What Is A DST And Why Is It Important To Investors?

If you are at all interested in investing in real estate, you may have heard the acronym “DST” along the way. DST stands for Delaware Statutory Trust and it is a great way to boost the profile of the property you own, while still taking advantage of the tax benefits of section 1031 of the IRS code. A DST is actually a legal entity created for real estate investment purposes as a trust under Delaware state law. DSTs are especially useful in a 1031 exchange.

The IRS has determined that any beneficial interest in the DST is treated as identical to a direct interest in real estate. This means that DST-held properties fully qualify for 1031 exchanges, so long as the other requirements of such an exchange are also met.

So why consider a DST instead of just buying property outright?

Under a DST, investors each own a pro rata share of the DST itself. The DST in turn holds title to various real estate interests, and distributes any income received from the properties (either through rental income or the sale of the property) to the investors in proportion to their ownership share in the DST.

With a DST, a pool of investors can buy property that each, individually, likely would not have the financing to purchase. DSTs allow savvy investors to boost the types of real estate in their portfolios. One important thing to note about a DST is that the trust is not considered a taxable entity, so any profits or losses are passed through to the investors of the trust.

One of the key benefits of a DST is that it’s signatory trustee makes all decisions related to any property held by the trust, freeing up investors from this responsibility. For investors not looking for the responsibility of day-to-day management and decision-making authority related to real estate holdings, a DST may be an excellent choice.

To find out how we can help you find and close on your next 1031 exchange property or to learn more about the exchange process and our qualified intermediary services, please visit our website.