What is a DST Investment?

A Delaware statutory trust (DST) is a unique real estate investment vehicle that allows a group of individual investors to purchase fractional interests in a large commercial real estate asset (one or multiple properties) that typically would not be accessible to them as a solo investor.

Investors who are interested in selling appreciated real estate often explore a 1031 Exchange and seek diversification and passive property ownership. Fractional interests in properties held within DSTs provide investors access to passive real estate investments that have professional asset management firms overseeing property acquisition, due diligence, loan sourcing when financing, asset management, property management when not triple net (NNN) leased, and property disposition.

 

The DST investment structure was created in Delaware in 1947. In 2004 the IRS issued Revenue Ruling 2004-86 which permits real estate investors to perform a 1031 Exchange into and out of a DST that holds title to real estate.

 

Today, DSTs are used for fractional 1031 Exchange investments, offering investors an alternative way to benefit from management-free ownership while still potentially deferring up to 100% of the taxes that would otherwise be due from the sale of an investment property.

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