How it works
A sponsor buys a large property (or portfolio), places it in a Delaware Statutory Trust, and sells beneficial interests to investors. Under IRS guidance (Rev. Rul. 2004-86), those interests count as like-kind real estate — so your intermediary can wire your exchange funds straight into one. Minimums often start around $25,000–$100,000, and you can split one sale across several DSTs.
Why people choose it
- Retiring from landlording while keeping the deferral — the classic use case.
- Beating the 45-day clock: DST inventory is sitting on the shelf, closable in days — which also makes DSTs a popular backup identification in case your primary property falls through.
- Sizing precisely: fractional amounts can absorb leftover funds that would otherwise become boot, and DSTs come with built-in non-recourse debt that helps match your debt-replacement requirement.
The trade-offs, honestly
- Illiquid: typical hold is 5–10 years, on the sponsor's schedule, with no meaningful resale market.
- Zero control: the trust structure legally prohibits new capital, refinancing, or renegotiated leases — you can't even vote on much.
- Fees: sponsor and selling loads commonly total several percent up front, which your returns must overcome.
- Accredited investors only — generally $1M+ net worth excluding your home, or high income.
When the DST eventually sells, you can 1031 the proceeds again — into another DST, back into direct property, or toward the hold-until-death endgame. Some DSTs also feed into 721 UPREIT structures, which is a one-way door worth understanding first.
Check your exchange numbers first →Know your deferral and debt-replacement targets before shopping DST inventory