When you invest in a Delaware Statutory Trust (DST), almost everything you need to know is contained in two documents: the Private Placement Memorandum (PPM) and the subscription agreement. The PPM is the offering's disclosure document — it describes the property, the business plan, the financing, the fees, the tax and legal opinions, and, critically, the risk factors. The subscription agreement is your purchase contract — the document you sign to buy your beneficial interest, in which you also make a series of representations about yourself, including affirming your accredited-investor status. Because DSTs are typically offered under Regulation D Rule 506(c) — a private placement available only to accredited investors who can be generally solicited but whose status must be verified — these documents are how the offering is disclosed and how your eligibility is established. Reading them carefully is the single most important thing you can do before investing. This walkthrough explains what the PPM contains, how to read the risk factors, what the subscription agreement is, your suitability representations, and the questions to ask before you sign. Note that DST interests are securities, Baker 1031 does not provide tax or legal advice, and you should coordinate with your CPA and attorney — this is educational information, not investment advice.
What the PPM Contains
The Private Placement Memorandum (PPM) is the master disclosure document for a DST offering, and it contains essentially everything material about the investment. At its core, the PPM describes the offering terms (how much is being raised, the price per interest, the minimum investment) and the property — its location, type, condition, tenancy, and the sponsor's business plan for it. It also discloses the financing: whether the trust used debt, how much, on what terms, and whether it's non-recourse to investors. For a 1031 investor needing to replace debt, the financing details are particularly important.
Beyond the property and financing, the PPM lays out the fees — the upfront load and offering costs, the ongoing management and administrative fees, and the disposition fees — so you can see the full cost of the investment and how much of your capital is actually deployed into real estate. It includes the tax opinion (a counsel's analysis supporting the DST's treatment as like-kind real property under Revenue Ruling 2004-86) and the legal opinions, the trust agreement and master-lease structure, the sponsor's track record, and — most importantly — a detailed risk-factors section. The PPM is dense, but every section matters.
So the PPM contains the offering terms, the property and business plan, the financing, the fees, the tax and legal opinions, and the risk factors — essentially everything material about the DST. What the PPM contains — the offering terms and minimum, the property and the sponsor's business plan, the financing and its non-recourse character, the full fee load (upfront, ongoing, and disposition), the tax opinion supporting 1031 eligibility, the legal opinions and trust and master-lease structure, the sponsor's track record, and the detailed risk factors — makes it the master disclosure document for the offering. Reading it in full is essential. Understanding what the PPM contains frames the rest of your review. The PPM is the DST's master disclosure document, containing the offering terms, property and business plan, financing, fees, tax and legal opinions, and risk factors — essentially everything material about the investment.
Reading the Risk Factors
The risk-factors section of the PPM deserves your most critical attention, because it's where the offering discloses, in plain terms, what could go wrong. This section is required to be candid, and a thorough PPM will list a long set of risks. Market risk covers the possibility that real estate values or rents in the property's market decline. Tenant risk addresses the danger of a major tenant defaulting, vacating, or failing to renew — especially significant for single-tenant net-lease DSTs, where one tenant drives the entire income.
Financing risk covers the debt at the trust level: the possibility that the property can't service its loan, that refinancing on maturity proves difficult, or that a downturn impairs the trust's ability to meet obligations. Liquidity risk is fundamental to DSTs — you generally can't sell your interest, and you're committed until the sponsor sells the property, with no secondary market to rely on. Sponsor risk addresses the sponsor's ability to execute the business plan competently and honestly. There are also DST-specific risks tied to the 'seven deadly sins' trustee restrictions, which limit the trust's flexibility to respond to problems. Read each of these as if it could happen, because any of them can.
So reading the risk factors means taking each disclosed risk — market, tenant, financing, liquidity, sponsor, and the structural DST limitations — seriously, because the PPM is telling you exactly what could go wrong. Reading the risk factors — studying the PPM's candid disclosure of market risk (declining values and rents), tenant risk (default or vacancy, acute for single-tenant net-lease DSTs), financing risk (debt service and refinancing), liquidity risk (the inability to sell and the multi-year commitment), sponsor risk (execution), and DST-specific trustee restrictions — is the most important part of your review, because these are the offering's own warnings about what could go wrong. Read each as a real possibility. Understanding the risk factors grounds your decision. Reading the risk factors means critically studying the PPM's disclosure of market, tenant, financing, liquidity, sponsor, and structural DST risks — taking each seriously, because the document is telling you exactly what could go wrong.
The risk-factors section is not boilerplate to skim past — it is the sponsor telling you, in writing and under legal obligation, every way this investment could lose money. Read it that way.
The Subscription Agreement
The subscription agreement is your purchase contract for the DST beneficial interest — the document you actually sign to commit to the investment. Where the PPM discloses the offering, the subscription agreement is the binding instrument that records your purchase. It specifies the dollar amount you're investing and the number (or fraction) of beneficial interests that represents, and it identifies precisely how you'll hold title — which, in a 1031 exchange, must match the taxpayer that sold your relinquished property to preserve the same-taxpayer requirement.
The subscription agreement also sets out the mechanics of the purchase: how and when you fund (for a 1031 investor, by directing your qualified intermediary to wire the exchange proceeds), the conditions under which the sponsor accepts or rejects your subscription, and the trust's governing terms you're agreeing to. Critically, it contains your investor representations — the statements you make about yourself to qualify for the offering — which is the subject of the next section. Signing the subscription agreement is what commits you to the offering, subject to the sponsor's acceptance and the offering not being oversubscribed. It's a contract, so understand it before signing.
So the subscription agreement is your binding purchase contract — it records your investment amount, your title-holding, the funding mechanics, and your representations, and signing it commits you to the offering. The subscription agreement — the binding purchase contract that records your investment amount and beneficial interests, specifies your title-holding (which must match the relinquished-property taxpayer in a 1031), sets out the funding mechanics and the sponsor's acceptance conditions, and contains your investor representations — is the document you sign to commit to a DST, subject to acceptance. It's a contract, not a formality. Understanding the subscription agreement shows what you're actually signing. The subscription agreement is your binding purchase contract: it records your investment, your titling (which must match the relinquished-property taxpayer in a 1031), the funding mechanics, and your representations — signing it commits you to the offering.
Investor Suitability Reps
Within the subscription agreement, you make a series of investor representations — formal statements affirming that you're qualified and informed. The most important is your accredited-investor representation: you affirm that you meet the accredited-investor standard (by income, net worth, or professional qualification), which is required because DSTs are offered under Regulation D to accredited investors. Under Rule 506(c), this representation is backed by verification — the sponsor or broker-dealer must take reasonable steps to confirm your status, so you provide supporting documentation rather than merely self-certifying.
You also represent that you've received and read the PPM (including the risk factors), that you understand the investment is illiquid and speculative, that you can bear the economic risk (including a total loss) and have no need for near-term liquidity from this capital, and that you're not relying on the sponsor for tax or legal advice. These representations matter: they're the basis on which the sponsor accepts you into a private offering, and they confirm the offering's compliance with the securities exemption it relies on. They also underscore your responsibilities as an investor — you're affirming, in writing, that you understand what you're buying and can afford the risk.
So your investor suitability representations affirm your accredited status (with verification under 506(c)), that you've read the PPM, that you understand the risks and illiquidity, and that you can bear a potential total loss. Investor suitability reps — the representations in the subscription agreement affirming your accredited-investor status (verified under Rule 506(c)), that you've received and read the PPM and its risk factors, that you understand the investment is illiquid and speculative, that you can bear the economic risk including total loss, and that you're not relying on the sponsor for tax or legal advice — are how you qualify for the offering and confirm its securities-law compliance. They're meaningful affirmations, not formalities. Understanding your reps clarifies your responsibilities. Your suitability representations affirm your accredited status (verified under 506(c)), that you've read the PPM, that you understand the risks and illiquidity, and that you can bear a potential total loss.
- The PPM is the master disclosure document — offering terms, property, financing, fees, tax and legal opinions, and risk factors.
- The risk-factors section is the most important part to read critically: market, tenant, financing, liquidity, sponsor, and structural risks.
- The subscription agreement is your binding purchase contract — it records your investment, titling, funding mechanics, and representations.
- Your suitability reps affirm accredited status (verified under 506(c)), that you've read the PPM, and that you can bear the risks and illiquidity.
Questions Before You Sign
Before you sign the subscription agreement, it's worth working through a focused set of questions — with your advisor, CPA, and attorney as appropriate. On the property and income: What is the property, who are the tenants, how long are the leases, and what happens to income if a major tenant leaves? On the financing: Is there debt, on what terms, is it non-recourse, and what's the refinancing risk at maturity — and does the debt help me replace the debt on my relinquished property for 1031 purposes? On the fees: What is the total load, what ongoing and disposition fees apply, and how much of my capital is actually deployed into the real estate?
On the sponsor: What's their track record, how many full-cycle deals have they completed, and how have prior offerings performed? On the structure and exit: What's the expected hold period, what's the business plan and exit strategy, and how do the trustee restrictions limit the trust's flexibility? On suitability and tax: Does this fit my goals, risk tolerance, and liquidity needs, and has my CPA confirmed the 1031 treatment and how the depreciation and reporting will work for me? Writing these questions down and getting clear answers — from the PPM and from the sponsor or broker-dealer — before you sign is how you make an informed decision rather than a rushed one.
So the questions before you sign cover the property and income, the financing, the fees, the sponsor, the structure and exit, and your own suitability and tax fit. Questions before you sign — on the property and income (tenants, leases, what happens if a tenant leaves), the financing (debt terms, non-recourse, refinancing, and 1031 debt replacement), the fees (total load, ongoing and disposition costs, capital deployed), the sponsor (track record and full-cycle history), the structure and exit (hold period, business plan, trustee restrictions), and your own suitability and tax fit — are how you turn document review into an informed decision. Get clear answers before signing. Understanding the questions ensures you don't sign blind. Before signing, work through questions on the property and income, the financing, the fees, the sponsor, the structure and exit, and your own suitability and tax fit — getting clear answers from the PPM and the sponsor.
If you can't get a clear answer to a basic question — what the property is, who pays the rent, what the fees total, how the sponsor has performed — that itself is an answer. Don't sign into uncertainty.
How Reg D 506(c) Shapes the Documents
Understanding that a DST is typically a Regulation D Rule 506(c) offering explains a great deal about why the documents look the way they do. Reg D is the set of SEC exemptions that let an offering raise capital privately without a full public registration; Rule 506(c) specifically permits general solicitation (the sponsor can advertise the offering publicly) but in exchange requires that every investor be accredited and that the issuer take reasonable steps to verify each investor's accredited status. That's why the subscription agreement contains your accredited representation and why you must supply verification documentation rather than self-certify.
Because the offering is exempt from full registration, the PPM — not an SEC-reviewed prospectus — is the disclosure document, and the burden falls on you to read it and understand the risks, since you're presumed (as an accredited investor) to be able to evaluate the offering. The 506(c) framework is also why the offering is restricted to accredited investors, why a broker-dealer and a suitability review are involved, and why the interests are illiquid and can't be freely resold. So the entire document structure — disclosure by PPM, accredited-only access, verification, suitability review, and transfer restrictions — flows from the securities exemption the offering relies on.
So Reg D 506(c) shapes the documents by requiring accredited investors with verified status, disclosure via the PPM rather than a registered prospectus, and the suitability review and transfer restrictions that come with a private placement. How Reg D 506(c) shapes the documents — the exemption permitting general solicitation but requiring all investors to be accredited with verified status (hence the accredited representation and verification documentation), relying on the PPM rather than a registered prospectus for disclosure, and bringing the broker-dealer, suitability review, and transfer restrictions of a private placement — explains why the PPM and subscription agreement are structured as they are. The exemption drives the paperwork. Understanding 506(c) clarifies the whole package. Reg D 506(c) shapes the documents by requiring verified accredited investors, disclosure through the PPM rather than a registered prospectus, and the suitability review and transfer restrictions of a private placement.
How Baker 1031 Helps You Review DST Documents
Baker 1031 Investments helps investors work through the two documents that define a DST investment — the Private Placement Memorandum and the subscription agreement — so you understand what the PPM contains, can read the risk factors critically, know what you're signing, understand your suitability representations, and can ask the right questions before you commit.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), under Regulation D Rule 506(c) to accredited investors after a suitability review, so we help you understand the 506(c) framework, verify your accredited status, and complete the suitability review that the offering requires. We walk you through the PPM — the property, financing, fees, tax and legal opinions, and especially the risk factors — and the subscription agreement, including the representations you make and the titling that must match the taxpayer who sold your relinquished property. Baker 1031 does not provide tax or legal advice; your CPA and attorney confirm the 1031 treatment, the tax opinion's application to your situation, and the legal terms, which are technical. We help you turn a dense document package into clear, answered questions before you sign. Distributions, yields, and returns are never promised, and past performance does not guarantee future results. Our role is to help you understand the documents fully and invest only when a DST is suitable for you.
Frequently Asked Questions
What is a PPM in a DST offering?
The PPM — Private Placement Memorandum — is the master disclosure document for a DST offering. It contains essentially everything material about the investment: the offering terms (amount raised, price per interest, minimum investment), the property (location, type, condition, tenancy, and the sponsor's business plan), the financing (whether the trust used debt, on what terms, and whether it's non-recourse), the fees (upfront load, ongoing management, and disposition fees), the tax opinion supporting the DST's treatment as like-kind real property under Revenue Ruling 2004-86, the legal opinions, the trust and master-lease structure, the sponsor's track record, and — most importantly — a detailed risk-factors section. Because a DST is a private placement exempt from full SEC registration, the PPM (not a registered prospectus) is the document through which the offering is disclosed, and the burden is on you to read it. So the PPM is the dense but essential document you study to understand exactly what you're investing in, what it costs, and what could go wrong. Read it in full before deciding.
What is a subscription agreement?
The subscription agreement is your purchase contract for a DST beneficial interest — the document you actually sign to commit to the investment. Where the PPM discloses the offering, the subscription agreement is the binding instrument that records your purchase: it specifies the dollar amount you're investing and the beneficial interests that represents, identifies precisely how you'll hold title (which, in a 1031, must match the taxpayer that sold your relinquished property), and sets out the funding mechanics, including directing your qualified intermediary to wire the exchange proceeds. It also states the conditions under which the sponsor accepts or rejects your subscription and the trust's governing terms you're agreeing to. Critically, it contains your investor representations — your affirmations about your accredited status, that you've read the PPM, and that you understand the risks. Signing it commits you to the offering, subject to the sponsor's acceptance. So the subscription agreement is a real contract, not a formality — understand its terms before you sign, ideally with your advisor and attorney.
How should I read the risk factors in a DST PPM?
Read the risk-factors section as the most important part of the PPM, and treat each disclosed risk as a real possibility rather than boilerplate. A thorough PPM lists market risk (real estate values or rents declining), tenant risk (a major tenant defaulting, vacating, or not renewing — especially significant for single-tenant net-lease DSTs where one tenant drives the income), financing risk (the property failing to service its debt or struggling to refinance at maturity), liquidity risk (the inability to sell your interest and the multi-year commitment), and sponsor risk (the sponsor failing to execute the business plan). There are also structural DST risks tied to the trustee restrictions that limit the trust's flexibility. The risk-factors section is required to be candid — it's the sponsor telling you, under legal obligation, every way the investment could lose money. So read each risk as if it could happen, ask how likely it is and what would result, and weigh the full set against the potential benefits. Don't skim this section.
What does Reg D 506(c) mean for a DST?
Regulation D Rule 506(c) is the SEC exemption most DSTs rely on to raise capital privately without full public registration. Rule 506(c) specifically permits general solicitation — the sponsor can advertise or publicly market the offering — but in exchange imposes two requirements: every investor must be accredited, and the issuer must take reasonable steps to verify each investor's accredited status. That's why a DST subscription agreement contains your accredited-investor representation and why you must supply verification documentation (tax returns, financial statements, or a third-party letter) rather than simply self-certifying. Because the offering is exempt from full registration, the PPM — not an SEC-reviewed prospectus — serves as the disclosure document, and the burden falls on you, as a presumed-sophisticated accredited investor, to read it and understand the risks. The 506(c) framework is also why the offering is accredited-only, why a broker-dealer and suitability review are involved, and why the interests are illiquid and not freely resellable. So 506(c) shapes the entire document package and access process for a DST.
Do I have to read the entire PPM before investing?
You should read the entire PPM, and ideally do so with your advisor, CPA, and attorney — it's the single most important thing you can do before investing in a DST. The PPM is dense and lengthy, but every section is material: the offering terms tell you the price and minimum; the property section tells you what you're buying and the business plan; the financing section is crucial if you need to replace debt for your 1031; the fee section shows the total cost and how much capital is actually deployed; the tax and legal opinions support the 1031 treatment; and the risk factors disclose what could go wrong. Skimming the PPM means investing without understanding what you own or what risks you've accepted — and when you sign the subscription agreement, you represent that you've received and read it. So yes, read the whole thing carefully, mark the parts you don't understand, and get them clarified before signing. The effort of reading the PPM thoroughly is the core of your due diligence.
What are investor suitability representations?
Investor suitability representations are the formal statements you make in the subscription agreement affirming that you're qualified and informed enough to invest in the DST. The central one is your accredited-investor representation — you affirm that you meet the accredited standard by income, net worth, or professional qualification — and under Rule 506(c) it's backed by verification, so you provide documentation rather than self-certifying. You also typically represent that you've received and read the PPM (including the risk factors), that you understand the investment is illiquid and speculative, that you can bear the economic risk (including a total loss) and don't need near-term liquidity from this capital, and that you're not relying on the sponsor for tax or legal advice. These representations are the basis on which the sponsor accepts you into a private offering and confirm the offering's compliance with its securities exemption. They also underscore your responsibilities — you're affirming, in writing, that you understand the investment and can afford the risk. So treat them as meaningful affirmations, not check-the-box formalities.
Why does my title-holding matter in the subscription agreement?
Your title-holding matters because, in a 1031 exchange, the same taxpayer who sold the relinquished property must take title to the replacement property — and the subscription agreement is where you specify how you'll hold your DST interest. If the titling doesn't match the taxpayer (or taxpayer identification number) that sold your relinquished property, you can jeopardize the exchange, because the IRS requires continuity of the taxpayer. This is why the subscription agreement carefully identifies the owner of record. If you held the relinquished property individually, through a single-member LLC, or through a revocable living trust, the DST interest generally needs to be titled consistently so the same taxpayer is treated as acquiring the replacement. Disregarded entities (like a single-member LLC or grantor trust) are treated as the same taxpayer, which preserves the exchange, but the titling still has to be done correctly. So getting the title-holding right on the subscription agreement is essential to protecting your 1031 — coordinate it with your QI and attorney before signing, since errors here can be costly.
What is a tax opinion in a DST PPM?
A tax opinion in a DST PPM is a written analysis, typically from a law firm, addressing the tax treatment of the DST — most importantly, supporting the conclusion that a beneficial interest in the DST should be treated as a direct interest in real property eligible for 1031 exchange treatment under IRS Revenue Ruling 2004-86. The opinion explains the legal basis for that conclusion and usually addresses the structural requirements the trust must satisfy (the trustee restrictions, often called the 'seven deadly sins,' that keep the DST from being recharacterized in a way that would defeat 1031 eligibility). A tax opinion provides comfort, but it's important to understand its nature: it's a reasoned legal opinion, not a guarantee from the IRS, and it's based on the facts as structured. It doesn't replace your own tax advisor's review of how the DST fits your specific situation. So the tax opinion is a meaningful part of the PPM that supports the 1031 treatment, but you should still have your CPA and attorney confirm the treatment for your circumstances rather than relying on it alone.
What questions should I ask before signing a DST subscription?
Work through a focused set of questions before signing, ideally with your advisor, CPA, and attorney. On the property and income: What is the property, who are the tenants, how long are the leases, and what happens to income if a major tenant leaves? On the financing: Is there debt, on what terms, is it non-recourse, what's the refinancing risk, and does the debt help me replace my relinquished-property debt for 1031 purposes? On the fees: What's the total load, what ongoing and disposition fees apply, and how much of my capital is actually deployed into the real estate? On the sponsor: What's their track record, how many full-cycle deals have they completed, and how have prior offerings performed? On structure and exit: What's the expected hold, the business plan, the exit strategy, and how do the trustee restrictions limit flexibility? On suitability and tax: Does this fit my goals, risk tolerance, and liquidity needs, and has my CPA confirmed the 1031 treatment? So ask about the property, financing, fees, sponsor, structure, and your own fit — and get clear answers before you sign.
Is the PPM the same as an SEC-registered prospectus?
No — a PPM is not the same as a registered prospectus, and the difference is important. A registered prospectus is filed with and reviewed by the SEC as part of a public securities registration. A DST, by contrast, is sold as a private placement under a Regulation D exemption (typically Rule 506(c)), which means it's exempt from full SEC registration — so the PPM is the disclosure document, but it is not reviewed or approved by the SEC. This places more responsibility on you: because there's no regulatory pre-review of the disclosure, you (as an accredited investor presumed able to evaluate the offering) must read the PPM carefully and assess the risks yourself, often with professional advisors. The trade-off is that private placements can be offered more flexibly and to a narrower, qualified audience. So don't assume a PPM carries the same regulatory vetting as a public prospectus — it doesn't. The absence of SEC review is exactly why thorough independent review of the PPM, and a suitability assessment, are so important before you invest.
Can I negotiate the terms of a DST subscription agreement?
Generally, no — DST subscription agreements are standardized, take-it-or-leave-it documents, because the DST is a pre-packaged offering being sold on identical terms to many investors. The structure of a DST (and the trustee restrictions that preserve its 1031 eligibility) limits the sponsor's flexibility to negotiate individual terms, and changing terms for one investor would complicate the uniform offering. So unlike a direct property purchase, where you negotiate price and terms, a DST subscription means accepting the offering as presented in the PPM and subscription agreement. What you can do is decide whether to invest at all and how much, choose among different DST offerings to find one whose terms (property, financing, fees, hold, sponsor) fit your goals, and confirm details like your titling are correctly reflected. If the terms don't suit you, the remedy is to choose a different offering rather than to negotiate. So treat the subscription as a yes-or-no decision on fixed terms, which makes reading the PPM and subscription agreement carefully — to confirm the terms work for you — all the more important before you commit.
What happens after I sign the subscription agreement?
After you sign the subscription agreement, several things happen before you're fully invested. First, the sponsor (and your broker-dealer) reviews your subscription — including verifying your accredited status under Rule 506(c) and confirming the suitability review — and then either accepts or rejects it; the sponsor isn't obligated to accept every subscription, and a popular offering may already be oversubscribed. Once accepted, you fund: for a 1031 investor, you direct your qualified intermediary to wire the exchange proceeds directly to the DST or its escrow, preserving the exchange. When your funds are received and your subscription is accepted, the trust records your beneficial interest and you become a beneficial owner of record. From there, you begin receiving your pro-rata distributions (typically monthly or quarterly) and become entitled to the DST's annual grantor-letter tax reporting. Your 1031 is complete once the replacement interest is acquired within the 180-day window. So signing is the commitment, but acceptance, funding through your QI, and recording of your interest complete the process. Confirm timing with your QI and broker-dealer.
Who can help me understand the DST documents?
Reviewing DST documents is best done with a team, because the PPM and subscription agreement span investment, tax, and legal terrain. Your broker-dealer or financial advisor can walk you through the offering — the property, financing, fees, structure, and risk factors — and help you assess suitability and complete the subscription and accreditation verification. Your CPA should review the 1031 treatment, the tax opinion's application to your situation, how the carryover basis and depreciation will work for you, and how the grantor-letter reporting fits your return. Your attorney can review the legal terms, the trust agreement, the trustee restrictions, and especially the titling to confirm it matches the taxpayer that sold your relinquished property. Because DST interests are securities and Baker 1031 doesn't provide tax or legal advice, coordinating with your CPA and attorney is important rather than relying solely on the offering materials. So lean on your advisor, CPA, and attorney together — each covers a different dimension of the documents, and the combination helps you make an informed decision before you sign.
Are DSTs only for accredited investors?
Yes — DSTs are generally offered only to accredited investors, because they're securities sold under Regulation D, typically Rule 506(c). Accreditation is usually met by income (commonly more than $200,000 individually or $300,000 jointly in each of the prior two years, with a reasonable expectation of the same), by net worth (more than $1 million excluding your primary residence), or by holding certain professional licenses. Under Rule 506(c), the sponsor or broker-dealer must take reasonable steps to verify your accredited status, so you provide documentation — tax returns, financial statements, brokerage statements, or a third-party letter from a CPA or attorney — rather than simply self-certifying. This is why the subscription agreement contains your accredited representation and why verification is part of the process. The accredited-only requirement reflects that DSTs are private, illiquid, complex investments presumed suitable for financially sophisticated investors who can bear the risk. So if you're considering a DST, you'll generally need to be accredited and to verify it. Confirm the specific offering's requirements with your broker-dealer before proceeding.
How does Baker 1031 help me review DST documents?
We help investors work through the two documents that define a DST investment — the Private Placement Memorandum and the subscription agreement — so you understand what the PPM contains, can read the risk factors critically, know what you're signing, understand your suitability representations, and can ask the right questions before you commit. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), under Regulation D Rule 506(c) to accredited investors after a suitability review, so we help you understand the 506(c) framework, verify your accredited status, and complete the suitability review. We walk you through the PPM — the property, financing, fees, tax and legal opinions, and especially the risk factors — and the subscription agreement, including your representations and the titling that must match the taxpayer who sold your relinquished property. Baker 1031 does not provide tax or legal advice; your CPA and attorney confirm the 1031 treatment, the tax opinion, and the legal terms. We help you turn a dense package into clear, answered questions. Distributions, yields, and returns are never promised, and past performance doesn't guarantee future results.
Glossary
- Private Placement Memorandum (PPM)
- The DST's master disclosure document detailing terms, property, fees, and risks.
- Subscription Agreement
- Your binding purchase contract for a DST beneficial interest.
- Risk Factors
- The PPM section disclosing how the investment could lose money.
- Regulation D
- The SEC exemptions allowing private securities offerings without full registration.
- Rule 506(c)
- A Reg D exemption permitting general solicitation to verified accredited investors.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Accreditation Verification
- The reasonable steps an issuer takes to confirm accredited status under 506(c).
- Investor Representations
- The affirmations you make about yourself in the subscription agreement.
- Tax Opinion
- Counsel's analysis supporting the DST's 1031 eligibility.
- Legal Opinion
- Counsel's analysis of the DST's legal structure and validity.
- Non-Recourse Debt
- Trust-level financing that isn't personally guaranteed by investors.
- Seven Deadly Sins
- Trustee restrictions that preserve a DST's 1031 eligibility.
- Suitability Review
- The broker-dealer's assessment that a DST fits the investor.
- General Solicitation
- Public advertising of an offering, permitted under Rule 506(c).
- Disposition Fee
- A sponsor fee charged when the DST property is sold.
- Beneficial Interest
- An undivided fractional interest in the DST, treated as like-kind real property.
Sources & References
- U.S. Securities and Exchange Commission. Investor Bulletin: Accredited Investors and Regulation D
- IRS. Revenue Ruling 2004-86
- 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.
