DST property and real estate: what you actually own

If you've been running your own building, a lot changes when you move into a DST. This page covers what the trust holds, what you own, who does the work and what you give up. When you're ready to see what's open, you can view listings.

What real estate a DST holds

A DST can hold a single property or a portfolio. The real estate is often commercial. Examples include net-lease retail, industrial or distribution buildings, office, medical office and self-storage.

Each offering's private placement memorandum describes the specific properties, tenants, leases and any debt. Property type alone doesn't make an offering right for your exchange.

Single property vs portfolio

A single-property DST ties your interest to one building and its tenants. A portfolio DST holds several properties in one trust, so your interest covers all of them.

All-cash vs leveraged

Some DSTs buy their property with cash only. Others use a loan at the trust level. Which one fits depends partly on the debt you need to replace from your sale, and partly on how much loan risk you're comfortable with. That comparison is covered in how DST listings work.

What you own as a DST investor

A beneficial interest, not a deed

You own a fractional beneficial interest in the trust. You don't get a deed to the building or to a specific suite. The trust holds title.

Your interest is sized to what you put in. Here's a hypothetical: $250,000 into an offering with $25 million of equity would be about a 1% interest. Those numbers are for illustration only.

Your share of distributions and sale proceeds

Your share of any distributions and sale proceeds, after trust expenses, is proportional to your interest, as the private placement memorandum describes. A DST interest may qualify for 1031 deferral when the offering is structured for it. Confirm that with your CPA before you count on it.

The debt isn't yours to sign

DSTs that use a loan typically use non-recourse financing at the trust level. In those offerings, investors don't sign the loan. Check the financing section of each offering's private placement memorandum for the actual terms.

Who manages DST property

This is the big change for an owner who's used to handling everything. In a DST, the work moves to other parties:

• Sponsor. Puts the deal together and usually runs it.
• Trustee. Makes decisions for the trust. It's often a sponsor affiliate.
• Master tenant or property manager. In many DSTs, an affiliated master tenant or property manager handles tenants, maintenance and day-to-day operations.
• You. A beneficiary. You don't manage anything.

That's the appeal if you're done being the landlord. It also means you're relying on the sponsor's judgment. The offering documents spell out each party's role, so read that section closely.

What you give up: control and liquidity

No votes on leases, loans or a sale

DST investors generally can't make decisions about the property. You don't vote on leasing, financing or a sale. If you're used to running your own building, giving up that control is the main trade-off.

The IRS limits behind it

To keep the interest treated as real estate for a 1031, IRS Revenue Ruling 2004-86 limits what the trust itself can do. In brief:

• No new capital from investors after the offering closes.
• No renegotiating loans or leases, except in limited cases.
• No reinvesting sale proceeds in new property.

For the full list, see the "seven deadly sins" section of how a 1031 exchange into a DST works.

Illiquidity

Plan to hold until the sponsor sells. DST interests generally don't trade on a public market, and selling early may not be possible.

How a DST ends: sale and your next move

Hold periods vary by offering. Any hold period in the documents is a projection, not a promise. When the sponsor sells the property, investors receive their share of the net proceeds.

What you do next is your call. Some investors start a new 1031 exchange with their share, if they meet the rules. Some offerings describe other exit options. Talk with your CPA well before a sale so you're not planning on a short clock.

How to see current DST properties

Specific DST offerings generally aren't advertised publicly with their terms, because they're private placements. At 1031 Specialist, you share your details and then review current DST and other 1031-eligible offerings. 1031 Specialist works with investors who have at least $100,000 to place.

Read each offering's private placement memorandum. Check identification details with your qualified intermediary before Day 45.

FAQ

What kind of real estate does a DST own?

A DST can own a single property or a portfolio, often commercial real estate such as net-lease retail, industrial or distribution buildings, office, medical office and self-storage. Each offering's private placement memorandum describes the specific properties, tenants, leases and any debt. Property type alone doesn't make an offering right for your exchange.

What do I actually own when I invest in a DST?

You own a fractional beneficial interest in the trust, not a deed to the building or a specific suite. The trust holds title. Your share of any distributions and sale proceeds, after trust expenses, is proportional to your investment. In this hypothetical, $250,000 into an offering with $25 million of equity would mean about a 1% interest.

Who manages DST property?

The sponsor, usually through an affiliated trustee, makes the decisions. In many DSTs, an affiliated master tenant or property manager handles tenants, maintenance and day-to-day operations. Investors don't manage anything. That takes landlord work off your plate, but it also means you're relying on the sponsor's judgment. The offering documents spell out each party's role.

Can DST investors make decisions about the property?

Generally, no. To keep the beneficial interest treated as real estate for a 1031 under IRS Revenue Ruling 2004-86, the trust is limited in what it can do. Investors don't vote on leasing, financing or a sale. If you're used to running your own building, giving up that control is the main trade-off.

How long is DST property held, and what happens when it sells?

Hold periods vary by offering and are projections, not promises. When the sponsor sells the property, investors receive their share of the net proceeds. Some investors then start a new 1031 exchange if they meet the rules. Some offerings describe other exit options. Plan for illiquidity, since selling your interest early may not be possible.

How can I see current DST properties?

Specific DST offerings generally aren't advertised publicly with their terms, because they're private placements. At 1031 Specialist, you share your details and then review current DST and other 1031-eligible offerings. Read each offering's private placement memorandum and check identification details with your qualified intermediary before Day 45.

Next step

If you're inside your 45-day window, see what's open and read the offering documents before you put anything on your list.