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How DST Ownership Works

A Delaware Statutory Trust (DST) is a specialized type of trust established under Delaware state law. It holds title to investment real estate properties and allows investors to purchase fractional shares.

These passive investment vehicles have many unique characteristics that have made them increasingly popular in recent years. Following, you’ll find a quick overview of the DST’s key features, as well as some important benefits of investing in a DST along with potential risks and limitations to consider.

Qualification as a Like-Kind Replacement Property

IRS Revenue Ruling 2004-86 qualifies a DST investment as an eligible “like-kind replacement property” for a 1031 exchange. This is important for several reasons.

First, the 1031 exchange rules require investors to identify one or more replacement properties within 45 days of the sale of the relinquished property and close on at least one of the identified properties within 180 days from the initial property sale. Those who struggle to meet these deadlines may be able to salvage the exchange by choosing a DST as their replacement property.

A DST may also be an attractive option for property owners who want to continue investing in real estate without having to deal with the hassle of actively managing real property.

Unique Sponsor/Investor Ownership Structure

A DST is established by a sponsor who takes responsibility for the following activities:

  • Finding potential properties and conducting due diligence
  • Arranging financing
  • Setting up the DSTs structure
  • Filing paperwork with regulatory authorities
  • Packaging and marketing the DST offering
  • Providing financial statements and tax reporting documents to investors
  • Determining optimum time to sell the property

Sponsors sometimes also manage the properties themselves. However, many outsource this task to a third party.

DST investors, also called beneficiaries, provide equity capital to replace the sponsor’s initial investment. In exchange, they receive fractional ownership, which provides a beneficial interest in the trust that holds the property, rather than direct shares of the underlying properties. Investors have no decision-making control and in exchange, their financial liability does not extend beyond the investment they’ve made.

Benefits of DST Ownership

There are several potential benefits of adding a DST to your portfolio. Many stem from the vehicle’s unique structure.

Passive Income

While the DST sponsor has full decision-making control and handles managerial duties such as dealing with tenants and taking care of property maintenance and upkeep, DST investors may receive passive income in the form of consistent monthly or quarterly distributions. This arrangement can be attractive to investors looking for professional management or those who do not want to deal with the hassles of active property ownership.

Fractional Ownership

Each DST beneficiary owns a portion of the DST based on the amount they’ve invested. However, no single owner can claim sole ownership rights, regardless of their investment percentage. By allowing multiple unrelated parties to purchase fractional shares, a DST allows investors to access large, high-value properties without over-extending their financial means.


Portfolio diversification is a cornerstone of risk mitigation. Since DSTs can be purchased with a relatively small investment compared to a direct property purchase, investors may be able to achieve diversification by investing in multiple DSTs or choosing a DST with a broad portfolio of assets.

Institutional Grade Properties

DSTs typically invest in high-quality institutional-grade commercial properties. This may include multi-tenant office buildings, self-storage buildings, multifamily residential buildings, industrial properties, and multi-tenant retail properties. Some also invest in niche property types, like medical offices, hotels, or senior housing.

Limitations of DST Ownership

As with most investment options, DSTs do have some potential drawbacks to consider.


Many DSTs have holding periods of five to 10 years. During this time, you may be unable to access the capital you’ve invested. This makes them suitable only for investors who are comfortable with intermediate-term timelines and have sufficient assets to cover their financial needs during the holding period.

Lack of Operational Control

While there are advantages to handing over the decision-making power to professionals, some investors are uncomfortable with the lack of control offered by a DST investment. Before investing in a DST, remember that you will have no input in the day-to-day management of the properties it holds.

Accredited Investor Requirements

DSTs are only available to accredited investors, which may be a significant drawback if you don’t 

  1. Have had a gross annual income of more than $200,000 ($300,000 for married couples filing jointly) for the past two years and reasonably expect to earn that much or more in the current year, OR
  2. Have an individual or joint net worth of more than $1 million, excluding your primary residence.

Learn More About Investing in DSTs

Delaware Statutory Trusts are unique investment vehicles that may make them attractive to real estate investors looking for passive income, professional management, and access to institutional-grade properties. Since the IRS acknowledges them as a qualified replacement property, they’re also popular among investors engaging in a 1031 exchange.

To learn more about the types of DSTs available and how they may fit into your investment strategy, contact us today to schedule a consultation with a member of our team. 

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Paul Getty

Paul Getty is a licensed real estate broker in the state of California and Texas and has been directly involved in commercial transactions totaling over $3 billion on assets throughout the United States. His experience spans all major asset classes including retail, office, multifamily, and student, and senior housing. Paul’s transaction experience includes buy and sell side representation, sourcing and structuring of debt and equity, workouts, and asset and property management. He has worked closely with nationally prominent real estate brokerage and investment organizations including Marcus Millichap, CB Richard Ellis, JP Morgan, and Morgan Stanley among others on the firm’s numerous transactions. Paul also maintains a broad network of active buyers and sellers of commercial real estate including lenders, institutions, family office managers, and high net worth individuals. Prior to founding First Guardian Group/FGG1031, Paul was a founder and CEO of Venture Navigation, a boutique investment banking firm specializing in structuring equity investments made by institutions and high net worth individuals. He possesses over 35 years of comprehensive worldwide business management experience in environments ranging from early phase start-ups to multi-billion-dollar corporations. His track record includes participation in IPOs and successful M&A activity that has resulted in investor returns of over $700M. Paul holds an MBA in Finance from the University of Michigan, graduating with honors, and a Bachelor’s Degree in Chemistry from Wayne State University. Paul Getty holds Series 22, 62, and 63 securities licenses and is a registered financial representative with LightPath Capital Inc, member FINRA /SIPC. Paul is a noted speaker, author, and actively lectures on investments, sales, and management related topics. He is author of The 12 Magic Slides, Regulation A+: How the JOBS Act Creates Opportunities for Entrepreneurs and Investors, and Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST), available on Amazon and other retail outlets.

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