Delaware Statutory Trusts (DSTs) are vehicles for real estate investment that give individual investors access to commercial investment properties that are usually significantly larger than what they would be able to acquire on their own.
DSTs are 1031 Exchange-eligible upfront and upon exit, which is a benefit that usually isn’t available with other co-ownership structures. Other potential benefits investors may reap from DSTs include:
DSTs are highly illiquid investments that cannot raise new capital. If you’re looking for hands-on investments where you can leverage experience, you’ll likely not want to invest in a DST.
What Are My Options?
Types of DST-Sponsored Properties
DSTs include a range of property types, including multi-family apartment complexes, industrial buildings, self-storage facilities, hotels, entertainment venues, medical offices and more.
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What is a DST?
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We start by learning about your goals, risk tolerance and current situation and figuring out how a DST might fit into them.
Step 2:
Creating Your Investment Plan
This will feature a summary of proposed investments and a detailed breakdown of your investment portfolio.
Step 3:
Reviewing Your DST-Specifics
We will review the specifics of your DST, like location, hold period, net income rates, sponsor, property-specific data and more.
Step 4:
Maintaining Your Portfolio
Your investment strategy can help you unlock trapped equity and reduce your risk, bringing in value and diversifying your portfolio.
Frequently Asked Questions
How is DST income reported?
DST shareholders receive a Form 1099 with their pro-rata share of income and expenses. This information is entered into Schedule E of their Form 1040.
How do I form a DST?
All parties involved need to create a private trust agreement to ensure individual interests are protected. This agreement also requires filing a Certificate of Trust with the Delaware Division of Corporations.
Is a DST a pass-through entity?
Yes, DSTs are pass-through entities. Income is distributed to each beneficiary of the DST, and those shareholders pay taxes on their pro-rata portion depending on their individual tax bracket.
What fees and expenses can I expect after forming my DST?
Prepare for fees and expenses, including offering and organization expenses; acquisition fees and expenses; asset management fees; property management fees; and disposition fees.
Do all of my DSTs need to be purchased and closed at the same time?
No, the most common timeframe is a delayed or deferred exchange, meaning you sell your property and the net proceeds go to the qualified intermediary. Then you have 45 days to identify replacement property(ies) and then another 135 days to close, for a total of 180 days.
How long is the typical hold period for a DST investment?
There is no guarantee as to when the property will sell. Most DSTs have ten years fixed-rate financing associated with them. Sponsors will be mindful of this and generally do all they can to watch the market for the best time to sell the property before year ten.
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