Reg D 506(c) and DST Offerings Explained

Regulation D Rule 506(c) is an SEC exemption that lets an issuer raise capital through a private placement — without the full registration required for a public offering — while openly advertising the offering to the public. It was created under the 2012 JOBS Act and became effective in 2013. The defining feature of 506(c) is that general solicitation and advertising are permitted, which traditional private placements couldn't do. The trade-off is that the issuer must take reasonable steps to verify that every investor is accredited, using documentation rather than accepting self-certification. Most DSTs and many private real estate offerings are sold under Reg D, and 506(c) is a common choice because it lets sponsors market openly to the broad pool of 1031 investors. So 506(c) is the 'advertise publicly but verify accreditation' exemption. For investors, it means you may see DST offerings advertised and should expect to verify your accredited status before investing. This is educational information about the rules, not legal advice — confirm specifics with your advisor.

General solicitation means publicly advertising or marketing a securities offering — reaching potential investors through channels like websites, email campaigns, webinars, social media, conferences, advertisements, or other public communications, rather than only approaching people with whom the issuer already has a relationship. Historically, private placements under Regulation D prohibited general solicitation: an issuer could only offer securities to investors it had a substantive, pre-existing relationship with, and public marketing risked losing the exemption. Rule 506(c), created by the JOBS Act, changed this by allowing general solicitation for the first time in a private placement — provided the issuer verifies that all investors are accredited. For DSTs, this is why you might legitimately encounter offerings advertised on a sponsor's or broker-dealer's website, in an educational webinar, or in marketing aimed at 1031 investors. So general solicitation is simply public marketing of the offering, now permitted under 506(c). It makes DST offerings more discoverable, but the actual purchase remains limited to verified accredited investors.

Under Rule 506(c), the issuer must take reasonable steps to verify that each investor is genuinely accredited — it can't simply rely on the investor checking a box (as 506(b) allows). Verification typically takes one of a few forms. The issuer or a verification service may review documents that demonstrate you meet the thresholds — for the income test, recent tax returns or W-2s; for the net-worth test, bank, brokerage, and other statements (plus a credit check for liabilities). Alternatively, and more commonly, you can provide a written letter from a third-party professional — a CPA, attorney, registered investment adviser, or registered broker-dealer — confirming they've reviewed your finances and that you qualify as accredited. Some sponsors use dedicated third-party verification platforms to streamline the process. Whichever method is used, the result must be reasonable, documented confirmation of your status before you invest. So plan to provide documentation or a professional's letter, and build a little time into your exchange timeline for it. Confirm the specific requirements with the offering and your advisor.

Rules 506(b) and 506(c) are the two main Reg D exemptions, and they differ in three ways. Advertising: 506(c) permits general solicitation and public advertising, while 506(b) prohibits it — a 506(b) offering can only be sold to investors with whom the issuer has a substantive, pre-existing relationship. Who can invest: 506(c) is accredited-only, while 506(b) allows up to 35 sophisticated non-accredited investors alongside unlimited accredited ones (though many sponsors limit 506(b) to accredited investors anyway). Verification: under 506(c), the issuer must take reasonable steps to verify accredited status with documentation, while under 506(b), investors can generally self-certify. So 506(b) is the quieter model (no advertising, pre-existing relationship, self-certification), and 506(c) is the open model (public advertising, accredited-only, mandatory verification). Many DSTs use 506(c) for its advertising reach. So the choice between them shapes how the offering is marketed and how your status is confirmed. Understanding it explains why a DST may be advertised openly or offered privately.

Many DST sponsors choose 506(c) primarily for reach. Because 506(c) permits general solicitation, a sponsor can openly market a DST offering to the broad universe of 1031 investors — through websites, educational content, webinars, and advertising — rather than being limited to investors it already has a pre-existing relationship with (as 506(b) requires). For a 1031 investor racing against the 45-day identification deadline, being able to discover and research available DST offerings publicly is genuinely valuable, and it has helped make DST investing more transparent and accessible. The trade-off the sponsor accepts is the verification burden: under 506(c), it must verify every investor's accredited status with documentation rather than accepting self-certification. For broadly marketed DST programs aimed at the general pool of exchangers, advertising reach usually outweighs the added verification work, so 506(c) is common. Some sponsors still use 506(b) for offerings placed quietly through existing relationships. So 506(c) is popular with DSTs because reaching time-pressured 1031 investors matters, and verification is an acceptable cost.

Yes — if the DST is offered under Rule 506(c), it can legitimately be advertised to the public through general solicitation. This means you may encounter DST offerings on a sponsor's or broker-dealer's website, in educational webinars, in email campaigns, at conferences, or in advertising aimed at 1031 investors. Before 506(c) existed, this kind of public marketing of a private placement was prohibited, but the JOBS Act changed that for 506(c) offerings. It's worth understanding, though, that the ability to advertise doesn't change who can actually invest: a 506(c) offering remains limited strictly to accredited investors, and the issuer must verify each investor's status with documentation. So public advertising under 506(c) makes offerings more discoverable and helps investors research options, but the purchase itself is gated to verified accredited investors. If a DST is offered under 506(b) instead, it can't be advertised publicly and is offered only through pre-existing relationships. So whether you'll see a DST advertised depends on which exemption it uses.

Yes — a Rule 506(c) offering is limited strictly to accredited investors, and you must be accredited (and verified) to invest in one. Unlike 506(b), which can include up to 35 sophisticated non-accredited investors, 506(c) has no room for non-accredited investors at all. To qualify as accredited, you generally need income over $200,000 (single) or $300,000 (joint) in each of the last two years with the same expected this year, or a net worth over $1 million excluding your primary residence; certain entities and licensed individuals (holding Series 7, 65, or 82) can also qualify. Under 506(c), you'll also need to verify that status with documentation or a professional's letter, not just self-certify. Because nearly all DSTs are Reg D private placements — and many are 506(c) — accreditation is effectively a requirement to invest in DSTs. So confirm your accredited status with your advisor before pursuing a DST, and be prepared to document it. Baker 1031 offers DST interests to accredited investors after a suitability review.

The documents you'll need depend on which accreditation test you're meeting and how the offering chooses to verify. If you're qualifying under the income test (over $200,000 single or $300,000 joint in each of the last two years), you'd typically provide recent tax returns or W-2s showing that income. If you're qualifying under the net-worth test (over $1 million excluding your primary residence), you'd provide statements showing your assets — bank, brokerage, and other account statements — and information on your liabilities, sometimes including a credit report. Alternatively, and often more conveniently, you can provide a written letter from a third-party professional — your CPA, attorney, registered investment adviser, or broker-dealer — confirming that they've reviewed your finances and that you qualify as accredited, which can spare you from handing over detailed financial documents directly. Some sponsors use third-party verification platforms that guide you through the process. So gather either your financial documentation or a professional's letter ahead of time. Confirm the specific requirements with the offering, since they can vary.

Not inherently — the exemption a DST uses (506(c) versus 506(b)) is about how the offering is marketed and how accreditation is confirmed, not about the riskiness of the underlying real estate. The risk of a DST comes from the property and structure: the quality and location of the real estate, the tenants and leases, the debt, the sponsor's track record, the fees, and the illiquid, longer-term nature of the interest. Those factors are the same regardless of whether the offering is 506(c) (advertised, accredited-only, verified) or 506(b) (not advertised, pre-existing relationship, self-certified). So you shouldn't assume a 506(c) DST is riskier just because it was advertised, or that a 506(b) DST is safer because it wasn't. Evaluate any DST on its underlying merits — the property, the sponsor, the structure, the fees, and the risks disclosed in the private placement memorandum — and rely on a suitability review. So the exemption type is a procedural distinction; the real risk analysis is about the investment itself, which you should review carefully with your advisors.

In practice, almost never. Nearly all DSTs are sold as Regulation D private placements, and the vast majority are limited to accredited investors. A 506(c) DST is strictly accredited-only with no exceptions. A 506(b) DST technically could include up to 35 sophisticated non-accredited investors, but most real estate sponsors choose to limit 506(b) offerings to accredited investors anyway, because including non-accredited investors triggers additional disclosure obligations and complexity. As a result, the practical reality is that DSTs require accreditation. This is because DSTs are Reg D private-placement securities sold through broker-dealers, and the accredited-investor standard is meant to limit these offerings to investors presumed able to bear the risk and illiquidity. So if you're not accredited, DST investing is generally not available to you, and you'd need to consider other ways to participate in real estate. Confirm your accreditation status with your advisor, and remember that accreditation is necessary but not sufficient — a suitability review still applies. So accreditation is effectively a gateway requirement for DSTs.

Verification timing varies, but it's usually a matter of days rather than weeks, especially if you prepare in advance. The fastest path is often a letter from a third-party professional — your CPA, attorney, registered investment adviser, or broker-dealer — confirming you're accredited; if your professional already knows your finances, they can often produce this quickly. Document-review verification (submitting tax returns, W-2s, or financial statements) can take a bit longer, depending on how quickly you gather the documents and how the offering or its verification service processes them. Third-party verification platforms can also streamline the process. Because a 1031 exchange runs on tight 45-day identification and 180-day closing deadlines, it's wise to start the verification process early — ideally before you've identified a specific DST — so it doesn't become a bottleneck near your closing. So gather your documentation or line up your professional's letter ahead of time. The verification itself is usually not lengthy, but it must be completed before your investment can be accepted, so build a buffer into your timeline.

While Regulation D doesn't always mandate a formal private placement memorandum (PPM) for purely accredited offerings, in practice nearly all DST offerings — whether 506(c) or 506(b) — are accompanied by a detailed PPM, and you should expect and rely on one. The PPM is the central disclosure document: it describes the property, the sponsor and trustee, the structure of the trust, the financing and debt terms, the fee structure, the projected and historical financials, the tax treatment, and — importantly — the risk factors. Reviewing the PPM carefully is one of the most important steps in evaluating any DST, because it's where the offering's terms and risks are spelled out. Don't rely on advertising or summaries; the PPM governs. Your broker-dealer can help you work through it, and your CPA and attorney can review the tax and legal sections relevant to your situation. So expect a PPM with any DST, read it thoroughly, and make sure you understand the property, structure, fees, and risks before investing. The advertising you may have seen under 506(c) is marketing; the PPM is the substance.

The SEC requires accreditation for Regulation D private placements because these offerings are exempt from the full registration and disclosure requirements that protect public investors. In a registered public offering, the issuer must provide extensive, SEC-reviewed disclosures; in a private placement, those protections are reduced. The accredited-investor standard is the SEC's way of limiting these less-disclosed, often riskier and less-liquid offerings to investors presumed to have the financial sophistication and resources to evaluate them and to bear potential losses. The thresholds — high income or substantial net worth, or certain professional licenses — are proxies for that ability. Under 506(c), because the offering can be publicly advertised to anyone, the SEC requires verification (not just self-certification) to ensure that only genuinely accredited investors actually buy in. For DSTs, this is why accreditation is effectively required: they're Reg D private placements. So accreditation is an investor-protection mechanism tied to the reduced disclosure of private offerings. This is educational background on the rules, not legal advice — confirm specifics with your advisor.

No — the fact that a DST is advertised under 506(c) says nothing about its exclusivity or quality. Advertising is simply a marketing method that the 506(c) exemption permits; it doesn't lower the standards for who can invest (still accredited-only, and verified) or change the nature of the underlying real estate. Many high-quality, institutional DST offerings from reputable sponsors are marketed under 506(c) precisely because the ability to reach the broad pool of 1031 investors is efficient and helps time-pressured exchangers find suitable replacement property. Conversely, the fact that a 506(b) DST isn't advertised doesn't make it better — it just means it's offered through pre-existing relationships. So judge a DST by its substance — the property, the sponsor's track record, the structure, the financing, the fees, and the risk factors in the PPM — not by whether or how it was advertised. The marketing method is a procedural feature of the exemption, not a quality signal. So don't let advertising (or its absence) drive your assessment; focus on the investment's merits and your suitability.

We help investors understand and navigate Regulation D Rule 506(c) DST offerings — what 506(c) is, the general-solicitation allowance, the accreditation-verification requirements, how 506(c) compares to 506(b), and what it all means for you — so you can move through the offering process smoothly and meet your exchange deadlines. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. Whether a DST is offered under 506(c) or 506(b), we help you understand the process, confirm and document your accredited status (coordinating with your CPA, attorney, or RIA on the verification letter when needed), and review the offering documents so you understand the property, structure, fees, and risks before investing. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation, and the securities-law details are technical, so this is educational information, not advice. Nothing here promises income or returns — DST interests are illiquid and carry real risk, and past performance doesn't guarantee future results.