Delaware statutory trusts (DSTs) are a popular option for investors seeking passive real estate income and 1031 exchange tax deferral. However, like any real estate investment, it’s essential to find strategies that minimise risk. Understanding how DSTs work and exploring reputable firms can help potential investors invest in DSTs safely while enjoying the benefits.
What Is a DST?
A DST is a legal entity that holds title to one or more income-producing commercial real estate properties. Instead of owning the property directly, investors buy fractional interests in the trust. They can then earn from the operation, such as through rental fees or the sale of the property.
DSTs allow multiple investors to pool capital and access high-quality assets, like multifamily housing, industrial facilities, office buildings or retail leases that might be inaccessible to individual investors. One of its primary benefits is as a replacement property in a 1031 exchange. By reinvesting the proceeds from a sold investment property into a DST, investors can defer capital gains taxes while maintaining real estate operations.
Another key benefit is passivity. DST investors do not have to manage maintenance or operations. The sponsor or trustee handles all everyday decisions, making DSTs attractive to investors who want real estate income without landlord responsibilities. With these benefits, this form of real estate investment is becoming more popular, experiencing a 30% annual growth rate and sales reaching $7.5 billion in 2025.
What’s the Safest Way to Invest in a DST?
Investing in a DST can be a smart way to gain passive real estate investment, but safety depends on how carefully you evaluate your opportunities. Consider these tips as a due diligence checklist before committing.
Scrutinise the Sponsor
Look closely at the sponsor’s track record and years of experience. A strong sponsor should be transparent about past deals, including outcomes that may not have met their expectations. Consistent reporting and realistic assumptions can indicate that they prioritise long-term investor outcomes over short-term sales.
Analyse the Property Fundamentals
While the prospective returns are important, it’s crucial to evaluate the real estate property itself first. Pay attention to location quality, asset type, lease duration, tenants and local market conditions. Properties in resilient markets with stable demand tend to offer better returns and protection, especially during economic downturns.
Understand the Fee Structure
DSTs can include up-front and ongoing fees, which directly affect net returns. Investors should request a clear breakdown of acquisition fees, asset management costs and other expenses built into the offering. Fees are a necessary part of acquiring a DST, but they should be fully disclosed and reasonable.
Evaluate the Exit Strategy
Every DST should have a defined exit plan. Most have a holding period of five to 10 years, depending on the sponsor. After this period, the property will be sold. Investors should understand what market conditions the sponsor may be assuming during the exit, as well as whether the timing is fixed or flexible. A realistic, well-explained exit strategy helps with planning and reduces uncertainty.
Work With an Independent Advisor
DST investment sales often occur through intermediaries who may receive compensation based on transactions. Working with an independent fiduciary advisor helps ensure recommendations align with your financial goals and risk tolerance, and whether they fit your overall portfolio and investment strategy.
Top 4 Companies for DST Investments
If you’re ready to take the leap, consider inquiring with these reputable advisors who can guide you through the DST process. The right one can help you score profitable investments that match your financial goals.
1. Sera Capital
Sera Capital is a wealth management consulting firm focused on helping investors access DST opportunities with an emphasis on exit planning and capital preservation. The firm works primarily with accredited investors and 1031 exchange participants seeking passive real estate income with minimal management responsibilities.
This option tops the list for its disciplined approach to DST selection. Instead of promoting any offering that comes its way, it emphasises careful sponsor vetting, helping clients align DST investments with broader portfolio and tax strategies.
2. Kay Properties & Investments
Kay Properties & Investments is an established firm specialising in DST investments for 1031 exchange investors. The company has been active in the DST space for many years and is known for its educational resources and investor-focused materials. It has a strong focus on helping investors understand the benefits and limitations of DSTs, centering on diverse property offerings that allow investors to find the best fit for their financial goals.
3. 1031 Crowdfunding
1031 Crowdfunding operates as an online marketplace providing investors with a wide range of DST offerings from multiple sponsors. The platform helps streamline the process of comparing opportunities and reviewing educational materials on DST investing and 1031 exchanges. It is ideal for investors who are already comfortable evaluating private real estate offerings and want a centralised hub for closing deals.
4. Inland Investments
Inland Investments has been a long-established real estate investment firm with over 50 years of experience in commercial property ownership and management. The firm sponsors DSTs across major commercial sectors across the U.S.
This provider appeals to investors seeking exposure to stabilised properties with recognisable markets. Its scale and history can provide a sense of stability, although due diligence is still essential for each property.
Balancing Risk and Opportunity
What’s the safest way to invest in a DST? It comes with disciplined evaluation, considering stability, reputation, strategy and other factors impacting financial and portfolio performance. A well-structured DST with an experienced sponsor and a clear exit plan can lead to profitable long-term investments.
