Florida has been one of the fastest-growing states in the country, with strong in-migration, job growth, and a steady stream of new residents and businesses. That growth has driven real estate values higher, leaving many Florida investors sitting on appreciated rentals — and facing the same dilemma owners everywhere face: how to exit an active rental without a large capital-gains tax bill, and without continuing to manage tenants and properties. A Delaware Statutory Trust (DST) offers one answer. A DST holds income-producing real estate, and an investor's fractional beneficial interest qualifies as like-kind real property for a 1031 exchange (under IRS Revenue Ruling 2004-86), so a Florida owner can sell an active rental and exchange into a passive, professionally managed DST while deferring federal capital-gains tax. Because Florida, like Texas, has no state income tax, the value of a 1031 here is primarily federal deferral — there's no state-level gain to defer. This guide explains why Florida investors use DSTs, the no-state-income-tax benefit, Florida's Sunbelt growth markets, how to source Florida and out-of-state DSTs, and how to plan your exchange. Note that DST interests are securities offered through a broker-dealer to accredited investors after a suitability review, and Baker 1031 does not provide tax or legal advice — verify the current rules with your CPA.
Why Florida Investors Use DSTs
Florida investors are drawn to DSTs for the universal reasons — passivity, diversification, and 1031 tax deferral — and the Florida context strengthens the appeal. Many Florida landlords have owned single-family rentals, vacation properties, small multifamily, or commercial buildings that have appreciated sharply as the state's population and economy have grown, particularly in metros like Miami, Tampa, Orlando, Jacksonville, and Fort Lauderdale. Selling an appreciated rental outright triggers federal capital-gains tax and depreciation recapture, while continuing to own it means continuing to manage it — and managing rentals in a hurricane-prone, seasonal, and increasingly expensive-to-insure market can be demanding. A DST lets an owner sell the active rental and 1031 the proceeds into a passive, fractional interest in institutional-quality real estate, deferring the tax.
The passivity often seals the decision. A DST is sponsor-managed — a professional sponsor owns, operates, and eventually sells the underlying property, while the investor receives a share of the net rental income (distributions are projections, not guaranteed). For a Florida investor tired of insurance headaches, storm-season worries, seasonal tenant turnover, or out-of-state landlording, trading active management for passive ownership is a meaningful change, especially for retirees and snowbirds who split time between states. DSTs also offer diversification — an investor can split a single exchange across multiple DSTs and markets — and relatively low minimums (often around $100,000), with a fast, predictable close that helps meet the 1031 timeline.
So Florida investors use DSTs to convert an active, taxable rental sale into passive, tax-deferred, diversified income. Why Florida investors use DSTs — exiting active rentals (single-family, vacation, multifamily, commercial) that have appreciated as the state grew, deferring federal capital-gains tax through a 1031, and moving into passive, sponsor-managed, fractional real estate with diversification and low minimums, while shedding the insurance, storm, and seasonal-management burdens of Florida landlording — reflects both universal DST benefits and Florida specifics. Passivity often seals the decision. Understanding the appeal frames the rest. Florida investors use DSTs to sell appreciated, management-intensive rentals and 1031 into passive, diversified, professionally managed real estate, deferring federal capital-gains tax in the process.
For a Florida landlord weary of insurance costs, storm-season worries, and seasonal turnover, a DST trades hands-on management for a passive, fractional stake — while deferring the federal tax on the sale.
No State Income Tax Benefit
Florida is one of the states with no state income tax, and that shapes how a 1031 exchange works for Florida property. In a state with an income tax, a 1031 defers both federal and state capital-gains tax. In Florida, there's no state-level capital-gains tax on the sale of investment real estate to begin with, so the value of a 1031 exchange — and of a DST as replacement property — is primarily the deferral of federal capital-gains tax, the 3.8% net investment income tax, and depreciation recapture. There's no state gain to defer because the state doesn't tax that gain in the first place, just as in Texas.
This doesn't diminish the value of a 1031 for Florida investors — federal capital-gains tax plus the net investment income tax and depreciation recapture can still claim a large share of a sale, and deferring it keeps far more capital compounding in the replacement property. It simply means the Florida planning conversation centers on federal tax, not a federal-plus-state stack like California's. It also means a Florida investor sourcing an out-of-state DST should consider whether the replacement property's state imposes income or filing obligations on the income it generates, even though Florida itself does not — a point to confirm with a CPA, since state rules vary and this is educational information, not advice.
So the no-state-income-tax benefit means a Florida 1031's primary value is federal deferral, with no state gain to defer. The no-state-income-tax benefit — Florida imposing no state income tax, so the sale of investment real estate generates no state-level capital-gains tax, making a 1031 exchange and a DST primarily a federal-deferral tool (federal capital gains, the 3.8% net investment income tax, and depreciation recapture) rather than a federal-plus-state one — defines the Florida planning context, much like Texas. It keeps the focus on federal tax. A Florida investor should still consider any out-of-state replacement property's own state rules with a CPA. Florida has no state income tax, so a 1031's value for Florida property is primarily federal capital-gains and recapture deferral — there's no state gain to defer, though out-of-state replacement property may carry its own state obligations.
- Florida has no state income tax, so a 1031's value for Florida property is primarily federal capital-gains deferral — there's no state gain to defer.
- A DST interest is 1031-eligible like-kind real property (Rev Rul 2004-86), letting Florida owners exit active rentals into passive, professionally managed real estate.
- Florida is a fast-growing Sunbelt market, and investors can source DSTs in Florida, elsewhere in the Sunbelt, or anywhere in the country.
- DST interests are securities offered through Aurora Securities, Inc. (member FINRA/SIPC) to accredited investors after a suitability review; distributions are projected, not guaranteed.
Sunbelt Growth Markets
Florida is a leading Sunbelt growth market, and that backdrop is part of what makes Florida-market real estate attractive in a DST. The state has seen strong in-migration — retirees, remote workers, and businesses relocating from higher-tax and higher-cost states — along with job growth and ongoing development. That demand has supported the market for apartments, logistics and industrial space, retail, healthcare, hospitality, and self-storage across the state's major metros. For a DST investor, exposure to a growing market like Florida can be appealing because population and job growth tend to support real estate demand over time.
But growth markets cut both ways. The same in-migration and development that drive demand also attract new construction and supply, which can pressure rents and values, and fast-growing Sunbelt markets can be more volatile than supply-constrained coastal ones. Florida specifically carries additional considerations — hurricane and flood risk, rising property-insurance costs, and the cyclicality of some tourism- and hospitality-linked sectors. So the growth backdrop creates opportunity, but it comes with real risk. This is one reason diversification matters: spreading an exchange across multiple DSTs and markets can temper the volatility any single growth market may experience. Projected returns are never guaranteed, and all real estate carries risk.
So Sunbelt growth markets like Florida offer demand-supporting growth alongside supply and climate-related risks. Sunbelt growth markets — Florida's strong in-migration, job growth, and development supporting demand for apartments, industrial, retail, healthcare, hospitality, and self-storage, balanced against the new-supply volatility of growth markets and Florida-specific risks like hurricanes, flood exposure, rising insurance costs, and tourism cyclicality — make Florida real estate attractive but risky in a DST. Diversification helps temper that. Returns are never guaranteed. Understanding the market dynamics informs the decision. Florida is a fast-growing Sunbelt market whose in-migration and job growth support real estate demand, but growth brings new-supply volatility and Florida-specific risks (storms, insurance, tourism cyclicality) — which diversification across DSTs and markets helps manage.
Florida's growth is real, but it cuts both ways: the in-migration that drives demand also invites new supply, and storms, insurance costs, and tourism cycles add risk that diversification helps temper.
Sourcing Florida & Out-of-State DSTs
A key point for Florida investors is that 1031 replacement property does not have to be located in Florida — or in any particular state. The like-kind standard for real estate is broad: U.S. investment real estate is generally like-kind to other U.S. investment real estate, regardless of state or property type. So a Florida investor selling a Tampa or Orlando rental can exchange into a DST holding property in Florida, elsewhere in the Sunbelt, or anywhere in the country. This geographic flexibility lets an investor pursue the best available opportunities and diversify away from concentration in a single market — useful for a Florida investor who may already be heavily exposed to Florida real estate and Florida-specific risks like storms and insurance.
In practice, sourcing means identifying the DST offerings available at the time of the exchange that fit the investor's objectives — income, growth, diversification, debt replacement, risk tolerance — and that can close within the 1031 timeline. Because DSTs are pre-packaged and can close quickly (often in days), they suit the 45-day identification and 180-day completion deadlines and make excellent backup identifications. Many Florida investors deliberately blend Florida-market DSTs with out-of-state offerings — pairing the growth potential of Florida and Sunbelt property with steadier, supply-constrained markets elsewhere — to balance growth and stability. Sourcing is done through a broker-dealer, since DST interests are securities.
So sourcing is flexible — Florida investors can exchange into DSTs anywhere, blending Florida-market and out-of-state offerings to fit their goals. Sourcing Florida and out-of-state DSTs — recognizing that 1031 replacement need not be in Florida (U.S. investment real estate is broadly like-kind), so a Florida seller can exchange into Florida-market, Sunbelt, or other out-of-state DSTs, choosing offerings that fit their goals and can close within the 45/180-day deadlines, and diversifying away from concentrated Florida exposure — gives investors wide latitude. DSTs' fast close suits the timeline. Sourcing runs through a broker-dealer. Florida investors can source DST replacement property anywhere in the U.S., blending Florida-market and out-of-state offerings through a broker-dealer to fit their goals and diversify away from concentrated Florida risk.
Diversifying Beyond Florida
Many Florida investors are heavily concentrated in Florida real estate — they live in the state and own most or all of their rental property there — which means their wealth is exposed to a single market and its specific risks: hurricanes, flooding, rising insurance costs, and the cyclicality of tourism- and hospitality-linked sectors. A 1031 exchange into DSTs offers a practical way to diversify that concentration. Because a single exchange can be split across multiple DSTs (subject to the identification rules), a Florida investor can spread exchange proceeds across different property types and different geographic markets in one transaction.
A Florida investor might, for example, keep some exposure to a Florida-market multifamily or industrial DST (capturing in-state growth) while adding out-of-state net-lease, healthcare, or industrial DSTs in other regions — reducing reliance on Florida's climate and tourism dynamics. This kind of geographic and sector diversification doesn't eliminate risk (all the holdings are still real estate), but it can temper the impact of any single market's downturn or any single property's underperformance. For investors who have built their wealth in Florida real estate, using a 1031 into DSTs to diversify is often as much about managing concentration risk as it is about deferring tax. As always, returns are not guaranteed.
So diversifying beyond Florida lets concentrated investors spread risk across markets and sectors within a single exchange. Diversifying beyond Florida — Florida investors who are concentrated in in-state property (and its hurricane, flood, insurance, and tourism risks) using a 1031 into multiple DSTs to spread exchange proceeds across property types and geographies in one transaction, blending some Florida-market exposure with out-of-state net-lease, healthcare, or industrial DSTs — manages concentration risk while keeping capital invested and tax deferred. It tempers, not eliminates, risk. Understanding it helps concentrated investors plan. Florida investors concentrated in in-state real estate can use a 1031 into multiple DSTs to diversify across markets and sectors in a single exchange, tempering Florida-specific concentration risk while deferring tax.
Planning Your Exchange
Planning a Florida 1031 into a DST is more straightforward than a California exchange (no clawback or special state reporting on the Florida side), but it still rewards preparation. The core players are a qualified intermediary (to hold the proceeds and preserve deferral), a CPA (to handle the federal tax — capital gains, the net investment income tax, and depreciation recapture — and any out-of-state replacement-property considerations), and a DST advisor at a broker-dealer (to source and screen suitable offerings and meet the 45-day and 180-day deadlines). Lining up an advisor and QI before the sale closes is the single best way to ensure a smooth, on-time exchange.
Good planning also means setting clear objectives and being candid about trade-offs. A Florida investor should decide what they want — higher current income, diversification, passivity, debt replacement, estate planning — and weigh it against the realities of DSTs: illiquidity (typically a five-to-seven-year hold), fees, sponsor-execution risk, and unguaranteed distributions. DSTs are limited to accredited investors and offered through a broker-dealer after a suitability review, so confirming suitability is part of the process. For a Florida investor, the advisor can also help structure diversification away from concentrated Florida exposure and flag any out-of-state-property tax considerations to confirm with the CPA. The advisor coordinates; the CPA and attorney handle tax and legal specifics.
So planning your exchange means assembling a team, setting objectives, and weighing the trade-offs candidly. Planning your exchange — assembling a qualified intermediary, CPA, and DST advisor early; setting clear objectives (income, diversification, passivity, debt replacement, estate planning); weighing DST illiquidity, fees, sponsor risk, and unguaranteed distributions; confirming accredited suitability; and using the advisor to structure diversification away from concentrated Florida exposure while the CPA handles federal and any out-of-state tax — is how Florida investors execute a DST exchange well. Preparation ensures an on-time exchange. The advisor coordinates while tax professionals handle specifics. Florida investors plan a DST exchange by assembling a QI, CPA, and DST advisor, setting objectives, weighing DST trade-offs candidly, confirming suitability, and diversifying — with the CPA handling federal and any out-of-state tax.
How Baker 1031 Helps Florida Investors
Baker 1031 Investments helps Florida investors use DSTs in a 1031 exchange — understanding why Florida investors use DSTs, what the no-state-income-tax benefit means, Florida's Sunbelt growth markets, how to source Florida and out-of-state DSTs, how to diversify beyond concentrated Florida exposure, and how to plan their exchange — so they can exit active rentals into passive, diversified, tax-deferred income suited to their goals.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation, including how a Florida 1031 defers federal capital-gains tax and depreciation recapture and how any out-of-state replacement property may be treated — state rules vary, so verify the current rules with your CPA, as this is educational information, not advice. We help you understand the DST structure, review offerings and sponsors generically (we describe sample property types, not specific securities, until a suitable match is identified), coordinate with your qualified intermediary and tax professionals, and source replacement property — in Florida, the Sunbelt, or anywhere — that fits your income, growth, diversification, and timeline needs, including diversifying away from concentrated Florida risk. We're candid that DSTs are illiquid, carry fees and sponsor risk, and offer no guaranteed returns; distributions and appreciation are projections only. Our role is to help you invest only when a DST is suitable for your goals and risk tolerance.
Frequently Asked Questions
Why do Florida investors use DSTs?
Florida investors use DSTs to exit active rental property — single-family rentals, vacation properties, small multifamily, or commercial buildings that have appreciated as the state's population and economy grew, particularly in metros like Miami, Tampa, Orlando, Jacksonville, and Fort Lauderdale — without triggering a large capital-gains tax bill and without continuing to manage the property. A DST holds income-producing real estate, and an investor's fractional beneficial interest qualifies as like-kind real property for a 1031 exchange (under IRS Revenue Ruling 2004-86), so a Florida owner can sell an active rental and exchange the proceeds into a passive, sponsor-managed DST while deferring federal capital-gains tax. The passivity often seals the decision — especially for owners tired of rising insurance costs, storm-season worries, seasonal turnover, or out-of-state landlording, and for retirees and snowbirds who split time between states. DSTs also offer diversification, relatively low minimums (often around $100,000), and a fast close that helps meet the 1031 deadlines. So Florida investors use DSTs to turn an active, taxable rental into passive, diversified, tax-deferred income.
Does Florida have a state capital-gains tax on real estate?
No — Florida is one of the states with no state income tax, and it imposes no separate state-level capital-gains tax on the sale of investment real estate. This shapes how a 1031 exchange works for Florida property. In a state with an income tax, a 1031 defers both federal and state capital-gains tax; in Florida, there's no state gain to defer in the first place, so the value of a 1031 exchange — and of a DST as replacement property — is primarily the deferral of federal capital-gains tax, the 3.8% net investment income tax, and depreciation recapture. This is the same dynamic as in Texas. It doesn't make a 1031 less worthwhile, since federal taxes and recapture can still be substantial, but it keeps the Florida planning conversation focused on federal tax rather than a federal-plus-state stack like California's. One caveat: if a Florida investor exchanges into out-of-state replacement property, that property's state may impose its own obligations — a point to confirm with a CPA, since state rules vary and this is educational information, not advice.
Can I exchange a Florida property into a DST in another state?
Yes. The like-kind standard for real estate is broad — U.S. investment real estate is generally like-kind to other U.S. investment real estate, regardless of state or property type — so 1031 replacement property does not have to be located in Florida or in any particular state. A Florida investor selling a Tampa, Orlando, or Miami rental can exchange into a DST holding property in Florida, elsewhere in the Sunbelt, or anywhere in the country. This geographic flexibility is especially useful for Florida investors, because many are heavily concentrated in Florida real estate and its specific risks — hurricanes, flooding, rising insurance costs, and tourism cyclicality — so exchanging into out-of-state DSTs is a practical way to diversify. Many Florida investors deliberately blend Florida-market exposure with out-of-state DSTs to balance growth and stability. The main thing to verify is whether out-of-state replacement property carries the destination state's own tax or filing obligations even though Florida does not — confirm that with your CPA. So yes, you can exchange a Florida property into a DST in any state.
How does Florida's lack of a state income tax affect my 1031?
Because Florida has no state income tax and no separate state capital-gains tax on real estate, a 1031 exchange of Florida property defers primarily federal tax — federal capital-gains tax, the 3.8% net investment income tax, and depreciation recapture — rather than a federal-plus-state stack. In a high-tax state like California, a 1031 also defers a substantial state-level gain (and triggers clawback and reporting rules); in Florida, there's no state gain to defer because the state doesn't tax it, just as in Texas. This doesn't reduce the value of a 1031 for Florida investors — federal capital-gains rates plus the net investment income tax and recapture can still claim a large share of a sale, and deferring that keeps far more capital compounding. It simply means the planning focus is federal. One nuance: if you exchange into out-of-state property, that state may tax the income the replacement generates, so the no-state-income-tax benefit applies to the Florida side, not necessarily to out-of-state replacement property. Confirm the details with your CPA, since this is educational, not advice.
Is Florida a good market for DST property?
Florida has been an attractive market for real estate because it's a leading Sunbelt growth state — strong in-migration (retirees, remote workers, and relocating businesses), job growth, and ongoing development have supported demand for apartments, logistics and industrial space, retail, healthcare, hospitality, and self-storage. For a DST investor, exposure to a growing market like Florida can be appealing because population and job growth tend to support real estate demand over time. But growth markets cut both ways: the same in-migration and development that drive demand also attract new construction and supply, which can pressure rents and values, and fast-growing Sunbelt markets can be more volatile than supply-constrained coastal ones. Florida also carries specific risks — hurricane and flood exposure, rising property-insurance costs, and the cyclicality of tourism-linked sectors. So Florida can be an attractive but risky market for DST property, and projected returns are never guaranteed. Diversifying across markets and sectors helps manage the risk. Evaluate any specific Florida offering on its own merits with your advisor.
What kinds of Florida-market DSTs are available?
DST sponsors regularly assemble offerings that hold real estate in Florida markets, reflecting the state's growth. Described generically — not as recommendations of any specific security — sample offerings have historically included multifamily apartment communities in growing metros, industrial and logistics facilities serving freight and e-commerce corridors, net-lease retail and medical properties with creditworthy tenants, self-storage assets, and student housing near major universities. The appeal of Florida-market property tracks the state's in-migration, job growth, and development, which support demand for housing, logistics space, and services. Actual availability changes constantly, so think in terms of the property types that tend to appear in the market rather than a fixed menu. Every specific offering must be evaluated on its own merits, and Florida-market property carries growth-market risks (new supply, volatility) plus Florida-specific risks like storms, flood exposure, and insurance costs. So a range of Florida-market DSTs is typically available across multifamily, industrial, net-lease, and specialty sectors, with availability and risk varying by offering. Confirm current availability with your DST advisor.
Should I diversify beyond Florida real estate?
Many Florida investors are heavily concentrated in Florida real estate — they live in the state and own most or all of their rental property there — which means their wealth is exposed to a single market and its specific risks: hurricanes, flooding, rising insurance costs, and tourism cyclicality. A 1031 exchange into DSTs offers a practical way to diversify that concentration. Because a single exchange can be split across multiple DSTs (subject to the identification rules), a Florida investor can spread exchange proceeds across different property types and geographic markets in one transaction — for example, keeping some Florida-market exposure while adding out-of-state net-lease, healthcare, or industrial DSTs. This geographic and sector diversification doesn't eliminate risk (all the holdings are still real estate), but it can temper the impact of any single market's downturn. For investors who have built their wealth in Florida real estate, using a 1031 into DSTs to diversify is often as much about managing concentration risk as deferring tax. So diversifying beyond Florida can be a sound risk-management move — discuss your specific situation with your advisor.
Is a DST a passive investment?
Yes — passivity is one of the main reasons Florida investors choose DSTs. In a DST, a professional sponsor owns, operates, and eventually sells the underlying real estate, while the investor holds a fractional beneficial interest and simply receives a share of the net rental income. The investor has no management responsibilities — no tenants to screen, no repairs to coordinate, no insurance to negotiate, no leasing or financing decisions to make. This is a sharp contrast to owning an active Florida rental, where the landlord handles everything, including the state's demanding insurance and storm-preparation realities. For a Florida investor who has spent years managing rentals — or for retirees and snowbirds who don't want to manage property from out of state — the shift to passive ownership is often the deciding factor. The trade-off for that passivity is loss of control: the investor doesn't make operating decisions and relies on the sponsor's execution, which is itself a risk. Distributions are projected, not guaranteed, and the investment is illiquid for the hold. So a DST is genuinely passive, with control and liquidity given up in exchange.
What are the minimum investment requirements for a DST?
DST minimums vary by sponsor and offering, but they're often around $100,000 for a 1031 exchange investment (some all-cash, non-1031 investments may have lower minimums, and certain offerings set higher ones). That's typically far less than the capital required to buy a comparable institutional-quality property outright, which is part of what makes DSTs accessible and what enables diversification — a Florida investor with, say, $1 million of exchange proceeds could spread it across multiple DSTs and markets rather than buying a single replacement property. DSTs are also limited to accredited investors and are offered through a broker-dealer after a suitability review, so meeting the financial-qualification thresholds for accredited status is a prerequisite. Beyond the minimum, an investor should weigh each offering's fees, projected distributions (which are estimates, not guarantees), hold period, leverage, and sponsor track record. So while minimums are relatively low compared with direct ownership, the more important questions are suitability, diversification, and the specifics of each offering. Confirm current minimums and requirements with your DST advisor for any given offering.
How long is a typical DST hold period?
A typical DST hold period is around five to seven years, though it varies by offering and by the sponsor's business plan and market conditions. During the hold, the sponsor operates the property and distributes net rental income to investors (distributions are projections, not guarantees), and at the end of the hold the sponsor sells the property. When the property sells, investors can take their proceeds as cash (paying the deferred tax), complete another 1031 exchange into a new DST or other replacement property to continue deferral, or, in some cases, participate in a 721 (UPREIT) exchange that rolls the interest into a REIT's operating partnership. Because a DST is illiquid — there's limited or no secondary market — an investor should be prepared to remain invested for the full hold, which makes the hold period an important suitability consideration. The hold is also why DSTs suit investors who want income over a defined period rather than ready access to their capital. So plan for a multi-year commitment, typically five to seven years, and discuss exit options with your advisor before investing.
Are DST distributions guaranteed?
No — DST distributions are never guaranteed. The income an investor receives from a DST comes from the net rental income the underlying property generates, and that income depends on real factors: occupancy, rent levels, operating expenses, insurance costs (significant in Florida), and (for leveraged DSTs) debt service. Any distribution figures presented for an offering are projections based on the sponsor's assumptions, not promises — actual results can be higher or lower, and distributions can be reduced or suspended if the property underperforms. This is true of all DSTs and is a core risk of the structure. It's also why DSTs are offered only to accredited investors after a suitability review, and why a responsible advisor is candid that returns and income are not guaranteed and that past performance does not predict future results. Investors should size and diversify their DST holdings with this in mind — for example, by spreading an exchange across multiple offerings and markets to reduce reliance on any single property. So treat projected distributions as estimates, not guarantees, and invest only what fits your risk tolerance and goals.
Do I need a qualified intermediary for a Florida DST exchange?
Yes — like any 1031 exchange, a Florida DST exchange requires a qualified intermediary (QI). A QI is an independent third party who holds the proceeds from the sale of your relinquished Florida property and then uses them to acquire the replacement property (the DST interest) on your behalf, so that you never take constructive receipt of the funds — which is essential to preserving the tax deferral. You must set up the QI before closing the sale of your relinquished property; you can't take the cash first and add a QI later. The QI also helps you meet the strict 1031 deadlines: identifying replacement property within 45 days and completing the exchange within 180 days. For a Florida DST exchange, your DST advisor typically coordinates with the QI and your CPA to ensure the offering closes within the timeline and the paperwork is correct. So a QI is a required part of the process, and lining one up before your sale closes is essential. Your advisor and CPA can help you select and coordinate with a qualified intermediary.
What are the risks of investing in a Florida-market DST?
A Florida-market DST carries the same core risks as any DST, plus considerations specific to Florida and growth markets. Core DST risks include illiquidity (you generally can't sell your interest and must remain invested for the multi-year hold), fees (which reduce net returns), sponsor-execution risk (you rely on the sponsor to operate and sell the property well), and the ordinary risks of real estate (declining occupancy, rents, or property values; interest-rate pressure on leveraged deals). Distributions are projected, not guaranteed. Florida and Sunbelt growth markets add specific dynamics: strong growth supports demand but can attract new supply and volatility, and Florida carries hurricane and flood risk, rising property-insurance costs, and tourism cyclicality that can affect certain sectors. So the same fundamentals that create opportunity also create risk. Diversifying across markets and sectors helps manage — but does not eliminate — these risks. DSTs are offered only to accredited investors after a suitability review. So weigh both the universal DST risks and Florida-specific dynamics, and invest only what suits your goals and risk tolerance.
Can I use a DST for retirement income as a Florida investor?
Yes — many Florida investors, including retirees and snowbirds, use DSTs as a source of passive retirement income, though suitability is always individual. A DST produces regular distributions from the net rental income of the underlying property (distributions are projections, not guarantees), and because the investment is fully passive, there's no property to manage — an appealing feature for retirees who don't want to handle tenants, repairs, insurance, or storm preparation, especially from out of state. By exchanging an appreciated active rental into one or more DSTs, a Florida retiree can defer the federal capital-gains tax, move into passive income, and diversify across markets and sectors. The trade-offs matter, though: DSTs are illiquid, typically held five to seven years, so a retiree should ensure they won't need the committed capital during the hold and should maintain other liquid resources. Distributions aren't guaranteed and can fluctuate with property performance. DSTs are also limited to accredited investors and offered after a suitability review. So a DST can be a useful passive retirement-income tool for a qualifying Florida investor who understands the illiquidity and risk. Confirm suitability with your advisor and CPA.
How does Baker 1031 help Florida investors with DSTs?
We help Florida investors use DSTs in a 1031 exchange — understanding why Florida investors use DSTs, what the no-state-income-tax benefit means, Florida's Sunbelt growth markets, how to source Florida and out-of-state DSTs, how to diversify beyond concentrated Florida exposure, and how to plan their exchange — so they can exit active rentals into passive, diversified, tax-deferred income. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation, including how a Florida 1031 defers federal capital-gains tax and recapture and how any out-of-state replacement property is treated — verify the current rules with your CPA. We help you understand the structure, review offerings and sponsors (described generically until a suitable match is identified), coordinate with your qualified intermediary and tax professionals, and source replacement property that fits your goals and timeline, including diversifying away from concentrated Florida risk. We're candid that DSTs are illiquid, carry fees and sponsor risk, and offer no guaranteed returns — distributions are projections only. Our role is to help you invest only when a DST is suitable for you.
Glossary
- Delaware Statutory Trust (DST)
- A trust holding income-producing real estate in which investors own fractional beneficial interests.
- 1031 Exchange
- A swap of like-kind investment real estate that defers capital-gains tax.
- Like-Kind Property
- U.S. investment real estate, broadly interchangeable regardless of state or type.
- Beneficial Interest
- An investor's fractional ownership stake in a DST's real estate.
- Revenue Ruling 2004-86
- The IRS ruling treating a DST interest as 1031-eligible real property.
- No State Income Tax
- Florida's lack of state income or state capital-gains tax.
- Federal Capital-Gains Tax
- The federal tax on a property's gain that a 1031 defers.
- Depreciation Recapture
- Tax on previously claimed depreciation, also deferred by a 1031.
- Net Investment Income Tax
- The 3.8% federal surtax that can apply to investment gains.
- Sunbelt
- Fast-growing southern and southwestern markets, including Florida.
- In-Migration
- Population moving into a state, driving real estate demand in Florida.
- Sponsor
- The firm that acquires, operates, and sells a DST's property.
- Qualified Intermediary (QI)
- The independent party that holds exchange proceeds to preserve deferral.
- 45-Day / 180-Day Rules
- The 1031 deadlines to identify and complete an exchange.
- Accredited Investor
- An investor meeting income or net-worth thresholds for DST offerings.
- Broker-Dealer
- The firm through which DST securities are offered after suitability review.
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
- FINRA. Real Estate Investments
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.
