How Does Investing in a DST Work?
A 1031 Exchange is a powerful tax-deferral strategy for real estate investors looking to sell investment properties and reinvest the proceeds into new ones, while deferring capital gains taxes. Within the realm of 1031 Exchanges, the Delaware Statutory Trust (DST) has emerged as a particularly appealing replacement property option for California accredited investors. A DST allows investors to own a fractional interest in institutional-quality real estate without the responsibilities of direct property management.
How the Investment Process Works
Investor Sells a Property in a 1031 Exchange – To defer capital gains taxes, the investor sells an existing investment property and identifies a DST as a replacement property within the IRS-required 45-day identification window.
Investor Purchases a DST Interest – Instead of acquiring a new property directly, the investor buys shares of a trust that holds institutional-grade real estate, such as multifamily apartments, medical offices, retail centers, or industrial properties.
Trust Generates Income & Appreciation – The DST sponsor manages the property, and investors receive passive income distributions from rental revenue while benefiting from potential property appreciation.
Eventual Sale of the DST Property – After a set hold period (typically 5–10 years), the sponsor sells the property, and investors can cash out or reinvest in another DST or 1031 Exchange property to continue deferring taxes.
Learn more about Possible DST Exit Outcomes →
A DST can be an excellent replacement property option for Sacramento and California investors currently in or considering a 1031 Exchange. Deciding whether to invest in a Delaware Statutory Trust requires thoughtful consideration of your financial goals, risk tolerance, and investment preferences. At Legacy, we can help you determine whether a DST is the right fit for your real estate strategy.
Give our knowledgeable team a call to learn more about DSTs and if they align with the legacy you want your investments to build.
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There are material risks associated with investing in private placements, Delaware Statutory Trusts (“DSTs”) and real estate securities including the potential loss of the entire investment principal, illiquidity, tenant vacancies impacting income and revenue, general and real estate market conditions, lack of operating history, interest rate risks, competition, including the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and investors should read the PPM carefully before investing paying special attention to the risk section. This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation. Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Legacy Investments & Real Estate is independent of CIS and CAM.