Broker Check
What is a DST?

What is a DST?

October 11, 2023

A Delaware Statutory Trust (DST) is a type of real estate investment trust (REIT) that is specifically created under the laws of the state of Delaware. DSTs offer a number of benefits to investors, including:

  • Access to institutional-grade properties: DSTs typically invest in large, high-quality properties that are typically out of reach for individual investors. This gives investors the opportunity to own a piece of a property that would otherwise be too expensive or difficult to acquire on their own.
  • 1031 exchange eligibility: DSTs are eligible for 1031 exchanges, which allows investors to defer capital gains taxes on the sale of one property by reinvesting the proceeds into another property of equal or greater value. This can be a valuable tax benefit for investors who are looking to reinvest their profits into real estate.
  • Passive income: DSTs are typically managed by a professional investment firm, which means that investors do not have to be involved in the day-to-day management of the properties. This can be a major benefit for investors who do not have the time or expertise to manage real estate investments on their own.
  • Diversification: DSTs typically invest in a variety of properties, which can help to reduce risk for investors. This is in contrast to investing in a single property, which could be more volatile.
  • Potential for high returns: DSTs can offer the potential for high returns, as they typically invest in properties that are expected to generate significant income. However, it is important to note that there is also the potential for losses, as any investment in real estate carries some degree of risk.

When considering an investment in a DST, it is important to carefully weigh the benefits and risks. Some of the factors to consider include:

  • The type of properties in which the DST invests: Investors should research the properties in which the DST invests to make sure that they are comfortable with the risk profile.
  • The type of properties in which the DST invests: Investors should research the properties in which the DST invests to make sure that they are comfortable with the risk profile.
  • The fees associated with the investment: DSTs typically charge a variety of fees, including management fees, marketing fees, and other administrative fees. Investors should carefully review these fees before investing.
  • The liquidity of the investment: DSTs are not as liquid as other types of investments, such as stocks or bonds. This means that it may be difficult to sell your investment quickly if you need to do so.

Here are some additional considerations for investors who are considering investing in a Delaware Statutory Trust:

  • Minimum investment amount: The minimum investment amount for DSTs can vary, but it is typically lower than the minimum investment amount for other types of real estate investments, such as REITs.
  •  Investment time horizon: DSTs typically have a lifespan of 10 years or less. This means that investors should be prepared to hold their investment for the duration of the trust.
  • Tax implications: DSTs are pass-through entities, which means that investors must pay taxes on their share of the trust’s income. This can be a significant tax liability for investors who are in high tax brackets.

If you are considering investing in a Delaware Statutory Trust, it is important to speak with a financial advisor to discuss the risks and potential rewards of this type of investment.

Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.