DST Assets: DSTs hold and are commonly invested in institutional-grade real estate including: Multi-Family, Industrial NNN, Self-Storage, Retail, Student Housing, Office, Hospitality, Medical Facilities, Senior Living and Energy. They potentially offer monthly income, which may be tax sheltered, and
participation in the performance of the underlying real estate asset upon disposition. Through subsequent 1031 purchases of DSTs, you may also effectively defer capital gains in perpetuity with ultimately an elimination of those capital gains via a step-up in basis for heirs.

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 considered like-kind real estate per IRS Revenue Ruling 2004-86 and are often used in 1031 exchanges as replacement property. 1031 exchanges, also known as like-kind exchanges, allow real estate investors to defer capital gains taxes when they sell one property and purchase another similar property, like a DST. DSTs offer a way for investors to aggregate their funds to acquire a pro rata interest in a larger, professionally managed, institutional quality property that qualifies for a 1031 exchange.

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

Pro Rata or Percentage Ownership in a Trust, not Tenants-in-Common or a 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 pro rata 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 investors finances. However, the DST debt will serve to satisfy debt replacement required by the IRS in a 1031 exchange.