Limited Liability: DSTs provide investors with limited liability protection, similar to that of a corporation or limited liability company (LLC). This means that the investors’ personal assets are generally shielded from the debts and liabilities of the trust.

Pass-Through Taxation: DSTs are typically structured as pass-through entities for tax purposes. This means that the income and expenses generated by the trust flow through to the individual investors, who report them on their own tax returns. This pass-through structure can be advantageous in certain tax situations.

1031 Exchanges: DSTs are often used in 1031 exchanges, also known as like-kind exchanges, which allow real estate investors to defer capital gains taxes when they sell one property and purchase another similar property. DSTs offer a way for investors to pool their funds to acquire a fractional interest in a larger, professionally managed institutional quality real estate property that qualifies for a 1031 exchange as replacement properties.

Management and Professional Expertise: DSTs are managed by a trustee, which is typically a financial institution or company with experience in real estate management. This allows investors to pass the day-to-day management responsibilities to professionals, which can be particularly attractive for passive investors. No more “Tenants, toilets & trash”!

Fractional or Percentage Ownership in a Trust, not Tenants-in-Common or TIC: In a DST, multiple investors collectively own and share in the benefits and risks associated with the underlying property in the Trust.  Each investor typically holds a percentage interest in the DST.

Investment Duration: DST’s usually have a finite lifespan, which is specified in the trust agreement. Once the trust’s purpose is fulfilled or the specified duration is reached, the property may be sold, and the proceeds distributed back to the investors or to their Qualified Intermediary to execute another 1031 Exchange.

Non-Recourse Debt: The acquisition debt, if any, in the DST structure is the debt of the DST, not the investors, which means the debt in the DST will not encumber or impact the investors personal finances.