A Delaware Statutory Trust (DST) can be an efficient way to complete a 1031 exchange into passive, professionally managed real estate — but not every DST is a good DST, and sponsors vary widely in track record, fees, and transparency. Because DST interests are illiquid securities held for years, the time to do your homework is before you invest, not after. A disciplined due diligence checklist gives you a repeatable way to compare offerings on the things that actually matter: the sponsor behind the deal, the property and market you're buying into, the debt layered on top of it, the risk factors spelled out in the offering documents, and whether the investment genuinely fits your situation and budget. This guide walks through five areas to evaluate — vet the sponsor, analyze the property and market, review the debt structure, read the PPM risk factors, and confirm suitability and fees. 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.
Vet the Sponsor
The first item on any DST due diligence checklist is the sponsor — the company that acquires the property, structures the trust, and manages the asset through to sale. The sponsor's decisions shape nearly everything about your experience as a beneficial owner, so its quality matters more than almost any other single factor. Start with track record: how many offerings has the sponsor brought to market, across how many years and market cycles, and what is its total assets under management? A sponsor that has operated through a downturn and kept properties performing tells you more than one with only a short, all-bull-market history.
Look specifically for full-cycle history — DSTs the sponsor has taken from acquisition all the way through sale — because that is the only record that shows how investors actually fared, not just how the deal looked at launch. Ask how full-cycle offerings performed relative to their original projections, whether distributions were maintained, and how the eventual sale prices compared to acquisition costs. Then assess financial strength: a well-capitalized sponsor is better able to support a property through a soft patch, fund reserves, and avoid forced decisions. Check for regulatory or litigation history, and confirm the sponsor's interests are aligned with yours through meaningful co-investment and a sensible fee structure.
So vetting the sponsor means examining track record, full-cycle history, assets under management, and financial strength — because in a passive investment where the sponsor makes the decisions, sponsor quality drives outcomes. Vetting the sponsor — reviewing how long it has operated and through which cycles, how much it manages, how its full-cycle DSTs performed against projections, how strong its balance sheet is, and whether its incentives align with investors' — is the foundational step because the sponsor controls the property and the trust. A long, transparent, full-cycle record signals discipline; a thin or all-bull-market one is a caution flag. Vetting the sponsor first frames everything else on the checklist, since even a good property can disappoint under a weak sponsor.
Analyze the Property & Market
Once you're comfortable with the sponsor, turn to the asset itself — the property and the market it sits in. Location is the starting point: is the property in a growing or stable market with healthy job growth, population trends, and demand for its property type, or in an area facing structural decline? Property type matters too. A net-lease retail building, a multifamily community, an industrial warehouse, a medical office, and a self-storage facility each carry different demand drivers and risk profiles, and you want exposure that fits your view and your broader portfolio.
Drill into the tenants and leases, because they generate the income that funds your distributions. For a single-tenant net-lease property, scrutinize the tenant's creditworthiness, the remaining lease term, and what happens at expiration — a long lease to a strong tenant is very different from a short lease to a weak one. For multi-tenant properties, examine the rent roll, occupancy, lease rollover schedule, and tenant concentration. Look at current occupancy versus the market, the trend in rents, and any deferred maintenance or capital needs the property faces. The goal is to understand not just today's income but its durability across the multi-year hold.
So analyzing the property and market means evaluating location, property type, tenants, leases, occupancy, and demand — the fundamentals that determine whether the income behind your distributions is durable. Analyzing the property and market — assessing the market's economic and demographic health, the suitability of the property type, the strength and term of the tenants and leases, current occupancy and rent trends, and any deferred maintenance or capital needs — tells you whether the asset can sustain the projected income over a multi-year hold. Strong location, durable tenancy, and healthy demand support the projections; weak fundamentals undermine them. Analyzing the property and market complements vetting the sponsor, because a strong sponsor and a sound asset together give a DST its best chance to perform as intended.
Distributions are only as durable as the rent behind them — so before you read the projected yield, read the rent roll, the lease terms, and the market the tenants depend on.
Review the Debt Structure
Most DSTs use leverage, so the debt structure deserves its own line on the checklist. Because the loan sits at the trust level and is non-recourse to investors, you don't personally qualify for or guarantee it — but the debt still shapes your risk and return profile, so you need to understand it. Start with leverage: what is the loan-to-value (LTV) ratio? A moderately leveraged DST (say, conservative LTV) carries less risk than a highly leveraged one, which amplifies both upside and downside and leaves a thinner cushion if property income softens. Some DSTs are all-cash (debt-free), which removes financing risk entirely but offers no debt replacement for investors who need it.
Examine the loan term and maturity relative to the expected hold. A key risk in any leveraged real estate is having debt mature in a difficult market, forcing a refinance or sale at a bad time — so look at when the loan comes due and whether that aligns with the projected exit. Check whether the rate is fixed or floating: a fixed rate locks in the cost of debt for the term, while a floating rate exposes the trust to rising interest costs that can squeeze distributions. Understand any interest-only periods, amortization, and refinancing assumptions baked into the projections, and consider how sensitive the deal is to rates and to the property's performance if those assumptions don't hold.
So reviewing the debt structure means examining LTV, loan term and maturity, fixed versus floating rate, and refinancing risk — because leverage magnifies outcomes and is one of the biggest drivers of how a DST performs. Reviewing the debt structure — assessing the loan-to-value ratio, the loan term and maturity relative to the planned hold, whether the rate is fixed or floating, and the refinancing risk embedded in the projections — reveals how much financing risk you're taking on alongside the real estate. Conservative leverage, a fixed rate, and a maturity matched to the hold reduce risk; high leverage, a floating rate, or a near-term maturity in a tough market increase it. Reviewing the debt structure builds on the property analysis, because even a sound asset can struggle under aggressive or poorly timed debt.
Read the PPM Risk Factors
The Private Placement Memorandum (PPM) is the central offering document for a DST, and its risk factors section is the part too many investors skip — which is exactly why it belongs on your checklist. The risk factors are where the sponsor is required to disclose, in detail, everything that could go wrong: that distributions are not guaranteed and are only projections, that the investment is illiquid with no public secondary market, that you have no control over management decisions, that the property could lose value, that tenants could default, that debt could become difficult to refinance, and that you could lose some or all of your principal.
Read these disclosures carefully rather than treating them as boilerplate, because they tell you how the sponsor itself frames the downside. Pay attention to risks specific to this deal — a single-tenant concentration, a near-term lease expiration, a floating-rate loan, an aggressive business plan, or a market with particular exposure. The PPM also lays out the fee structure, the sponsor's compensation, conflicts of interest, the trust's governing documents (including the 'seven deadly sins' restrictions that limit what the trustee can do under IRS rules), and the assumptions behind the projected returns. Where something is unclear, ask the sponsor or your representative — and weigh whether the projected return adequately compensates you for the risks disclosed.
So reading the PPM risk factors means working through the offering document's disclosures — illiquidity, no control, no guaranteed distributions, property and tenant risk, debt risk, fees, and conflicts — to understand the full downside before you invest. Reading the PPM risk factors — studying the disclosures on illiquidity, lack of control, unguaranteed distributions, market and tenant risk, financing risk, fees, conflicts of interest, the trust's operating restrictions, and the assumptions behind the projections — is essential because it reveals what the sponsor itself says could go wrong. Risks that are deal-specific deserve the closest reading. Reading the PPM risk factors complements the sponsor, property, and debt review, turning an attractive headline yield into a clear-eyed picture of the risk you're accepting in exchange.
- Vet the sponsor: review track record, full-cycle history, assets under management, financial strength, and alignment before anything else.
- Analyze the property and market: assess location, property type, tenant credit, lease terms, occupancy, and demand behind the projected income.
- Review the debt: check LTV, loan term and maturity versus the hold, fixed versus floating rate, and refinancing risk.
- Read the PPM risk factors and confirm suitability and fees: distributions are projections, the DST is illiquid, and the load and ongoing fees reduce returns.
Confirm Suitability & Fees
The final area on the checklist turns the lens back on you: is this DST suitable for your situation, and do you understand what it costs? DST interests are securities offered under Regulation D to accredited investors, so the threshold question is whether you qualify (generally income over $200,000 individually or $300,000 jointly, or net worth over $1 million excluding your home) and whether the illiquid, multi-year hold fits your liquidity needs and risk tolerance. A suitability review with your broker-dealer representative considers your financial situation, goals, time horizon, and how a DST fits alongside your other holdings — including how much of your exchange you're placing in any one trust versus diversifying across several.
Then confirm the fees, because they directly reduce your net return. DSTs carry an upfront load — selling commissions, the dealer-manager fee, and organizational and offering costs — that means not all of your invested capital goes into the real estate, plus ongoing fees such as asset-management and property-management fees, and a disposition fee at sale. The PPM discloses these, often summarized as the total load. A higher-fee DST isn't automatically a worse investment if the underlying asset and sponsor are strong, but you should know exactly what you're paying and weigh it against the projected return and the quality of the offering. Compare fees across offerings on a like-for-like basis as part of your decision.
So confirming suitability and fees means verifying your accredited status and risk tolerance and understanding the full load and ongoing costs — because a DST has to fit both your situation and your return expectations net of fees. Confirming suitability and fees — checking that you meet accreditation requirements, that the illiquid multi-year hold suits your liquidity needs and goals through a suitability review, and that you understand the upfront load and ongoing fees that reduce your net return — closes the checklist by tying the offering back to your circumstances. A strong deal that doesn't fit your situation, or whose fees outweigh its merits, still isn't the right one. Confirming suitability and fees completes the due diligence picture, ensuring the DST is appropriate for you, not just sound in the abstract.
Due diligence isn't only about whether the DST is good — it's about whether it's good for you, at a cost you understand, given your liquidity needs and risk tolerance.
Putting the Checklist to Work
Knowing the five areas is one thing; applying them consistently is another. The value of a checklist is that it forces the same disciplined review across every offering, so you compare DSTs on substance rather than on whichever one was marketed most aggressively. A practical approach is to score each offering across the five areas — sponsor, property and market, debt, PPM risk factors, and suitability and fees — and to insist on satisfactory answers in each before moving forward. A weakness in one area isn't necessarily disqualifying, but it should be understood and weighed, not glossed over.
The checklist also helps you avoid the most common pitfalls: chasing the highest projected distribution without examining the durability of the income behind it, ignoring leverage and maturity risk, treating the PPM as boilerplate, over-concentrating an entire exchange in a single trust, and underestimating fees. Diversifying across multiple DSTs — by sponsor, property type, and geography — is one way the checklist naturally improves outcomes, since it reduces the impact of any single weak assumption. Throughout, remember that projections are projections: even a DST that passes every step can underperform, because real estate, tenants, financing, and markets all carry risk that diligence reduces but cannot eliminate.
So putting the checklist to work means applying the five areas consistently across offerings, weighing weaknesses rather than ignoring them, diversifying, and keeping projections in perspective. Putting the checklist to work — scoring each DST across sponsor, property and market, debt, PPM risk factors, and suitability and fees; insisting on satisfactory answers; avoiding common pitfalls like yield-chasing and over-concentration; diversifying across sponsors, property types, and geographies; and remembering that projections are not guarantees — turns a list of topics into a repeatable discipline. Consistent application is what makes due diligence protective. Putting the checklist to work is where the preceding steps pay off, helping you select DSTs that fit your goals while managing, though never eliminating, the inherent risks.
How Baker 1031 Helps You Run DST Due Diligence
Baker 1031 Investments helps investors work through DST due diligence — vetting the sponsor, analyzing the property and market, reviewing the debt structure, reading the PPM risk factors, and confirming suitability and fees — so you can compare offerings on substance and invest only when a DST genuinely fits your goals.
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, liquidity needs, time horizon, and risk tolerance. We help you evaluate sponsors' track records and full-cycle history, examine the underlying real estate and its tenants and leases, understand the loan-to-value, maturity, and rate structure of any debt, work through the PPM and its risk factors, and weigh the load and ongoing fees against the quality of the offering — and we encourage diversifying across multiple DSTs where appropriate. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific tax situation, including how the exchange and the DST interact with your circumstances, which can be technical. We're candid that DSTs are illiquid, that distributions are projections rather than guarantees, and that sponsors vary widely in quality — neither yields nor returns are promised, and past performance does not guarantee future results. Our role is to help you run thorough due diligence and invest only when a DST is suitable for you.
Frequently Asked Questions
What is DST due diligence?
DST due diligence is the structured process of evaluating a Delaware Statutory Trust offering before you invest, so you understand what you're buying and the risks involved. Because DST interests are illiquid securities held for years and sponsors vary widely in quality, a disciplined review protects you from committing exchange proceeds to a deal you don't fully understand. A practical checklist covers five areas: vetting the sponsor (track record, full-cycle history, assets under management, and financial strength), analyzing the property and market (location, tenants, leases, occupancy, and demand), reviewing the debt structure (loan-to-value, maturity, and fixed versus floating rate), reading the PPM risk factors (illiquidity, no control, unguaranteed distributions, and deal-specific risks), and confirming suitability and fees (your accreditation and risk tolerance, the load, and ongoing costs). So DST due diligence is a repeatable framework for comparing offerings on substance and confirming a DST fits your situation before you invest.
Why does the DST sponsor matter so much?
The sponsor matters enormously because a DST is a passive investment in which the sponsor and trustee make virtually all the decisions — acquiring the property, managing the asset, handling the debt, and ultimately selling. As a beneficial owner, you have no control over those decisions, so the sponsor's quality largely determines your experience. A strong sponsor with a long track record across market cycles, a transparent full-cycle history showing how past DSTs performed against projections, substantial assets under management, and real financial strength is far better positioned to support a property through a soft patch and avoid forced decisions. A thin, all-bull-market record or a weak balance sheet is a caution flag. Because sponsors vary widely in track record, fees, and transparency, vetting the sponsor is the foundational step in DST due diligence — even a good property can disappoint under a weak sponsor. So the sponsor is the first thing to evaluate and one of the most important.
What is a full-cycle DST and why does it matter?
A full-cycle DST is one a sponsor has taken all the way from acquisition through to sale, completing the entire investment life cycle. It matters in due diligence because it's the only record that shows how investors actually fared — not just how the deal looked at launch. When you review a sponsor's full-cycle history, you can ask how those offerings performed relative to their original projections: whether distributions were maintained throughout the hold, how the eventual sale price compared to the acquisition cost, and what total return investors realized. A sponsor with many full-cycle DSTs across different market conditions has a demonstrable record; one with only newly launched, still-open offerings has projections but no proven outcomes. So full-cycle history is a key signal of sponsor quality and discipline. Keep in mind, though, that past full-cycle results don't guarantee future performance — every new DST carries its own risks, and projections remain projections, not promises.
How do I evaluate the property in a DST?
To evaluate the property, focus on the fundamentals that determine whether the income behind your distributions is durable over a multi-year hold. Start with location and market: is the property in a growing or stable area with healthy job and population trends and demand for its property type? Consider the property type itself — net-lease retail, multifamily, industrial, medical office, and self-storage each carry different demand drivers and risks. Then examine the tenants and leases, which generate the income: for a single-tenant net-lease property, look at the tenant's credit, the remaining lease term, and what happens at expiration; for multi-tenant properties, study the rent roll, occupancy, lease rollover, and tenant concentration. Check current occupancy versus the market, the trend in rents, and any deferred maintenance or capital needs. So evaluating the property means assessing market health, property type, tenant strength, lease terms, occupancy, and demand — the drivers of whether the projected income can be sustained.
What should I look for in a DST's debt structure?
In reviewing a DST's debt, focus on how much financing risk you're taking on alongside the real estate, since leverage magnifies both upside and downside. Start with the loan-to-value ratio: conservative leverage carries less risk than high leverage, which leaves a thinner cushion if property income softens; some DSTs are all-cash (debt-free), removing financing risk but offering no debt replacement. Examine the loan term and maturity relative to the expected hold — a loan maturing in a difficult market can force a refinance or sale at a bad time. Check whether the rate is fixed or floating: a fixed rate locks in the cost of debt, while a floating rate exposes the trust to rising interest costs that can squeeze distributions. Understand interest-only periods, amortization, and the refinancing assumptions in the projections. Because the loan is non-recourse at the trust level, you don't personally qualify for it — but it still shapes your risk. So scrutinize LTV, maturity, rate type, and refinancing risk.
What is a PPM and why should I read the risk factors?
A PPM — Private Placement Memorandum — is the central offering document for a DST, disclosing the property, the sponsor, the structure, the fees, the projections, and the risks. The risk factors section is the part many investors skip, which is exactly why it deserves close reading: it's where the sponsor is required to disclose, in detail, everything that could go wrong. That includes that distributions are projections and not guaranteed, that the investment is illiquid with no public secondary market, that you have no control over management decisions, that the property could lose value, that tenants could default, that debt could be hard to refinance, and that you could lose principal. The PPM also lays out fees, conflicts of interest, the trust's operating restrictions (the 'seven deadly sins'), and the assumptions behind the projected returns. Reading it carefully turns an attractive headline yield into a clear picture of the risk you're accepting. So always read the PPM, and ask questions about anything unclear before investing.
What are the 'seven deadly sins' restrictions in a DST?
The 'seven deadly sins' are a set of restrictions, derived from IRS Revenue Ruling 2004-86, that limit what a DST's trustee can do in order to preserve the trust's status as a 1031-eligible investment. In broad terms, once the offering closes, the trustee generally cannot accept new capital contributions, cannot renegotiate the existing debt or borrow new funds, cannot reinvest sale proceeds, can make only limited capital expenditures on the property (essentially normal repairs and those required by law or existing leases), must distribute cash regularly rather than reserve it beyond reasonable needs, and faces limits on entering new leases or renegotiating existing ones. These constraints are what make a DST a 'passive' structure that qualifies as like-kind real property for a 1031 exchange — but they also mean the trust can't actively manage its way out of trouble the way a direct owner could. So the seven deadly sins are central to how DSTs work, and understanding them is part of reading the PPM and assessing the structure's limitations.
How do I confirm a DST is suitable for me?
Confirming suitability means checking that the DST genuinely fits your situation, not just that it's a sound offering in the abstract. First, confirm you qualify as an accredited investor, since DST interests are securities offered under Regulation D — generally income over $200,000 individually or $300,000 jointly, or net worth over $1 million excluding your home. Then consider whether the illiquid, multi-year hold fits your liquidity needs and risk tolerance, because DSTs generally can't be sold on demand and are held until the sponsor sells. A suitability review with your broker-dealer representative weighs your financial situation, goals, time horizon, and how the DST fits alongside your other holdings — including how much of your exchange you place in any single trust versus diversifying across several. A strong deal that doesn't fit your liquidity needs or concentrates too much capital still isn't the right one. So suitability ties the offering back to your circumstances, and a suitability review is required before you invest.
What fees does a DST charge?
A DST carries an upfront load and ongoing fees, all disclosed in the PPM. The upfront load typically includes selling commissions, a dealer-manager fee, and organizational and offering costs, which together mean not all of your invested capital goes directly into the real estate — these are often summarized as the total load. Ongoing fees commonly include an asset-management fee and a property-management fee charged during the hold, and there may be a disposition fee paid to the sponsor when the property is sold. Because fees reduce your net return, you should know exactly what you're paying and weigh it against the projected return and the quality of the sponsor and asset. A higher-fee DST isn't automatically worse if the underlying offering is strong, but you should compare fees across offerings on a like-for-like basis. So confirm the full fee picture — upfront load and ongoing costs — as part of your due diligence, and factor it into your return expectations.
How many DSTs should I invest in?
There's no single right number, but diversifying across multiple DSTs rather than placing an entire exchange in one trust is a common way to manage risk. Because each DST concentrates in a specific property or small portfolio, with a specific sponsor, debt structure, and market, spreading your exchange across several DSTs — by sponsor, property type, and geography — reduces the impact of any single weak assumption, underperforming tenant, or difficult market. DSTs' relatively low minimums (often around $25,000 to $100,000) make this diversification practical even for a moderate exchange. That said, diversification has trade-offs: more offerings mean more due diligence, more sponsors to vet, and potentially more fees, so it's a balance. The right number depends on the size of your exchange, your risk tolerance, and how comfortable you are concentrating versus spreading. So while there's no fixed rule, diversifying across multiple DSTs is generally prudent, and your representative can help you structure an allocation that fits your situation and the 45-day identification rules.
Can a DST lose money?
Yes — a DST can lose money, and that risk is disclosed throughout the PPM. Distributions are projections, not guarantees, and they can be reduced or suspended if property income falls. The value of the underlying real estate can decline, so the eventual sale could return less than you invested — potentially much less, especially with leverage, which amplifies losses as well as gains. Tenants can default or vacate, occupancy can drop, debt can become difficult to refinance at maturity, and broader market or interest-rate conditions can hurt performance. Because DSTs are illiquid, you generally can't exit early to limit a loss; you're committed until the sponsor sells. Due diligence — vetting the sponsor, analyzing the property, reviewing the debt, and reading the risk factors — reduces these risks but cannot eliminate them. So a DST is a real investment that can lose value, including principal. Treat projected returns as projections, size your investment accordingly, and diversify to manage the downside.
Is a higher projected distribution always better?
No — a higher projected distribution is not always better, and chasing yield is one of the most common DST due diligence pitfalls. A higher projected distribution can reflect higher risk: more leverage, a weaker tenant, a shorter remaining lease, a riskier market, or more aggressive assumptions in the projections. What matters is the durability of the income behind the distribution — whether the tenants, leases, occupancy, and market can actually sustain it over the multi-year hold — and how the projected return compensates you for the risks disclosed in the PPM. A modestly lower projected yield from a strong sponsor with a creditworthy tenant, conservative debt, and a healthy market may be far more attractive than a higher yield resting on shaky assumptions. So evaluate the projected distribution in context, alongside the sponsor, property, debt, and risk factors — never in isolation. And remember that any projected distribution is a projection, not a guarantee; the actual income depends on how the investment performs.
Do all DST sponsors offer the same quality?
No — DST sponsors vary widely in quality, and assuming they're all the same is a serious mistake. Sponsors differ in track record (how long they've operated and through which market cycles), in full-cycle history (how their completed DSTs performed against projections), in assets under management, in financial strength, in fee structures, and in transparency. Some sponsors have decades of experience, deep balance sheets, and a long record of full-cycle offerings that performed as expected; others are newer, thinly capitalized, or have only launched offerings in favorable markets. These differences directly affect your outcome, because a DST is a passive investment in which the sponsor makes the decisions. That's why vetting the sponsor is the foundational step in due diligence and why you should compare sponsors carefully rather than treating any offering as interchangeable. So evaluate each sponsor on its own merits, look hard at full-cycle results, and weigh sponsor quality heavily — it's one of the biggest drivers of how a DST performs.
What's the difference between an all-cash and a leveraged DST?
An all-cash (debt-free) DST owns its property without any mortgage, while a leveraged DST uses a non-recourse loan at the trust level to finance part of the purchase. The difference matters for both risk and exchange planning. An all-cash DST carries no financing risk — no maturity to refinance, no rate sensitivity, no leverage amplifying losses — which makes it generally lower-risk, but it provides no debt replacement, so it suits exchangers whose relinquished property had little or no debt. A leveraged DST, by contrast, lets you replace the debt from your relinquished property without personally qualifying for or guaranteeing the loan, which is important in a 1031 exchange where you generally must replace both equity and debt to fully defer your gain. But leverage amplifies both upside and downside and adds maturity and refinancing risk. So the choice depends partly on your exchange's debt-replacement needs and partly on your risk tolerance. Your representative can help match the structure to your situation.
How does Baker 1031 help me with DST due diligence?
We help investors work through DST due diligence — vetting the sponsor, analyzing the property and market, reviewing the debt structure, reading the PPM risk factors, and confirming suitability and fees — so you can compare offerings on substance and invest only when a DST genuinely fits your goals. 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, liquidity needs, time horizon, and risk tolerance. We help you evaluate sponsors' track records and full-cycle history, examine the underlying real estate and its tenants and leases, understand the debt's loan-to-value, maturity, and rate structure, work through the PPM and its risk factors, and weigh the load and ongoing fees — and we encourage diversifying across multiple DSTs where appropriate. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation. We're candid that DSTs are illiquid, that distributions are projections, and that sponsors vary widely — 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.
- Due Diligence
- The process of evaluating an offering's risks before investing.
- Sponsor
- The company that acquires, structures, and manages a DST.
- Full-Cycle DST
- A DST taken from acquisition through to sale.
- Track Record
- A sponsor's history of offerings across market cycles.
- Assets Under Management (AUM)
- The total value of assets a sponsor manages.
- PPM
- Private Placement Memorandum — the DST's central offering document.
- Risk Factors
- The PPM section disclosing what could go wrong.
- Loan-to-Value (LTV)
- The ratio of loan amount to property value (leverage).
- Non-Recourse Loan
- Trust-level debt for which investors aren't personally liable.
- Fixed vs. Floating Rate
- Whether a loan's interest rate is locked or variable.
- Seven Deadly Sins
- IRS restrictions limiting what a DST trustee may do.
- Load
- The upfront fees and commissions on a DST offering.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Suitability Review
- Assessing whether a DST fits the investor's situation.
- Diversification
- Spreading an exchange across multiple DSTs to manage risk.
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.
