. If a DST is suitable, you can then review available offerings — typically with help understanding the property, the sponsor, the projected distributions, the fees, the debt, and the hold period — and select one (or several) that fit your goals.
Once you've chosen an offering, you review its offering documents (the private placement memorandum) and complete the subscription process to formally invest. For a 1031 exchange, the timing has to align with your exchange deadlines: you must identify your replacement property (which can be the DST) within 45 days of selling your relinquished property and close within 180 days, and your qualified intermediary holds the proceeds in between. DSTs are well-suited to these deadlines because they can close quickly — sometimes in days — which helps exchangers meet the tight 45-day identification and 180-day closing windows.
So you invest in a DST through a broker-dealer: confirm accreditation, pass a suitability review, choose a suitable offering, review the documents, and subscribe — coordinating with your 1031 deadlines if exchanging. So the process runs through a broker-dealer. How you invest in a DST — accessing it through a broker-dealer (since interests are securities), confirming accredited status, passing a suitability review, selecting a suitable offering, reviewing the offering documents, and completing the subscription, all coordinated with the 45-day and 180-day 1031 deadlines if you're exchanging — follows a defined, advisor-assisted path. DSTs can close quickly to meet exchange windows. Understanding the process shows how to act on a DST decision. You invest in a DST through a broker-dealer: confirm accreditation, pass a suitability review, choose a suitable offering, review documents, and subscribe — coordinating with your 1031 deadlines if exchanging.
How Baker 1031 Helps You Understand DSTs
Baker 1031 Investments helps investors understand the basics of Delaware Statutory Trusts — what a DST is in simple terms, whether DSTs qualify for a 1031 exchange, what returns DSTs offer, whether you can sell a DST early, and who can invest — so you can decide whether a DST fits your goals and, if so, access suitable offerings.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review that considers your financial situation, goals, liquidity needs, and risk tolerance. We help you understand the structure (a trust owning real estate, with fractional beneficial interests), the 1031 eligibility under Revenue Ruling 2004-86, the income-oriented but non-promissory return profile, and the illiquidity that means you should plan to hold for the full cycle. Baker 1031 does not provide tax or legal advice — your CPA and attorney handle your specific 1031 exchange and tax situation, which can be technical. We're candid that DST distributions and returns are projections, not guarantees, that DSTs are illiquid and fee-bearing, and that past performance doesn't guarantee future results. Our role is to answer your questions clearly and help you invest only when a DST is suitable for your goals and risk tolerance.
Frequently Asked Questions
What is a Delaware Statutory Trust (DST) in simple terms?
In simple terms, a Delaware Statutory Trust (DST) is a trust that owns income-producing real estate, and when you invest, you buy a fractional beneficial interest — a slice of ownership — and receive your share of the income without managing the property. Think of it as owning a piece of a large, professionally managed building or portfolio passively: the trust holds title to the real estate, a professional sponsor manages it, and you collect your proportional share of the rental income. The name comes from the trust being formed under Delaware law, which provides a well-established legal framework. The key idea is fractional, passive ownership: instead of buying a whole property and dealing with tenants, maintenance, and financing, you own a fraction of a trust that owns the property, with the day-to-day work handled for you. Your beneficial interest entitles you to your share of the income and any eventual proceeds when the property is sold. So a DST is fractional, passive real estate ownership through a trust.
Do DSTs qualify for a 1031 exchange?
Yes — DSTs qualify for a 1031 exchange, and this is the main reason most investors use them. Under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST is treated as a direct interest in real property, meaning it counts as like-kind real estate for a 1031 exchange. So when you sell appreciated investment real estate, you can reinvest the proceeds into a DST as replacement property and defer the capital-gains tax you'd otherwise owe. This 1031 eligibility distinguishes a DST from many other passive investments — a REIT share, for instance, is a security, not like-kind real property, so it can't complete a 1031 exchange, but a DST interest can. For the exchange to work, the DST must comply with Revenue Ruling 2004-86's structural requirements (the 'seven deadly sins' restrictions on the trustee), which is why DSTs are professionally structured by sponsors. So yes, a properly structured DST interest qualifies as 1031 replacement property and defers your gain.
What returns do DSTs offer?
DSTs are generally used for income, so the most visible return is the regular distribution — your share of the property's net rental income, typically paid monthly or quarterly. But it's important to be clear: distribution rates vary by offering and are projections, not guarantees. A sponsor may project a distribution based on expected rents and expenses, but actual distributions depend on real performance — occupancy, rent collection, expenses, and market conditions — and can be lower than projected or interrupted. Beyond current distributions, a DST's total return can also include appreciation (if the property sells for more than was paid) and the effect of debt paydown over the hold, though these are uncertain too. No part of a DST return is promised — the figures sponsors publish are projections and targets, not commitments, and past performance doesn't guarantee future results. So DSTs are designed to produce income and potentially appreciation, but returns are non-promissory and carry real risk, including the possibility of loss.
Can I sell a DST early?
Generally, no — you can't readily sell a DST early. DSTs are illiquid investments designed to be held for the full investment cycle, commonly around five to seven years (sometimes longer). You remain invested until the sponsor sells the underlying property, at which point you receive your share of the proceeds. There's no established secondary market for DST interests, so you can't simply list your interest and sell it the way you'd sell a publicly traded security. This illiquidity is a fundamental feature, not a temporary condition, and it's one of the most important trade-offs to understand before investing. A DST is appropriate only for capital you can commit for the duration of the hold — not money you might need in the near or medium term. While there may occasionally be limited, informal exit options in certain circumstances, you should never count on selling before the property is sold. So plan to hold a DST to the end of its cycle and size your investment accordingly.
Who can invest in a DST?
DSTs are available only to accredited investors, because DST interests are securities offered under Regulation D (typically Rule 506(c)). Accredited-investor status is based on income or net-worth thresholds — broadly, an individual income over $200,000 (or joint income over $300,000) in each of the past two years, or a net worth over $1 million excluding your primary residence, among other qualifying criteria. So not everyone can invest; you have to meet these financial qualifications. Beyond accreditation, investing involves a suitability review conducted through the broker-dealer offering the DST, which considers your financial situation, goals, liquidity needs, and risk tolerance to confirm an illiquid, longer-term DST is appropriate for you. This gatekeeping exists because DSTs are illiquid, complex, fee-bearing securities not meant for everyone or for near-term capital. So the path to investing runs through both an accreditation check and a suitability review, after which you can subscribe to a suitable offering through the broker-dealer. Verify the current rules with your advisors.
How is a DST different from owning property directly?
A DST and direct ownership offer very different experiences. With a DST, you invest passively by buying a fractional beneficial interest — you don't manage tenants, maintenance, or financing, and a professional sponsor handles the property. You gain access to institutional-quality real estate at a relatively low minimum, with the ability to diversify across several DSTs. With direct ownership, you have hands-on control and direct responsibility — you manage (or hire managers for) the property, arrange financing in your own name, and bear the day-to-day work, but you also keep full control over decisions. A key similarity: both a DST interest and direct real estate qualify for a 1031 exchange, so both can defer capital-gains tax. A key difference: a DST is illiquid and you can't control the specific property decisions, whereas direct ownership is also illiquid but gives you control. So a DST trades control for passivity and access, while keeping the 1031 tax advantage that makes it useful for exchangers.
Are DST distributions guaranteed?
No — DST distributions are not guaranteed. The distribution rate a sponsor publishes is a projection based on the property's expected rents and expenses, not a promise. Actual distributions depend on real performance — occupancy, rent collection, operating expenses, and market conditions — and can be lower than projected, reduced, or interrupted if the property underperforms. A DST is a real estate investment that carries real risk, including the risk that income falls short of projections or that you lose principal. No part of a DST's return — distributions, appreciation, or debt paydown — is promised. Sponsors publish projections and targets, but these are not commitments, and past performance of a sponsor or property type doesn't guarantee future results. So while DSTs are designed to produce regular income, you should treat the projected distribution as a target, not a certainty, and understand that it can change. Size and diversify your DST allocation accordingly, and never invest based on the assumption that distributions are guaranteed.
How long is a typical DST hold period?
A typical DST hold period is commonly around five to seven years, though some are shorter and some longer. The hold is determined by the sponsor's business plan for the property — the period during which the sponsor manages the asset, collects income, and works toward an eventual sale. You remain invested for the duration of this hold; you generally can't exit early because DSTs are illiquid with no established secondary market. At the end of the cycle, the sponsor sells the underlying property and distributes your share of the proceeds, and you can then choose to 1031 exchange into a new property or DST, take the proceeds (paying any deferred tax), or pursue another option. Because the hold is multi-year and you're committed for its duration, a DST is appropriate only for capital you can leave invested for that period. So plan around a roughly five-to-seven-year horizon, confirm the specific offering's expected hold, and understand that the actual timing can vary based on the sponsor's strategy and market conditions.
What is a beneficial interest in a DST?
A beneficial interest is your fractional ownership stake in a Delaware Statutory Trust. When you invest in a DST, you don't own the real estate directly or hold shares in a company — you own a beneficial interest in the trust that holds title to the property. This interest entitles you to your proportional share of the trust's income (the distributions) and any eventual proceeds when the property is sold. Crucially, under IRS Revenue Ruling 2004-86, a beneficial interest in a properly structured DST is treated as a direct interest in real property, which is what makes it qualify as like-kind real estate for a 1031 exchange. So the beneficial interest is both your economic stake (your share of income and proceeds) and your legal claim to like-kind real property for tax purposes. It's the mechanism that lets many investors co-own a single property or portfolio while each holding a 1031-eligible real estate interest. So a beneficial interest is your passive, fractional, 1031-eligible ownership stake in the DST.
Is a DST the same as a REIT?
No — a DST and a REIT are different, and the difference matters most for 1031 exchanges. A DST is a trust that holds specific real estate, in which you own a fractional beneficial interest that is treated as like-kind real property under Revenue Ruling 2004-86 — so it qualifies for a 1031 exchange and can defer capital-gains tax. A REIT is a company that owns or finances a diversified portfolio of real estate and pays dividends; a REIT share is a security, not like-kind real property, so it cannot be used to complete a 1031 exchange. There are other differences too: a DST typically holds one or a few specific properties and is illiquid with a defined hold, while a publicly traded REIT owns a large diversified portfolio and trades daily with liquidity. So if your goal is to defer tax on a property sale through a 1031 exchange, a DST qualifies and a REIT share doesn't. The two serve different purposes despite both offering passive real estate exposure.
What are the main risks of investing in a DST?
DSTs carry several risks worth understanding. Illiquidity: you generally can't sell before the property is sold (commonly a five-to-seven-year hold), with no established secondary market. Distribution risk: projected distributions aren't guaranteed and can be reduced or interrupted if the property underperforms. Market and property risk: rents, occupancy, and property values can decline, and a market downturn can hurt both income and the eventual sale price. Sponsor and management risk: you rely on the sponsor's execution, since you don't control the property. Fee risk: DSTs carry fees that reduce net returns. Interest-rate and debt risk: if the DST uses debt, rate movements and leverage can affect outcomes. Limited control: trustee restrictions under Revenue Ruling 2004-86 mean the trust can't readily adapt to changing conditions. So while DSTs offer passive income and 1031 deferral, they're real investments that can lose value. Diversifying across DSTs and sizing the allocation appropriately help manage these risks but don't eliminate them. Past performance doesn't guarantee future results.
How much does it cost to invest in a DST?
The cost to invest in a DST has two components: the minimum investment and the fees. Minimums vary by sponsor and offering — for a 1031 exchange, often around $100,000 (sometimes ranging from roughly $25,000 to $100,000); for a cash investment, sometimes lower, around $25,000. Beyond the amount you invest, DSTs carry fees: upfront costs (selling commissions, offering and organizational costs) and ongoing fees (asset-management and property-management fees), which reduce the net return you receive. These fees are part of why it's important to understand a DST's full cost structure before investing. The fees compensate the sponsor and the parties involved in structuring and managing the offering. Because fees vary by offering, you should review the specific DST's private placement memorandum to understand its full cost structure. So the cost includes both the minimum you commit and the fees that reduce your net return — confirm both on the specific offering, and weigh them against the projected distributions and the tax-deferral benefit, with your advisors.
What happens at the end of a DST's hold period?
At the end of a DST's hold period — commonly around five to seven years — the sponsor sells the underlying property and distributes your proportional share of the sale proceeds. At that point, you have choices. You can complete another 1031 exchange, rolling your proceeds into a new property or another DST to continue deferring capital-gains tax. You can take the proceeds as cash, which would trigger the deferred capital-gains tax (and any depreciation recapture) that you'd deferred. Or, in some structures, the DST property may be acquired by a REIT through a 721 (UPREIT) exchange, converting your interest into operating-partnership units while maintaining deferral. So the end of the hold is a decision point: continue deferring via another exchange, cash out and pay the deferred tax, or potentially convert into a REIT structure. The right choice depends on your goals, your tax situation, and the options available at the time. Plan ahead with your advisors, because the end-of-hold decision has significant tax consequences.
Do I need to be wealthy to invest in a DST?
You need to be an accredited investor to invest in a DST, which means meeting certain income or net-worth thresholds, but 'accredited' doesn't necessarily mean ultra-wealthy. Broadly, you qualify with an individual income over $200,000 (or joint income over $300,000) in each of the past two years, or a net worth over $1 million excluding your primary residence, among other qualifying criteria. Many investors meet these thresholds, particularly those who've owned appreciated investment real estate and are now looking to do a 1031 exchange — the very situation DSTs are built for. You'll also need to meet the offering's minimum investment, which varies but is often around $100,000 for a 1031 exchange. So while DSTs aren't open to everyone, you don't have to be extraordinarily wealthy — you need to qualify as accredited and meet the minimum. Verify your accredited status and the current rules with your advisors, since the criteria and thresholds can change over time.
How does Baker 1031 help me understand DSTs?
We help investors understand the basics of Delaware Statutory Trusts — what a DST is in simple terms, whether DSTs qualify for a 1031 exchange, what returns DSTs offer, whether you can sell a DST early, and who can invest — so you can decide whether a DST fits your goals and, if so, access suitable offerings. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review that considers your financial situation, goals, liquidity needs, and risk tolerance. We help you understand the structure, the 1031 eligibility under Revenue Ruling 2004-86, the income-oriented but non-promissory return profile, and the illiquidity that means planning to hold for the full cycle. Baker 1031 does not provide tax or legal advice — your CPA and attorney handle your specific 1031 and tax situation. We're candid that DST distributions and returns are projections, not guarantees, that DSTs are illiquid and fee-bearing, and that past performance doesn't guarantee future results. We help you invest only when suitable for your goals.
Glossary
- Delaware Statutory Trust (DST)
- A trust owning income-producing real estate with fractional investor interests.
- Beneficial Interest
- An investor's fractional, 1031-eligible ownership stake in a DST.
- 1031 Exchange
- A like-kind exchange deferring capital-gains tax on investment property.
- Revenue Ruling 2004-86
- The IRS ruling making a DST interest like-kind real property.
- Like-Kind Property
- Real property that qualifies as a 1031 replacement.
- Sponsor
- The firm that structures and manages a DST offering.
- Distribution
- An investor's share of a DST's net rental income.
- Appreciation
- An increase in the property's value over the hold.
- Debt Paydown
- Reduction of trust-level debt that can add to total return.
- Hold Period
- The multi-year span (often 5-7 years) until the property is sold.
- Illiquidity
- The inability to readily sell a DST interest before the property sells.
- Secondary Market
- A market for reselling interests — not established for DSTs.
- Seven Deadly Sins
- Trustee restrictions a DST must observe under Rev. Rul. 2004-86.
- Regulation D
- The SEC exemption under which DST securities are offered.
- Accredited Investor
- An investor meeting income or net-worth thresholds for DST offerings.
- Suitability Review
- Assessing whether a DST fits the investor before investing.
Sources & References
- IRS. Revenue Ruling 2004-86
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
- U.S. Securities and Exchange Commission. Investor.gov — Updated Investor Bulletin: Accredited Investors
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.
