Real estate crowdfunding and Delaware Statutory Trust (DST) properties are often grouped together as 'passive' ways to invest in real estate, but they're built for different jobs — and the difference matters most to an investor selling appreciated property who wants to defer the capital-gains tax. The single most important distinction is tax treatment in an exchange: a DST interest is treated as like-kind real property, so it qualifies as replacement property in a 1031 exchange and can defer the gain, while most crowdfunding investments are structured as LLC or LP interests or non-traded REIT shares — entity interests that are generally not 1031-eligible. Beyond that, the two differ in how they're sponsored and structured, in liquidity and minimums, and in who they suit. This guide compares DST properties and real estate crowdfunding at a glance, explains the 1031 eligibility difference, examines sponsor and structure differences, compares liquidity and minimums, and lays out which suits a 1031 investor. Note that Baker 1031 Investments does not provide tax or legal advice — verify the current rules and your specific situation with your tax advisor; this is educational information, not investment advice.
DST vs. Crowdfunding Basics
At a basic level, both DST properties and real estate crowdfunding let investors put money into real estate without buying, financing, and managing property directly — but they're structured and accessed very differently. A DST is a trust that holds one or a few specific properties, in which investors own fractional beneficial interests treated as direct interests in real property; it's professionally managed, sold through a broker-dealer after a suitability review, and held to a defined exit (commonly around five to seven years). The investor owns a slice of identifiable real estate.
Real estate crowdfunding is an online model that gives investors access to individual deals or funds through a platform. The platform aggregates many investors' capital into a given offering, which is typically structured as an LLC or LP interest (you become a member or limited partner in an entity that owns the property) or as a non-traded REIT. Crowdfunding spans a wide range of sponsors, deal types, and minimums, and the platform — not a single sponsor — is the access point, with diligence standards that vary from platform to platform.
So DST properties and real estate crowdfunding both offer passive real estate, but they differ in legal form and access: a DST is a direct fractional real-property interest sold through a broker-dealer, while crowdfunding is usually an entity interest accessed online through a platform. So the basics frame the comparison. DST vs. crowdfunding basics — a DST being a trust holding specific properties in which investors own 1031-eligible fractional real-property interests over a defined hold, versus crowdfunding being an online platform offering access to individual deals or funds typically structured as LLC/LP interests or non-traded REITs — show the two as passive but structurally distinct. The defining split is whether you own real property or an entity interest. Understanding the basics frames everything that follows. DST properties are direct fractional real-property interests; crowdfunding is usually an LLC/LP or non-traded-REIT interest accessed via a platform — a structural difference that drives the rest of the comparison.
1031 Eligibility Difference
The 1031 eligibility difference is the most consequential one for a 1031 investor. A 1031 exchange lets you sell investment real estate and reinvest the proceeds into like-kind replacement real estate while deferring the capital-gains tax. To qualify, the replacement must be like-kind real property. A DST interest is structured (under IRS Revenue Ruling 2004-86) so that each investor is treated as owning a direct, undivided interest in the underlying real property — so it qualifies as 1031 replacement property, making DSTs a standard tool for exchangers seeking a passive replacement.
Most crowdfunding investments don't qualify, because they're typically structured as LLC or LP interests, membership interests, or non-traded REIT shares — interests in an entity, not direct like-kind real property. The tax law excludes partnership, membership, and corporate or REIT interests from like-kind treatment, so you generally can't sell a property and 1031 directly into a crowdfunding investment to defer your gain. This is the decisive point: a 1031 investor can defer into a DST, but generally cannot defer into typical real estate crowdfunding. If deferral on a property sale is the goal, the DST is the 1031-eligible option and most crowdfunding is not.
So 1031 eligibility is the dividing line: a DST interest defers tax on a property sale, while typical crowdfunding interests do not. So this difference drives the choice for exchangers. The 1031 eligibility difference — a DST interest qualifying as like-kind real property under Revenue Ruling 2004-86 (so a 1031 exchanger can defer the gain by exchanging into it), versus most crowdfunding being LLC/LP or non-traded-REIT interests (entity interests excluded from like-kind treatment, so generally not 1031-eligible) — is the most consequential distinction. A DST is 1031-eligible; typical crowdfunding is not. Understanding it drives the choice for exchangers. The key difference is 1031 eligibility: a DST interest is like-kind real property that defers a property-sale gain, while typical crowdfunding interests (LLC/LP or non-traded REIT) are entity interests that generally don't qualify — so a 1031 investor can exchange into a DST but generally not into crowdfunding.
For a 1031 exchanger, this is the deal-breaker: a DST interest can stand in as like-kind replacement property and defer the gain, while a typical crowdfunding LLC or LP interest generally cannot.
Sponsor & Structure Differences
Sponsor and structure differ meaningfully between the two. A DST is offered by a single sponsor (the firm that acquires, structures, and manages the property) and distributed through a broker-dealer that conducts a suitability review before an accredited investor invests. The structure is standardized around the DST rules that preserve 1031 eligibility — including the 'seven deadly sins' that limit the trust's ability to take certain actions — and the sponsor handles all management within those constraints. So a DST comes with a defined sponsor, a regulated distribution channel, and a tightly constrained legal structure.
Real estate crowdfunding works differently: the platform is the access point, and it presents offerings from a variety of sponsors with varied structures (LLCs, LPs, funds, non-traded REITs) and varied diligence standards. Some platforms vet sponsors and deals carefully; others are more of a marketplace. The investor relies on the platform's screening and the individual sponsor's execution, and the structure isn't constrained by 1031 rules because crowdfunding generally isn't aimed at exchangers. So crowdfunding offers breadth and choice across many sponsors and structures, but with diligence and quality that can vary widely from platform to platform and deal to deal.
So sponsor and structure differ: a DST has one sponsor, a broker-dealer channel, and a 1031-constrained structure, while crowdfunding aggregates many sponsors and structures through a platform with varied diligence. So this difference shapes how you evaluate each. Sponsor and structure differences — a DST having a single sponsor, broker-dealer distribution with a suitability review, and a standardized 1031-eligible structure, versus crowdfunding presenting many sponsors and varied structures (LLCs, LPs, funds, non-traded REITs) through a platform with diligence that varies — distinguish how the two are put together and vetted. A DST is constrained and channeled; crowdfunding is broad and varied. Understanding this shapes how you evaluate each. A DST has one sponsor, a broker-dealer channel, and a 1031-constrained structure; crowdfunding aggregates many sponsors and varied structures through a platform whose diligence standards differ — so evaluation differs accordingly.
Liquidity and Minimums
Liquidity and minimums are where crowdfunding sometimes looks more accessible, but the picture is nuanced. On minimums, crowdfunding platforms sometimes offer lower entry points — some deals accept a few thousand dollars, and certain platforms even admit non-accredited investors for particular offerings — making them accessible for smaller, non-exchange investments. DSTs, by contrast, typically carry higher minimums (often in the tens of thousands and up) because they're designed for 1031 exchangers reinvesting substantial property-sale proceeds, and they're accredited-only.
On liquidity, both are generally illiquid. A DST is held to its full cycle — you remain invested until the sponsor sells the property, with little or no secondary market. Crowdfunding investments are also typically illiquid: your capital is usually locked up for the deal's term (often several years), and while some platforms offer limited redemption windows or secondary marketplaces, these are generally thin, capped, or unavailable. So neither should be treated as liquid capital. The main accessibility difference is the minimum — crowdfunding can be cheaper to enter — not liquidity, where both require a multi-year commitment.
So minimums sometimes favor crowdfunding's lower entry points, while liquidity is limited for both — each requiring a multi-year hold. So liquidity and minimums are a practical axis of comparison. Liquidity and minimums — crowdfunding sometimes offering lower minimums and broader access (occasionally to non-accredited investors), versus DSTs carrying higher, accredited-only minimums suited to substantial exchange proceeds, with both generally illiquid (a DST held to its full cycle; crowdfunding locked for the deal term with only thin redemption options) — distinguish the two on accessibility. Crowdfunding can be cheaper to enter; both lock up capital. Understanding this refines the comparison. Crowdfunding sometimes has lower minimums, but both DSTs and crowdfunding are generally illiquid multi-year commitments — so the accessibility difference is mainly entry cost, not liquidity.
- Both DST properties and real estate crowdfunding offer passive real estate, but a DST is 1031-eligible like-kind property and typical crowdfunding (LLC/LP or non-traded REIT) is not.
- 1031 eligibility is the key difference: a 1031 investor can defer a property-sale gain into a DST but generally cannot defer into typical crowdfunding.
- A DST has one sponsor, a broker-dealer channel, and a 1031-constrained structure; crowdfunding aggregates many sponsors and varied structures with diligence that varies.
- Crowdfunding sometimes offers lower minimums and broader access, but both are generally illiquid multi-year commitments — so DSTs fit exchange proceeds, crowdfunding suits non-1031 cash.
Diligence and Transparency
Diligence and transparency follow from the structures and channels. A DST reaches you through a broker-dealer that performs a suitability review and through a sponsor whose offering is documented in a private placement memorandum detailing the specific properties, leases, financing, fees, and risks — so you can examine exactly what real estate underlies your investment, with a regulated intermediary in the chain. So a DST comes with asset-level disclosure and a broker-dealer's suitability layer.
Crowdfunding diligence varies widely by platform. Some platforms conduct meaningful sponsor and deal vetting and provide detailed offering materials; others operate more as marketplaces where the burden of diligence falls more heavily on the investor, and disclosure quality differs from deal to deal. Because offerings span many sponsors and structures, the investor must assess each platform's standards and each deal's documentation individually. So crowdfunding can offer transparency, but its consistency and the depth of independent vetting depend on the platform — there isn't a single standardized channel as with a DST's broker-dealer distribution.
So diligence and transparency are more standardized for a DST (broker-dealer plus sponsor disclosure) and more variable for crowdfunding (platform-dependent). So this difference matters for how carefully you must vet each option. Diligence and transparency — a DST offering asset-level disclosure through a sponsor's private placement memorandum and a broker-dealer's suitability review, versus crowdfunding offering variable diligence and disclosure that depend on the individual platform and deal — distinguish how each is vetted. A DST has a standardized channel; crowdfunding's rigor varies. Understanding this matters for how carefully you must evaluate each. A DST provides asset-level disclosure plus a broker-dealer suitability layer; crowdfunding's diligence and transparency vary by platform — so the investor bears more of the vetting burden in crowdfunding.
With a DST, a broker-dealer's suitability review and a sponsor's detailed disclosure are built into the channel; with crowdfunding, the depth of diligence depends entirely on which platform and which deal you're looking at.
Which Suits a 1031 Investor
Which vehicle suits you comes down to whether you're doing a 1031 exchange. For a 1031 investor — someone selling appreciated investment real estate who wants to defer the capital-gains tax — the DST is the fitting choice, because only a DST is 1031-eligible. You can exchange your property-sale proceeds into a DST within the exchange timeline and defer the gain, moving to passive ownership of identifiable real estate. Typical crowdfunding interests (LLC/LP or non-traded REIT) generally can't serve as 1031 replacement property, so they don't fit inside an exchange.
Real estate crowdfunding, by contrast, suits a non-1031 cash investor — someone deploying new capital (not exchange proceeds) who wants accessible, online access to real estate deals, possibly at a lower minimum, and who doesn't need 1031 treatment. For that investor, crowdfunding's breadth, lower entry points, and choice of deals can be attractive. So the two serve different investors: DSTs for the 1031 exchanger preserving deferral, crowdfunding for the cash investor seeking accessible exposure. The decision turns first on whether a 1031 is involved.
So a 1031 investor should look to DSTs (1031-eligible), while a cash investor without an exchange may find crowdfunding suitable. So matching the vehicle to your situation is the decision. Which suits a 1031 investor — a DST fitting the 1031 exchanger who needs like-kind replacement property to defer a property-sale gain, versus crowdfunding fitting the non-1031 cash investor wanting accessible, possibly lower-minimum online access to deals — depends first on whether you're exchanging. DSTs fit the exchange; crowdfunding suits non-1031 cash. Understanding this guides the decision. For a 1031 investor deferring a property-sale gain, a DST fits because it's 1031-eligible; crowdfunding suits non-1031 cash investors who don't need like-kind treatment — so the choice turns first on whether an exchange is involved.
How Baker 1031 Helps You Compare DSTs and Crowdfunding
Baker 1031 Investments helps investors compare DST properties and real estate crowdfunding — the structural basics, the 1031 eligibility difference, sponsor and structure differences, liquidity and minimums, diligence and transparency, and which suits a 1031 investor — so you can choose the vehicle that fits your tax situation, capital source, and goals.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Because the central difference is 1031 eligibility, the choice often turns on whether you're deferring a property-sale gain — and Baker 1031 specializes in 1031 and DST strategies, so we focus on the 1031-eligible path. Baker 1031 does not provide tax or legal advice; your CPA and attorney confirm your 1031 eligibility and the tax treatment, including whether a particular structure qualifies, which is technical and time-sensitive. We help you understand the trade-offs between a 1031-eligible DST and a non-1031 crowdfunding investment, evaluate DST offerings (the sponsor, structure, fees, and underlying real estate), and, if a DST is suitable, access it within your exchange timeline and coordinate with your tax professionals. Distributions and returns are never guaranteed — projections are not promises, and past performance does not guarantee future results. Our role is to help you compare the vehicles clearly and invest only when suitable for your goals and risk tolerance.
Frequently Asked Questions
What is the main difference between a DST and real estate crowdfunding?
The main difference is 1031 eligibility. A DST (Delaware Statutory Trust) interest is treated as like-kind real property under IRS Revenue Ruling 2004-86, so it qualifies as replacement property in a 1031 exchange — letting an investor sell appreciated real estate and reinvest into a DST to defer capital-gains tax. Most real estate crowdfunding investments are structured as LLC or LP interests, membership interests, or non-traded REIT shares — interests in an entity, not direct like-kind real property — so they're generally not 1031-eligible. Beyond that, a DST holds specific properties in which you own a direct fractional interest, sold through a broker-dealer after a suitability review, while crowdfunding gives online access to many sponsors' deals through a platform, sometimes at lower minimums. So both offer passive real estate, but only the DST is 1031-eligible. For a 1031 exchanger deferring a property-sale gain, that distinction is decisive: you can exchange into a DST, but generally not into typical crowdfunding.
Can I do a 1031 exchange into real estate crowdfunding?
Generally no — most real estate crowdfunding investments aren't 1031-eligible, because they're typically structured as LLC or LP interests, membership interests, or non-traded REIT shares, which are interests in an entity rather than direct like-kind real property. A 1031 exchange requires the replacement to be like-kind real estate, and the tax law excludes partnership, membership, and REIT interests from like-kind treatment — so you generally can't sell investment real estate and 1031 directly into a crowdfunding deal to defer your gain. A DST, by contrast, is structured so each investor is treated as owning a direct interest in the underlying real property, so it does qualify. So if your goal is to defer a property-sale gain, a DST works as 1031 replacement property and typical crowdfunding does not. Some platforms may occasionally offer a structure marketed as 1031-compatible, but you should confirm the specific legal form with your tax advisor before relying on it, since most crowdfunding structures won't qualify.
Why isn't crowdfunding usually 1031-eligible?
Because of how crowdfunding investments are structured. Most crowdfunding deals are organized as LLC or LP interests (you become a member or limited partner in an entity that owns the property) or as non-traded REIT shares. In each case, what you own is an interest in an entity, not a direct interest in the real estate itself. A 1031 exchange requires like-kind real property, and the tax law specifically excludes interests in partnerships, LLCs treated as partnerships, and corporations or REITs from like-kind treatment — so those entity interests don't qualify. A DST is different: it's structured under IRS Revenue Ruling 2004-86 so that each investor is treated as owning a direct, undivided beneficial interest in the underlying real property, which is why a DST qualifies for a 1031. So it's the legal form of the interest — entity interest (crowdfunding) versus direct real-property interest (DST) — that determines eligibility, not the fact that both ultimately involve real estate. Confirm the specifics with your tax advisor, as the structuring is technical.
What is real estate crowdfunding?
Real estate crowdfunding is an online model that lets investors put money into real estate through a platform that aggregates many investors' capital into a given offering. Instead of buying a property yourself, you invest alongside others in a specific deal or a fund, usually by becoming a member or limited partner in an LLC or LP that owns the property, or by buying shares in a non-traded REIT the platform offers. Crowdfunding platforms present a range of opportunities — individual properties, diversified funds, debt or equity deals — from a variety of sponsors, and they sometimes offer lower minimums than traditional private real estate, with some deals open to non-accredited investors. The platform is the access point and, depending on the platform, may provide varying levels of sponsor vetting and deal diligence. So real estate crowdfunding is a technology-enabled way to access passive real estate investments online. The key limitation for a 1031 investor is that these entity-based structures are generally not 1031-eligible, unlike a DST interest.
Are DSTs and crowdfunding both illiquid?
Yes — both are generally illiquid, though the entry side differs. A DST is held to its full cycle: you typically can't readily sell your fractional interest, there's little or no secondary market, and you remain invested until the sponsor sells the underlying property, usually after a multi-year hold. Crowdfunding investments are also typically illiquid — your capital is usually committed for the deal's term, often several years, and while some platforms offer limited redemption windows or thin secondary marketplaces, these are generally capped, restricted, or unavailable, so you shouldn't count on them. So neither vehicle should be treated as liquid capital you can access on demand; both require a multi-year commitment. Where they differ more is the minimum to enter — crowdfunding sometimes offers lower entry points — not liquidity. So plan to hold either for the long term, and review the specific exit, redemption, or term provisions in the offering documents before investing. For a 1031 investor, the DST's illiquidity comes paired with its 1031 eligibility, which crowdfunding generally lacks.
Does crowdfunding have lower minimums than DSTs?
Often, yes. Real estate crowdfunding platforms sometimes offer lower entry points than DSTs — some deals accept a few thousand dollars, and certain platforms even admit non-accredited investors for particular offerings, making them accessible for smaller, non-exchange investments. DSTs, by contrast, typically carry higher minimums (often in the tens of thousands of dollars and up) and are limited to accredited investors. The reason is that DSTs are designed for 1031 exchangers reinvesting substantial property-sale proceeds, so the minimums reflect that purpose, and they're sold as Regulation D securities to accredited investors after a suitability review. So if low minimums and broad accessibility are your priority and you're investing new cash (not exchange proceeds), crowdfunding may offer a lower entry point. But if your goal is to defer a property-sale gain through a 1031 exchange, the DST is the 1031-eligible vehicle regardless of its higher minimum — crowdfunding's lower minimum doesn't help if the investment can't complete your exchange. So weigh the minimum against what you actually need the investment to do.
How does sponsor diligence differ between DSTs and crowdfunding?
The diligence picture differs because of the channels. A DST reaches you through a single sponsor and a broker-dealer that conducts a suitability review, and the offering is documented in a private placement memorandum detailing the specific properties, leases, financing, fees, and risks — so there's a regulated intermediary and standardized asset-level disclosure in the chain. Crowdfunding, by contrast, presents offerings from many sponsors through a platform, and diligence varies widely: some platforms vet sponsors and deals carefully and provide detailed materials, while others operate more as marketplaces where the diligence burden falls more on the investor. Because crowdfunding offerings span many sponsors and structures, you have to assess each platform's standards and each deal's documentation individually. So a DST comes with a more standardized diligence and disclosure process through the broker-dealer channel, while crowdfunding's rigor depends on the platform and the specific deal. So with crowdfunding, plan to do more of your own diligence; with a DST, a broker-dealer's suitability layer and the sponsor's disclosure are built into the process.
Which suits a 1031 investor better, a DST or crowdfunding?
For a 1031 investor, the DST is the fitting choice, because only a DST is 1031-eligible. If you're selling appreciated investment real estate and want to defer the capital-gains tax through a 1031 exchange, you need like-kind replacement real property — and a DST interest qualifies, while typical crowdfunding interests (LLC/LP or non-traded REIT) generally do not. So you can exchange your property-sale proceeds into a DST within the exchange timeline and defer your gain; you generally can't do that with crowdfunding. Real estate crowdfunding instead suits a non-1031 cash investor — someone deploying new capital (not exchange proceeds) who wants accessible, online access to deals, possibly at a lower minimum, and who doesn't need 1031 treatment. So the deciding question is whether you're doing a 1031 exchange: if yes, the DST fits; if you're investing new cash without an exchange, crowdfunding may suit you. Match the vehicle to your situation, and confirm eligibility and suitability with your advisors before investing.
Can crowdfunding ever be used in a 1031 exchange?
In most cases, no — typical crowdfunding structures aren't 1031-eligible, because they're usually LLC or LP interests, membership interests, or non-traded REIT shares, which the tax law excludes from like-kind treatment. For a 1031 exchange, you need a direct interest in like-kind real property, and those entity interests don't qualify. A DST is the structure specifically designed to give 1031 investors a passive, 1031-eligible interest, because it's structured (under Revenue Ruling 2004-86) so each investor is treated as owning a direct interest in the underlying real estate. Occasionally a platform might offer something structured to be 1031-compatible, but that's the exception, and you'd need to confirm the precise legal form with your tax advisor before relying on it. So as a general rule, if you're doing a 1031 exchange, don't assume a crowdfunding investment will qualify — most won't — and look to a DST or other direct like-kind real property instead. So verify the structure carefully with your tax advisor, because using an ineligible investment would disqualify your exchange and trigger the tax you were trying to defer.
Are DSTs or crowdfunding investments riskier?
Each carries different risks, so 'riskier' depends on the dimension. A DST is concentrated (one or a few specific properties), illiquid (committed until the property sells), and dependent on the sponsor's execution and the specific assets — so it carries concentration, illiquidity, and sponsor risk, within a standardized, broker-dealer-distributed structure. Crowdfunding risk varies widely by platform and deal: you depend on the individual sponsor's execution and the platform's diligence standards, which differ, and offerings range from relatively conservative funds to higher-risk individual deals; some platforms admit non-accredited investors to investments that still carry real risk. Both are illiquid, and in both cases distributions and returns aren't guaranteed. So a DST's risks are more standardized and center on concentration and the specific deal, while crowdfunding's risks vary with the platform's rigor and the deal's nature. Neither is categorically safer. So assess the specific offering — the properties, sponsor, platform diligence, leverage, fees, and structure — rather than assuming one vehicle type is inherently riskier. Sponsor quality, diligence, and appropriate sizing help manage risk in both, but don't eliminate it.
Do DSTs and crowdfunding charge fees?
Yes — both involve fees, which is an important factor in evaluating either. A DST typically has upfront load and offering costs (covering selling, organizational, and acquisition expenses) and ongoing asset-management and property-related fees, all of which reduce the net income and proceeds investors ultimately receive; these are disclosed in the offering's private placement memorandum. Crowdfunding investments also carry fees, which vary by platform and deal — they may include platform fees, sponsor or asset-management fees, acquisition or disposition fees, and performance fees (carried interest) — and the fee structure and transparency differ from one platform to another. Because both are private real estate investments, fees can be meaningful and affect your net returns, so you should review them carefully in the offering documents for either vehicle. Remember that projected distributions are estimates, not guarantees, and fees are one reason actual results can differ. So weigh the fee structure alongside the other differences — especially 1031 eligibility, which for a 1031 investor is the decisive factor regardless of fees, since only the DST can complete an exchange.
Is crowdfunding open to non-accredited investors?
Sometimes — it depends on the platform and the specific offering. Some real estate crowdfunding platforms offer certain deals to non-accredited investors (for example, through offerings registered under exemptions that permit broader participation), while other deals on the same or different platforms are limited to accredited investors. This broader accessibility is one of crowdfunding's distinguishing features. DSTs, by contrast, are sold as Regulation D securities and are limited to accredited investors, accessed through a broker-dealer after a suitability review. So crowdfunding can be more broadly accessible than a DST, including to some non-accredited investors. But broader access doesn't change the 1031 point: regardless of who can invest, typical crowdfunding entity interests generally aren't 1031-eligible, while a DST (accredited-only) is. So a non-accredited investor might be able to use crowdfunding to invest new cash in real estate, but neither a non-accredited nor an accredited investor can generally use typical crowdfunding to complete a 1031 exchange — for that, a DST is the eligible vehicle. Match the option to both your investor status and whether you're exchanging.
Can I diversify across multiple DSTs the way crowdfunding diversifies?
Yes — a 1031 investor can diversify across multiple DSTs, which is a common way to build breadth while staying 1031-eligible. Just as crowdfunding lets you spread capital across many deals on a platform, you can split your exchange proceeds across several DST offerings — different sponsors, property sectors, and geographic markets — to reduce concentration in any single property or sponsor. This lets you build a diversified, passive real estate allocation while preserving 1031 deferral, since each DST interest is 1031-eligible like-kind real property. Crowdfunding diversifies too, but typically through entity interests that aren't 1031-eligible, so it serves non-exchange capital. So if your goal is a diversified passive real estate position from a 1031 exchange, you can achieve it by allocating across multiple DSTs rather than relying on crowdfunding. The trade-off is that DSTs carry higher minimums, so the number of DSTs you can spread across depends on your exchange proceeds. So diversification is available in both, but only the DST route keeps your exchange intact — confirm the allocation and suitability with your advisor.
Which is more transparent, a DST or crowdfunding?
A DST tends to offer more standardized transparency, though crowdfunding can be transparent depending on the platform. A DST comes with a private placement memorandum detailing the specific properties, leases, financing, fees, and risks, distributed through a broker-dealer that conducts a suitability review — so you get asset-level disclosure through a regulated channel. Crowdfunding transparency varies: some platforms provide detailed offering materials and meaningful sponsor and deal vetting, while others operate more as marketplaces where disclosure quality differs from deal to deal and the investor bears more of the diligence burden. Because crowdfunding spans many sponsors and structures, you have to assess each platform's standards and each deal's documentation individually. So a DST's transparency is more consistent and channeled through a broker-dealer, while crowdfunding's depends on the platform and deal. Neither gives you operational control — both are passive — but the DST's standardized disclosure and suitability layer make it more predictable to evaluate. So with crowdfunding, scrutinize the platform's diligence and the specific deal's materials; with a DST, the disclosure and suitability process are more built-in.
How does Baker 1031 help me compare DSTs and crowdfunding?
We help investors compare DST properties and real estate crowdfunding — the structural basics, the 1031 eligibility difference, sponsor and structure differences, liquidity and minimums, diligence and transparency, and which suits a 1031 investor — so you can choose the vehicle that fits your tax situation, capital source, and goals. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Because the central difference is 1031 eligibility, the choice often turns on whether you're deferring a property-sale gain — and we specialize in 1031 and DST strategies, so we focus on the 1031-eligible path. Baker 1031 does not provide tax or legal advice; your CPA and attorney confirm your 1031 eligibility and whether a particular structure qualifies. We help you understand the trade-offs between a 1031-eligible DST and a non-1031 crowdfunding investment, evaluate DST offerings, and, if a DST is suitable, access it within your exchange timeline. Distributions and returns are never guaranteed, and past performance does not guarantee future results.
Glossary
- DST
- A Delaware Statutory Trust holding 1031-eligible fractional real estate.
- Real Estate Crowdfunding
- Online platform access to real estate deals or funds.
- 1031 Exchange
- A tax-deferred swap of like-kind investment real estate.
- Like-Kind Real Property
- The real estate a 1031 requires (a DST qualifies; an LLC/LP interest doesn't).
- Revenue Ruling 2004-86
- The IRS ruling treating a DST interest as real property for 1031.
- LLC / LP Interest
- A membership or partnership interest — an entity interest, not 1031-eligible.
- Non-Traded REIT
- An unlisted REIT share (a security, not 1031-eligible).
- Fractional Beneficial Interest
- A DST investor's direct share of the specific property.
- Sponsor
- The firm that acquires, structures, and manages a DST or deal.
- Crowdfunding Platform
- The online access point aggregating investor capital into deals.
- Private Placement Memorandum
- The DST offering document disclosing properties, fees, and risks.
- Regulation D
- The exemption under which DSTs are sold privately to accredited investors.
- Accredited Investor
- An investor meeting income or net-worth thresholds for private offerings.
- Suitability Review
- Assessing whether a DST fits the investor before investing.
- Minimum Investment
- The smallest amount an offering accepts (often lower for crowdfunding).
- Defined Hold
- A DST's multi-year period (often ~5-7 years) before sale.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts)
- 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.
