Delaware Statutory Trust (DST) Q&A:
Your Top Questions Answered
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A Delaware Statutory Trust (DST) is a legal entity that allows multiple investors to own fractional interests in high-quality, institutional-grade real estate properties, such as apartments, office buildings, or retail centers.It’s structured under Delaware law and is commonly used for 1031 exchanges to defer capital gains taxes when selling appreciated real estate.

Unlike direct ownership of rentals, where you handle maintenance,tenants, and management, a DST is passive. You invest as a beneficiary, and a professional sponsor manages everything—no roofs to replace, no tenant calls,and no day-to-day involvement. It can be ideal for aging investors like me who want to step back.

A 1031 exchange is an IRS provision allowing you to sell investment your property and reinvest the proceeds into a"like-kind" property without immediate capital gains taxes. DSTs qualify as like-kind investments, making them a popular choice for exchangers who want to defer taxes while transitioning to passive ownership.

DSTs can be ideal if you’re tired of managing properties, facing large capital expenses, or want a passive income stream. They can offer tax deferral, steady cash flow, and no management hassle, appealing to investors who want a passive investment and income.

Benefits include tax deferral via 1031 exchanges, passive income, professional management, diversification across properties, potential appreciation, and no personal liability for property debts—a low-stress way to stay in real estate.

DSTs often invest in institutional-grade assets like multifamily apartments, medical offices, industrial warehouses, government buildings, or triple-net leased retail properties. These can be stable,income-producing assets less prone to vacancy issues.

A sponsor (a real estate firm) manages all operations, leasing, and decisions.As a passive investor, you have no control, which many find appealing for its simplicity and freedom from management duties.

DSTs often provide monthly or quarterly distributions from rental income,depending on the property. Results aren’t guaranteed.

DSTs are designed for long-term holding (5-10 years) and are generally illiquid. Secondary markets or buyback options may exist, but plan for limited liquidity when investing.

Risks include market downturns, tenant defaults, interest rate impacts on property values, and reliance on the sponsor’s performance. Returns and principal aren’t guaranteed, and poor property performance could affect your investment.

Yes, most DSTs require you to be an accredited investor, meaning a net worth over $1 million (excluding primary residence) or annual income exceeding$200,000 (single) or $300,000 (joint filers).

DST income is reported as passive rental income on Schedule E. Investors can depreciate their share of the property and deduct interest expenses as if they owned it directly, making income tax-efficient.

Yes, DST interests are easier to transfer or divide among heirs than physical properties. Upon death, heirs receive a step-up in basis, potentially eliminating deferred taxes, and they inherit passive income without management burdens.

Fees include upfront acquisition fees, annual asset management fees, and disposition fees upon sale. These are deducted from income, so net yields reflect them. Review the offering memorandum for specifics.

Unlike Tenancy-in-Common (TIC), which involves shared control and liability,DSTs are passive. Compared to buying another property, DSTs avoid financing and management hassles but offer less control—ideal for those wanting simplicity.

Yes, investing in multiple DSTs across different asset classes or regions reduces risk from any single property. It’s a great way to diversify real estate holdings without added management. Some investors have diversified into 20 to 30 properties from a million-dollar relinquished property, spreading risk while maintaining passive real estate exposure without added management.

After the hold period (5-10 years), the sponsor typically sells the property,distributing proceeds to investors. You can reinvest in another DST or property via a 1031 exchange to defer taxes or cash out and pay taxes.

Minimums vary but often start at $100,000 to $250,000, suitable for larger 1031exchange proceeds. Some offerings allow smaller investments—check with GDF Financial for details.

For a 1031 exchange, engage a Qualified Intermediary (QI) before your relinquished property closes. A QI is a third party who holds sale proceeds to ensure IRS compliance. Contact us for a list of QIs and we’ll start you through the process.

A special kind of REIT, called an UPREIT, offers quicker liquidity and more flexibility while preserving your 1031 exchange benefits, similar to DSTs. For many UPREITs, liquidity is just a phone call away.

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