Delaware Statutory Trusts (DSTs) are best known as a landing spot for 1031 exchangers — investors selling appreciated real estate who want passive replacement property that defers their capital-gains tax. But there's a common misconception worth correcting: you do not need a 1031 exchange to invest in a DST. A cash investor — someone deploying new money, not exchange proceeds — can buy DST interests directly. The DST still holds the same institutional-grade, income-producing real estate; the cash buyer simply receives a fractional beneficial interest, a share of the rental income, and a share of any appreciation and debt paydown at sale, without the carried-over basis and deferral mechanics of a 1031. Why would a cash investor choose this? Passive income, diversification, and access to professionally managed real estate at relatively low minimums. This guide explains how DSTs work without a 1031, why cash investors choose them, the income and diversification benefits, the tax treatment for cash buyers, and how to decide whether a DST fits you. DST interests are securities offered to accredited investors after a suitability review; Baker 1031 does not provide tax or legal advice, so verify the current rules and your specific situation with your tax advisor — this is educational information, not investment advice.
DSTs Without a 1031
The starting point is the misconception itself: many investors assume a DST is only for 1031 exchanges, but that isn't true. A DST holds income-producing real estate, and investors own fractional beneficial interests in it — and you can acquire those interests with cash, just as you would acquire any other passive real estate investment. The 1031 exchange is one way in (for an investor who is selling property and wants to defer the gain), but a direct cash purchase is another, equally valid way in.
When you invest cash in a DST, the mechanics on the property side are identical to a 1031 investor's: you own the same fractional interest in the same trust, receive the same pro-rata share of net rental income, and participate in the same appreciation and debt paydown when the property is sold. What differs is only the tax wrapper you bring to the table. A 1031 investor carries over the deferred gain and basis from the property they sold; a cash investor starts fresh, with a new cost basis equal to what they invested. The underlying real estate, the sponsor, the hold period, and the income stream are the same.
So a DST is not exclusively a 1031 vehicle — it is a way to own passive, professionally managed real estate, and cash investors can buy in directly alongside exchangers. DSTs without a 1031 — the recognition that a cash investor can buy DST interests directly (deploying new capital rather than exchange proceeds), owning the same fractional beneficial interest in the same income-producing real estate, receiving the same income and participating in the same appreciation and debt paydown, with the only difference being the tax wrapper (fresh basis instead of carried-over deferred gain) — corrects a widespread misconception. The 1031 is one path in; cash is another. Understanding this opens the DST to a broader set of investors. You don't need a 1031 to invest in a DST; cash investors can buy DST interests directly and own the same real estate, income, and upside as exchangers, differing only in tax treatment.
Why Cash Investors Choose DSTs
Cash investors choose DSTs for three main reasons. The first is passive income: a DST holds income-producing real estate that a professional sponsor manages, so the investor receives a share of the net rental income without any landlord responsibilities — no tenants, maintenance, financing, or operations to handle. For an investor who wants real estate cash flow but not the work of direct ownership, a DST delivers passivity in a way that buying and managing a property cannot.
The second reason is diversification, and the third is access to institutional-grade real estate at relatively low minimums. A cash investor can spread capital across multiple DSTs — different sponsors, property types, and geographic markets — building a diversified slice of real estate that would be impossible to assemble by buying whole properties directly. And DSTs typically offer access to larger, professionally managed assets (multifamily communities, industrial logistics, net-lease retail, medical office) at minimums far below the cost of acquiring such a property outright. So a cash investor gains institutional-quality exposure, fractionally, that direct ownership rarely affords.
So cash investors choose DSTs for passive income, diversification, and low-minimum access to institutional real estate — the same core benefits that draw 1031 exchangers, minus the exchange requirement. Why cash investors choose DSTs — passive income (a share of professionally managed rental income without landlord duties), diversification (spreading capital across multiple sponsors, property types, and markets), and access to institutional-grade real estate at relatively low minimums (fractional exposure to assets too large to buy outright) — explains the appeal beyond tax deferral. These benefits stand on their own for new capital. Understanding them shows why a cash investor would choose a DST. Cash investors choose DSTs for passive income, diversification across sponsors and markets, and low-minimum access to institutional-grade real estate — benefits that apply to new capital, independent of any 1031 exchange.
Strip away the 1031 and a DST is simply a way to own passive, professionally managed, institutional-grade real estate fractionally — a package a cash investor often can't assemble by buying buildings one at a time.
Income & Diversification Benefits
The income and diversification benefits deserve a closer look, because they're the heart of the cash-investor case. On income: a DST passes through the net rental income from its real estate to investors, typically as regular (often monthly) distributions over the hold. A cash investor receives a pro-rata share based on the size of their interest, providing a stream of real estate cash flow that's passive and tied to a known, specific asset or small set of assets — distinct from the daily-priced, market-driven dividends of a publicly traded REIT.
On diversification: because DST minimums are relatively low, a cash investor can divide capital across several DSTs rather than concentrating it in one property. You might hold a multifamily DST in one market, an industrial DST in another, and a net-lease retail DST in a third — diversifying by sponsor, property type, geography, and lease structure. This spreads risk in a way single-property direct ownership cannot, and it lets you tailor a real estate allocation to your goals. Diversification doesn't eliminate risk, but it reduces the impact of any single property or market underperforming.
So the income and diversification benefits are concrete: passive, asset-specific cash flow plus the ability to build a diversified real estate sleeve from relatively modest capital. Income and diversification benefits — passive distributions of net rental income (typically regular, often monthly, tied to specific real estate) and the ability to diversify across multiple DSTs (different sponsors, property types, markets, and lease structures) thanks to relatively low minimums — are the core of the cash-investor case for DSTs. They deliver real estate cash flow and risk-spreading that direct, single-property ownership struggles to match. Understanding them shows what a DST allocation actually provides. DSTs offer cash investors passive, asset-specific income (regular distributions of net rental income) and meaningful diversification (spreading modest capital across multiple sponsors, property types, and markets) that single-property direct ownership can't easily replicate.
Tax Treatment for Cash Investors
The tax treatment for a cash investor differs in important ways from a 1031 investor's, and understanding it helps set expectations. First, basis: a cash investor gets a fresh cost basis equal to the amount invested, with no carried-over deferred gain. A 1031 investor, by contrast, brings a low, carried-over basis from the relinquished property along with the deferred gain. So the cash investor starts clean — there's no prior gain riding on the investment that would come due if the DST is sold and the proceeds aren't exchanged again.
Second, depreciation and income: a DST passes through depreciation to investors, and a cash investor receives their pro-rata share of that depreciation deduction, which can shelter part of the distributions from current tax — so some of the income may be tax-advantaged in any given year. The income itself is taxed normally as it's received; because there was no exchange, there's no 1031 deferral to apply. When the property eventually sells, the cash investor recognizes gain (or loss) measured against their fresh basis, including any depreciation recapture, unless they choose to roll the proceeds into a 1031 exchange at that point (which a cash investor is free to do).
So a cash investor enjoys a fresh basis, pass-through depreciation that shelters part of the income, and ordinary taxation of the income with no deferral — a different profile from the 1031 investor's carried-over gain. Tax treatment for cash investors — a fresh cost basis (no carried-over deferred gain), pass-through depreciation that shelters part of the distributions, and income taxed normally as received (no 1031 deferral, since there was no exchange), with gain recognized against the fresh basis at sale unless rolled into a future 1031 — differs meaningfully from the 1031 investor's profile. The cash buyer starts clean and gets depreciation's shelter. This content is educational, not tax advice. A cash DST investor gets a fresh basis, pass-through depreciation that shelters part of the income, and ordinary taxation of distributions with no 1031 deferral — verify the specifics with your tax advisor.
- You don't need a 1031 exchange to invest in a DST — cash investors can buy DST interests directly with new capital.
- Cash investors choose DSTs for passive income, diversification across sponsors and markets, and low-minimum access to institutional-grade real estate.
- A cash investor gets a fresh cost basis, pass-through depreciation that shelters part of the income, and ordinary taxation with no 1031 deferral.
- DST interests are illiquid, long-hold securities offered to accredited investors after a suitability review — suitability is the key question.
Is It Right for You?
Whether a cash DST investment is right for you comes down to suitability, and there are a few realities to weigh honestly. A DST is illiquid: there's limited or no secondary market, and you generally remain invested until the sponsor sells the underlying property, typically after a multi-year hold (commonly around five to seven years). So DST capital should be money you can leave invested for the duration — not funds you might need in the near or medium term. If liquidity matters to you, a publicly traded REIT or another vehicle may fit better.
Two other suitability factors matter. DST interests are securities offered under Regulation D to accredited investors, so you generally need to meet accreditation thresholds (income or net-worth tests) to participate. And the long hold means a DST suits investors with a multi-year horizon who want income and real estate exposure over that period, not short-term traders. Before you invest, a suitability review considers your financial situation, goals, liquidity needs, and risk tolerance to confirm the fit. A DST also carries the usual real estate risks — vacancy, market, sponsor execution — and distributions are not guaranteed.
So a cash DST fits an accredited investor with a multi-year horizon who wants passive, diversified real estate income and can accept illiquidity — and a suitability review confirms it. Is it right for you — a question of suitability turning on illiquidity (a multi-year commitment with little secondary market), accreditation (DST interests are Reg D securities for accredited investors), and time horizon (a long hold suiting income-focused, multi-year investors, not short-term traders), with a suitability review and the usual real estate and sponsor risks to weigh — is the decisive consideration for a cash investor. The benefits only matter if the structure fits your situation. Understanding suitability guides the decision. A cash DST suits an accredited investor with a multi-year horizon who wants passive, diversified real estate income and can accept illiquidity — confirmed by a suitability review.
The DST's benefits are real, but they only matter if the structure fits you: accredited status, a multi-year horizon, and capital you can genuinely leave illiquid for the duration of the hold.
How Cash DST Investing Compares to the Alternatives
It helps to place cash DST investing alongside the alternatives a new-capital investor might consider. Versus buying a rental property directly, a cash DST is passive and diversifiable — you skip the management, financing, and concentration of owning a single building, gaining fractional exposure to institutional-grade assets instead, though you give up direct control and the ability to use your own leverage and timing. Versus a publicly traded REIT, a cash DST is illiquid and asset-specific rather than liquid and portfolio-level — you trade daily liquidity and broad diversification for exposure to identifiable properties and pass-through depreciation.
Versus the 1031 investor in the very same DST, the cash investor owns an identical interest in identical real estate; the only differences are the tax wrapper (fresh basis versus carried-over deferred gain) and the entry path (new capital versus exchange proceeds). This is worth emphasizing because it underscores that the cash investor isn't getting a lesser product — the real estate, sponsor, income, and upside are the same. The cash investor simply forgoes the 1031 deferral they never needed (having no property-sale gain to defer) in exchange for a clean starting basis and the flexibility to exchange or cash out later.
So a cash DST sits between direct ownership and a liquid REIT — more passive and diversified than the former, more asset-specific and illiquid than the latter — and offers the cash buyer the same real estate as a 1031 investor. How cash DST investing compares — more passive and diversifiable than buying a rental directly (at the cost of control and personal leverage), more illiquid and asset-specific than a publicly traded REIT (in exchange for identifiable assets and depreciation), and identical to a 1031 investor's stake in the same DST except for the tax wrapper and entry path — frames where it fits among the alternatives. The cash buyer gets the same real estate, not a lesser product. Understanding the comparison clarifies the choice. A cash DST is more passive and diversified than direct ownership and more asset-specific and illiquid than a liquid REIT, while offering the same real estate as a 1031 investor in the same trust — differing only in tax wrapper and entry path.
How Baker 1031 Helps Cash Investors Evaluate DSTs
Baker 1031 Investments helps cash investors understand and evaluate DSTs — how you can invest without a 1031, why cash investors choose them, the income and diversification benefits, the tax treatment for cash buyers, and whether a DST is right for your situation — so you can decide whether a direct cash DST investment fits your goals, and, if so, access suitable offerings.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review — that review considers your financial situation, goals, liquidity needs, and risk tolerance to confirm an illiquid, long-hold DST is appropriate for you. We help you understand the structure, compare DST offerings (the underlying real estate, sponsor, fees, hold period, and income), and build a diversified allocation across multiple DSTs if that suits your plan. Baker 1031 does not provide tax or legal advice; your CPA handles your specific tax situation — including how the fresh basis, pass-through depreciation, and ordinary income taxation apply to you as a cash investor, and how a future 1031 exchange of the proceeds might work — which can be technical. Distributions and returns are never promised; past performance does not guarantee future results, and DST distributions and values can fluctuate. Our role is to help you understand cash DST investing clearly and invest only when suitable for your goals and risk tolerance.
Frequently Asked Questions
Do I need a 1031 exchange to invest in a DST?
No — you do not need a 1031 exchange to invest in a DST. While DSTs are well known as replacement property for 1031 exchanges, a cash investor can buy DST interests directly using new capital, just as they would any other passive real estate investment. When you invest cash, you own the same fractional beneficial interest in the same income-producing real estate as a 1031 investor, receive the same pro-rata share of net rental income, and participate in the same appreciation and debt paydown when the property sells. The only real difference is the tax wrapper: a 1031 investor carries over a deferred gain and low basis from the property they sold, while a cash investor starts with a fresh cost basis equal to what they invested. So the 1031 is just one way into a DST; a direct cash purchase is another, equally valid way. If you have new money to invest and want passive real estate, you can buy a DST interest with cash.
Why would a cash investor choose a DST?
Cash investors choose DSTs for three main reasons. First, passive income: a DST holds income-producing real estate managed by a professional sponsor, so you receive a share of the net rental income without any landlord responsibilities — no tenants, maintenance, financing, or operations. Second, diversification: because DST minimums are relatively low, you can spread capital across multiple DSTs (different sponsors, property types, and markets), building a diversified real estate sleeve that would be hard to assemble by buying whole properties. Third, access: DSTs offer fractional exposure to institutional-grade assets — multifamily, industrial, net-lease retail, medical office — at minimums far below the cost of buying such a property outright. So a cash investor gains passive cash flow, diversification, and institutional-quality real estate access from relatively modest capital. These benefits stand on their own, independent of any tax deferral — which is why a cash investor with no property to sell might still choose a DST. Suitability still applies, given the illiquidity and long hold.
How does a cash investor's tax treatment differ from a 1031 investor's?
The main difference is basis and deferral. A 1031 investor brings a low, carried-over cost basis from the property they sold, along with a deferred capital gain that would come due if the proceeds aren't exchanged again. A cash investor, by contrast, gets a fresh cost basis equal to the amount invested, with no carried-over deferred gain — they start clean, with no prior gain riding on the investment. Both investors receive their pro-rata share of pass-through depreciation, which can shelter part of the distributions from current tax. The income is taxed normally as it's received; for the cash investor there's no 1031 deferral to apply, since there was no exchange. When the property sells, the cash investor recognizes gain or loss against their fresh basis (including depreciation recapture), unless they roll the proceeds into a future 1031. So the cash investor's profile is a fresh basis, depreciation shelter, and ordinary income taxation. This is educational, not tax advice — confirm specifics with your CPA.
Do cash DST investors get depreciation?
Yes — a cash DST investor receives their pro-rata share of the depreciation the DST passes through, just as a 1031 investor does. A DST holds depreciable real estate, and the depreciation deduction flows through to investors based on the size of their interest. This depreciation can shelter part of your distributions from current income tax, so some of the cash flow you receive in a given year may be tax-advantaged rather than fully taxable. The benefit is meaningful because it means your after-tax income can be higher than the headline distribution rate would suggest. Note that depreciation isn't free in the long run: it reduces your basis over time, so when the property is sold, the depreciation you claimed is generally subject to recapture (taxed when you recognize the gain), unless you roll the proceeds into a 1031 exchange. So a cash investor gets depreciation's current shelter, with recapture deferred or due at sale depending on what you do with the proceeds. Confirm the details with your tax advisor.
Are DSTs illiquid for cash investors?
Yes — DSTs are illiquid regardless of whether you invest with cash or through a 1031 exchange. There's limited or no secondary market for DST interests, so you generally can't sell your interest on demand. Instead, you remain invested until the sponsor sells the underlying property, which typically happens after a multi-year hold — commonly around five to seven years, though it can be shorter or longer depending on the deal and market conditions. This illiquidity is a defining feature of the structure, not a temporary condition, so DST capital should be money you can leave invested for the full hold. If you might need access to your funds in the near or medium term, a DST is generally not appropriate, and a liquid vehicle like a publicly traded REIT may fit better. So for a cash investor, the question isn't just whether the DST's real estate is attractive — it's whether you can genuinely commit the capital for the duration. Confirm the expected hold and any liquidity provisions in the offering documents before investing.
Do I have to be an accredited investor to buy a DST with cash?
Generally, yes — DST interests are securities typically offered under Regulation D, which means they're usually available only to accredited investors. To be accredited, you generally must meet income thresholds (for example, income above a set level in recent years) or net-worth thresholds (net worth above a set level, excluding your primary residence), among other qualifying categories. This requirement applies whether you're investing through a 1031 exchange or with cash — the security itself is offered to accredited or otherwise suitable investors, and accreditation is part of confirming you can bear the risk and illiquidity. Before you invest, a suitability review confirms both your accreditation and that the investment fits your goals, liquidity needs, and risk tolerance. So if you're considering a cash DST investment, expect to verify your accredited status and go through a suitability process. The specific thresholds and rules can change, so confirm the current accreditation standards and your eligibility with the broker-dealer offering the DST.
How is a cash DST different from buying a rental property directly?
A cash DST and a direct rental property are very different experiences. With a DST, you invest passively — the sponsor handles all management, leasing, and operations, and you simply receive a share of the income, with no landlord duties. You also gain fractional exposure to institutional-grade real estate and can diversify across multiple DSTs (sponsors, property types, markets) from relatively modest capital. With a direct rental, you have hands-on control, can use your own leverage and timing, and earn the full income, but you take on active management, concentration in a single property, financing responsibility, and illiquidity of a different kind. The DST trades control and direct leverage for passivity, diversification, and professional management; the direct rental trades passivity for control. Both involve real estate risk and illiquidity. So a cash DST suits an investor who wants real estate income without the work and concentration of direct ownership, while a direct rental suits a hands-on investor who wants control. Match the approach to how involved you want to be.
Can a cash DST investor do a 1031 exchange later?
Yes — a cash DST investor is free to roll the proceeds into a 1031 exchange when the DST eventually sells, just as a 1031 investor can. Even though you entered the DST with cash (and therefore had no gain to defer at the outset), the DST still holds investment real estate, so when the sponsor sells the property and you receive your share of the proceeds, that's a taxable event measured against your fresh basis — and you can choose to defer the resulting gain by exchanging into another DST or other like-kind real property. This gives the cash investor flexibility: you can cash out and pay the tax, or you can begin a 1031 chain from that point forward. So entering with cash doesn't lock you out of 1031 treatment later; it simply means your first investment created a fresh basis, and any gain from the DST's sale is what you'd potentially defer going forward. The mechanics and timing of a 1031 are technical and deadline-driven, so coordinate with a qualified intermediary and your CPA well before the sale.
What returns can a cash DST investor expect?
A DST's total return for any investor — cash or 1031 — comes from three sources: the current distributions of net rental income you receive during the hold, any appreciation in the property's value realized when it's sold, and the debt paydown (amortization) that builds equity over the hold if the DST uses financing. There's no single guaranteed number: returns depend on how the underlying real estate performs (occupancy, rents, expenses) and on the exit assumptions when the property sells. Any return, yield, or IRR figure presented in a DST offering is a projection based on assumptions — not a guarantee — and actual results can be higher or lower. Distributions can be reduced or suspended if property income falls, and the property could sell for less than projected. So a cash investor should expect a combination of current income and potential appreciation and debt paydown, while understanding that all of it is projected and subject to real estate risk. Past performance doesn't guarantee future results. Evaluate the assumptions behind any projection carefully before investing.
Is a cash DST a good source of passive income?
A cash DST can be a meaningful source of passive income for the right investor. The DST passes through net rental income from professionally managed real estate, typically as regular (often monthly) distributions, so you receive real estate cash flow without any landlord responsibilities. For an investor who wants income from real estate but not the work of direct ownership, that passivity is a genuine benefit, and pass-through depreciation can make part of the income tax-advantaged. That said, DST income isn't guaranteed: distributions depend on the property's performance and can be reduced or suspended if occupancy or rents decline. The investment is also illiquid and long-hold, so the income comes with a multi-year capital commitment. So a cash DST can be a solid passive-income holding for an accredited investor with a multi-year horizon who can accept illiquidity and understands the income isn't guaranteed — but it shouldn't be treated as a risk-free or bond-like income source. Size and diversify any DST income allocation appropriately, and confirm suitability before investing.
How much do I need to invest in a DST as a cash investor?
DST minimums vary by offering, but they're generally far lower than the cost of buying a comparable property outright — which is part of the appeal. For cash investors, minimums are often set at a level that makes fractional access to institutional-grade real estate practical without requiring the capital to buy a whole building. The exact minimum depends on the sponsor and the specific DST, so you'll see it stated in each offering's documents. Because minimums are relatively accessible, a cash investor can divide a larger amount across several DSTs to diversify by sponsor, property type, and market rather than concentrating in one deal. Keep in mind that whatever you invest should be capital you can leave illiquid for the multi-year hold, since there's little secondary market. So the practical question isn't only the minimum but how much you can commit for the duration and how you want to spread it for diversification. Review the minimums and terms of each offering, and confirm the overall allocation fits your plan and suitability profile with the broker-dealer.
What are the risks of a cash DST investment?
A cash DST carries the same risks as any DST. Illiquidity: there's little secondary market, so you're committed until the property sells, typically after a multi-year hold. Real estate risk: occupancy, rents, and property values can decline, reducing income and the eventual sale price. Distribution risk: distributions aren't guaranteed and can be cut or suspended if income falls. Sponsor risk: results depend on the sponsor's execution — leasing, management, and the eventual sale. Concentration risk: a single DST holds one or a few specific properties, so it's concentrated unless you diversify across several. Leverage risk: if the DST uses financing, debt amplifies both gains and losses. Interest-rate and market risk: rising rates or weak markets can pressure values and exit pricing. Cash investors face all of these just as 1031 investors do. So a DST is a real investment that can lose value, not a guaranteed income product. Diversifying across DSTs, vetting the sponsor, and sizing the allocation appropriately help manage these risks — but don't eliminate them. Past performance doesn't guarantee future results.
Can I diversify across multiple DSTs as a cash investor?
Yes — and diversifying across multiple DSTs is one of the main advantages cash investors have. Because DST minimums are relatively low, you can divide your capital among several DSTs rather than concentrating it in a single property. You might hold a multifamily DST in one market, an industrial or logistics DST in another, and a net-lease retail or medical-office DST in a third — diversifying by sponsor, property type, geography, and lease structure. This spreads risk so that the underperformance of any one property, market, or sponsor has a smaller impact on your overall position. Diversification doesn't eliminate risk — all DSTs share illiquidity and real estate exposure — but it reduces concentration, which is one of the larger risks of holding a single DST. So a cash investor with enough capital can build a diversified real estate sleeve across several DSTs, tailored to their goals. A broker-dealer can help you evaluate offerings and construct a diversified allocation, while confirming each investment is suitable for you.
Is a DST or a publicly traded REIT better for a cash investor?
Neither is universally better — it depends on what you value. A publicly traded REIT offers daily liquidity, broad diversification across a large portfolio, transparent market pricing, and low minimums, but its price swings with the market and it doesn't pass through depreciation to you the way a DST does. A cash DST offers exposure to identifiable, specific real estate, pass-through depreciation that can shelter part of the income, and the option to 1031-exchange the proceeds later, but it's illiquid (a multi-year commitment), accreditation-gated, and concentrated unless you diversify across several. So if you prioritize liquidity, transparency, and the lowest minimums, a publicly traded REIT may fit; if you prioritize asset-specific exposure, depreciation shelter, and future 1031 flexibility — and you can accept illiquidity and meet accreditation — a cash DST may fit. Many investors use both. So match the vehicle to your liquidity needs, tax goals, and time horizon. A suitability review applies to the DST. Coordinate with your advisor and CPA to weigh the trade-offs for your situation.
How does Baker 1031 help cash investors evaluate DSTs?
We help cash investors understand and evaluate DSTs — how you can invest without a 1031, why cash investors choose them, the income and diversification benefits, the tax treatment for cash buyers, and whether a DST is right for your situation — so you can decide whether a direct cash DST fits your goals and, if so, access suitable offerings. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review that weighs your financial situation, goals, liquidity needs, and risk tolerance. We help you understand the structure, compare offerings (the real estate, sponsor, fees, hold, and income), and diversify across multiple DSTs if that suits your plan. Baker 1031 does not provide tax or legal advice; your CPA handles your specific situation — the fresh basis, pass-through depreciation, ordinary income taxation, and any future 1031 of the proceeds. Distributions and returns are never promised, and past performance doesn't guarantee future results. Our role is to help you understand cash DST investing clearly and invest only when suitable.
Glossary
- DST
- A Delaware Statutory Trust holding income-producing real estate as fractional interests.
- Cash Investor
- Someone investing new capital in a DST, not 1031 exchange proceeds.
- Fractional Beneficial Interest
- An investor's pro-rata share of a DST's specific real estate.
- 1031 Exchange
- A tax-deferred swap of like-kind investment real estate.
- Fresh Cost Basis
- A cash investor's new basis equal to the amount invested.
- Carried-Over Basis
- The low basis and deferred gain a 1031 investor brings in.
- Pass-Through Depreciation
- Depreciation a DST allocates to investors, sheltering part of income.
- Depreciation Recapture
- Tax on prior depreciation owed when the property is sold.
- Distributions
- Periodic payments of net rental income to DST investors.
- Diversification
- Spreading capital across multiple DSTs, sponsors, and markets.
- Institutional-Grade Real Estate
- Large, professionally managed assets accessed fractionally via a DST.
- Illiquidity
- The inability to readily sell a DST interest before the property sells.
- Accredited Investor
- An investor meeting income or net-worth thresholds for Reg D offerings.
- Regulation D
- The exemption under which DST securities are offered to accredited investors.
- Suitability Review
- Assessing whether a DST fits the investor's goals and risk tolerance.
- Hold Period
- A DST's multi-year term (often ~5-7 years) before the property sells.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts)
- U.S. Securities and Exchange Commission. Investor Bulletin: Accredited Investors — Updated
- FINRA. Real Estate Investments
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
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.
