The Investor's Guide to DSTs
A step-by-step guide to understanding and investing in Delaware Statutory Trusts for your 1031 exchange.
Step 1: Understanding the Basics
A DST allows you to own a fractional interest in large, institutional-quality properties. A sponsor company acquires the property and places it into a trust, then offers shares of that trust to 1031 exchange investors. You receive the potential for monthly income and appreciation without any management responsibilities.
Step 2: The Investment Process
- Consultation: Discuss your financial goals, risk tolerance, and 1031 exchange timeline with a qualified advisor.
- Review Offerings: Your advisor will provide you with a Private Placement Memorandum (PPM) for various DST offerings that match your criteria.
- Due Diligence: Carefully review the PPM, which contains all material information about the property, sponsor, financials, and risks.
- Subscription: Complete the subscription documents to formally invest in the chosen DST. Your 1031 exchange funds are then transferred from your Qualified Intermediary.
Key Consideration: Illiquidity
DSTs are long-term, illiquid investments. There is no public market to sell your interest. The sponsor typically aims to sell the underlying property after a holding period of 5-10 years, at which point you would receive your pro-rata share of the proceeds.