Delaware Statutory Trust (DST)

How DSTs Work

1. A DST sponsor (typically a national real estate firm) acquires a property using investor capital pooled into a Delaware statutory trust.
2. Investors purchase fractional "beneficial interests" in the trust — typically $100,000 minimums.
3. The trust holds title to the property; investors are beneficial owners but do not control day-to-day operations.
4. The DST sponsor manages the property; investors receive monthly cash distributions.
5. At the end of the hold period (typically 5–10 years), the property is sold and proceeds distributed pro rata — or investors can 1031 exchange again into a new replacement.

Why Use a DST in a 1031 Exchange

• Tight timelines: DST inventory can be identified and closed within 1031's 45/180 day windows without competitive bidding.
• Passive ownership: Zero management responsibility; truly passive income.
• Institutional quality: Access to property classes (large Class A multifamily, regional industrial portfolios) typically out of reach for individual investors.
• Multiple-property identification: Spread funds across multiple DSTs to satisfy the 200% rule and diversify.
• Estate planning: Predictable income streams that pass cleanly to heirs at stepped-up basis.
• Reduced execution risk: DST closings are typically faster and more reliable than direct property acquisitions.

DST Limitations (The Seven Deadly Sins)

To preserve 1031 qualification, the IRS imposes specific restrictions on DST sponsors. These are commonly called the "seven deadly sins":

1. No additional contributions from current investors after closing
2. No renegotiation of loan terms
3. No reinvestment of property sale proceeds (except minor)
4. Capital expenditure limited to routine maintenance
5. No new leases after closing (except in case of tenant default)
6. Cash held must be temporary investment in short-term debt
7. Distributions must be regular and based on net cash flow

These rules can limit a DST's flexibility — including its ability to refinance or sign new leases — so investors should review the offering carefully before committing.

DST vs. TIC (Tenancy in Common)

Both DSTs and Tenant-in-Common (TIC) structures qualify for 1031 exchange treatment, but they differ structurally. TIC investors are direct co-owners of the underlying property and typically participate in management decisions; DST investors hold beneficial interests in a trust that owns the property and have no management authority. DST has largely supplanted TIC as the dominant fractional 1031 replacement vehicle since the IRS clarified DST qualification in 2004.

DSTs and Florida Investors

Florida investors have a unique combination of advantages with DSTs: no state capital gains tax, no state income tax on DST distributions, and the ability to relocate basis from high-tax states. Many DST sponsors offer Florida-located properties, but investors are not limited to Florida — Florida-resident DST investors can acquire interests in properties anywhere in the US while preserving Florida's tax advantages.

How much do I need to invest in a DST?

DST minimums are typically $100,000 for accredited investors, though some sponsors offer lower minimums for non-1031 buyers and some require higher minimums for institutional offerings. Most DST sponsors verify accredited investor status before accepting investments.

How long does a DST hold the property?

Typical DST hold periods are 5–10 years, depending on the strategy and asset class. Multifamily and industrial DSTs often hold 7–10 years; net-lease and trophy retail can hold longer. At the end of the hold, the property is typically sold and investors can take cash or 1031 exchange into a new replacement.

Can I do another 1031 exchange when the DST sells?

Yes. When a DST sells its property, investors receive distribution and can 1031 exchange those proceeds into another replacement property — including another DST. This allows DST investors to defer capital gains indefinitely across multiple exchanges.

Where do I find DST inventory for a Florida 1031 exchange?

Michael R. Linton at Linton Global Solutions and 1031DealFlow.com maintain current DST inventory from national sponsors covering all major asset classes. We coordinate the full 1031 process including QI selection and identification within the 45-day window. Call (312) 612-1031.

Need a DST for Your 1031 Exchange?

Time-sensitive exchange? Get current DST inventory from national sponsors plus full 1031 coordination.