As a real estate professional, knowledge about the DST (Delaware Statutory Trust) can not only help you generate listings but can also help you stand out among your clients -- especially baby boomers who are entering retirement and looking to explore their real estate options. 

By understanding and communicating the potential benefits of a DST investment in a 1031 Exchange, you can minimize any concern's your client has and help guide them in the right direction. 

Here are 8 approaches on how to utilize a DST investment with your clients.

1. Identification Issues

Realtors are finding it challenging in today’s market to find their real estate investor's replacement properties, leading to apprehension in obtaining listings. Thinking about finding the deal, getting it under contract, inspections, financing, title, etc., all add to seller’s anxiety and reluctance to pull the trigger and list. A DST investment can eliminate/minimize these issues as either the primary property or as a backstop. The “3-property” rule is the most common way to identify properties within the 45-day period.  It is easy to work with your DST advisor to provide a back up if you have the room to identify them. Leaving a blank on the ID form is not best practices and adding a DST allows it to act as an “emergency parachute” by providing your client with the safety of a fallback option.

  • Property 1 – Realtor’s choice
  • Property 2 – DST provided by Financial Advisor
  • Property 3 - DST provided by Financial Advisor


2. Institutional Quality Replacement Properties

Your investor may have properties that have issues such as lower quality, deferred maintenance, poor management, fully depreciated or lower returns on today’s equity. Also, the majority of DST investments are more substantial institutional grade properties with long terms leases and higher occupancy rates. The size, value, and quality of these assets also garnish lower loan interest rates for major banks, lenders, and agencies. In today’s market, we see returns on equity invested in the 5% range.


3. Easy Replacement Solution

We know that some of your clients are never inclined to sell their building because they don’t have or fear to try to find a replacement property. They are concerned with the hefty tax bill that comes along with selling their property. Working with a company like Fortitude can assist you by presenting a DST or a portfolio of DST’s that the client may be comfortable investing in, so you as an exchange specialist can get the listing.


4. Additional Equity or Debt Left Over

Many times, a realtor will sell a client’s property but only find a replacement for some of their proceeds. Example: Property sells at $2M, and the new property is only $1.8M. And this would require your seller to pay taxes (boot) on $200,000. Typical DST minimums are $100,000, which could result in your investor picking up another one or two properties, having no tax issues and diversifying their real estate portfolio. Your client may also need additional debt that their 1st choice does not entirely cover.

  • Property 1 – $1.8M Realtor’s choice
  • Property 2 – $100,000 DST
  • Property 3 - $100,000 DST


5. Replacement Debt Issues

Realtors find one of the major components of executing a 1031 exchange is making sure that all the debt from the client's relinquished property is replaced. Debt can be replaced by adding more equity, but usually not ideal for the seller. Lenders can be fickle with their underwritten, loan to value (LTV), personal guarantees, appraisals and so on. In using a DST, the debt is non-recourse to the investor, so there is no individual underwriting. The investor gets the benefits of the debt but not the personal liability due to the trust structure. DST investments can be structured to accommodate most debt requirements.


6. Passive Management - Retiring from the 3 T’s (Toilets, Tenants & Trash)

Is your client looking to get out of management responsibilities? The DST Sponsors provide institutional quality professional management services. Allowing  your client to retire from the toilets, tenants and trash aspects of owning and managing real estate.


7. Ability to Diversify With Low Minimums

Diversification is almost always an essential aspect of any client’s investment strategy.  A DST investment typically has a $100,000 minimum investment for “Accredited Investors” in a 1031 exchange. These low minimums can assist your client in putting together a truly diversified real estate portfolio that spans several states and real estate sectors. Very helpful when your client doesn’t want to put “all their eggs in one basket."


8. Legacy Planning Simplified

The morbid saying for a 1031 exchange is “swap-until-you-drop." Your seller keeps 1031 exchanging their properties until they pass.  At that point, their heirs receive the properties at a step-up tax basis. The DST keeps this strategy simple. Due to its passive nature, the heirs have no management responsibilities. Instead of worrying if one property will be better than the last, the DST can allow many arms of one family to receive an interest in the same investment.

If you want to know if a DST is right for your client or want to learn more about this topic,  please feel free to contact us

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This is for informational purposes only and is not an offer to buy/sell an investment. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated. Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice. Please speak with your legal and tax advisors for guidance regarding your particular situation.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Insurance products offered through Concorde Insurance Agency, Inc. (CIA) Fortitude Investment Group is independent of CIS, CAM, and CIA.

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