What is a Delaware Statutory Trust?

A Delaware Statutory Trust, or DST, is a legal trust structure that can hold title to investment real estate and qualify as replacement property under 1031 exchange rules when structured properly under IRC Revenue Ruling 2004-86.

Why do 1031 investors use DSTs?

Many 1031 investors use DSTs to access passive ownership, professional third-party management, diversification across multiple property types and geographies, and a faster path to identifying qualified replacement property within the IRS 45-day identification window.

Do DSTs eliminate investment risk?

No. DSTs still involve real estate, market, liquidity, sponsor, and cash flow risk. Distributions are not guaranteed and investors can lose principal. Petra's approach is to evaluate those risks carefully and design portfolios around the client's specific objectives and risk tolerance.

What is the minimum investment for a DST?

Most DSTs require a minimum equity investment of $100,000 for 1031 replacement property interests. Some offerings allow lower minimums for non-1031 direct cash investments.

Can DSTs help with debt replacement in a 1031 exchange?

Yes. Many DSTs are structured with in-place, non-recourse financing that allocates debt to investors on a pro-rata basis. This can help satisfy the debt replacement requirement in a 1031 exchange without requiring investors to personally guarantee a new loan.

Why DST

A simpler way to defer taxes and step away from active property management.

A Delaware Statutory Trust can give 1031 investors access to passive ownership, professional management, and diversified replacement property strategies. It is not a shortcut around risk. It is a structure that can create better alignment between tax deferral and investment planning when used correctly.

Book a portfolio design session Read the ABC's of DSTs

Why investors consider DSTs

Passive ownership with professional third-party management.
Access to higher-value and more diversified property strategies than sole ownership typically allows.
Faster identification and closing support during the 45-day window.
Non-recourse debt replacement without personal guarantee.
Potential tax deferral and estate planning flexibility.

Placeholder image Institutional-quality DST property exterior — multifamily, industrial, or medical building

Freedom from management

DSTs eliminate what Petra calls the "three T's" of active landlord life: tenants, trash, and toilets. The DST sponsor takes on all third-party property management responsibilities. Investors receive monthly distributions and annual tax reporting without any day-to-day obligations.

Lower minimums, more diversification

Because DSTs are pooled-equity structures, investment minimums typically start at $100,000. That low threshold makes it possible to spread exchange proceeds across multiple DSTs instead of concentrating everything into one replacement property.

Pre-structured replacement options

DSTs are typically already formed and operating when an investor enters. That means you can identify and close inside the IRS 45-day window far more predictably than racing to source, underwrite, and finance a traditionally managed replacement property.

Petra's evaluation framework

The 3Q lens: quality of assets, quality of income, quality of sponsor.

A 1031 exchange is an investment strategy first and a tax strategy second. Petra has consistently argued that investors should apply the same discipline to a DST that they would bring to any direct real estate decision. The 3Q test is how Petra evaluates every strategy it recommends.

Remember: the investment that promises you everything you want will risk everything you have.

Read the full 3Q article

What Petra examines

Sector strength, occupancy stability, and credit quality of tenants
Cash flow durability, lease terms, and stress-tested income assumptions
Sponsor track record, discipline, and defined exit strategy
Diversification across geography, asset class, and sponsor exposure
Debt structure, loan terms, and non-recourse provisions
Alignment between the investor's risk tolerance and the property's risk profile

How 1031 exchanges and DSTs work together

The mechanism, simply explained.

You sell your investment property

The relinquished property closes. Your qualified intermediary holds the proceeds and the 45-day identification clock starts.

You identify DST replacement interests

Because DSTs are pre-structured, you can identify and nominate them quickly inside the 45-day window without starting a new acquisition from scratch.

Taxes are deferred

The exchange defers federal and state capital gains tax and depreciation recapture tax on the relinquished property.

You become a passive owner

The DST trustee and sponsor manage the properties. You receive monthly income distributions and annual reporting. No active management required.

Common questions

What 1031 investors ask about DST strategy.

A DST is a legal trust created under Delaware law that can hold title to investment real estate. When properly structured under IRC Revenue Ruling 2004-86, a beneficial interest in a DST qualifies as replacement property in a 1031 exchange. The DST is the borrower, the titleholder, and the entity that contracts with the property manager. Individual investors hold proportional beneficial interests in the trust.

Investors typically use DSTs to defer taxes, move into passive ownership, access diversified property exposure at institutional quality, and close more predictably inside the IRS 45-day identification window. For investors who are tired of active management, DSTs offer a path to keep real estate exposure while eliminating the operational burden.

DSTs are illiquid real estate securities. Investors cannot sell their interest on demand. Risks include market and property value decline, vacancy, sponsor failure, debt refinancing risk, and reduction or elimination of cash distributions. Investors can lose some or all of their principal. Petra reviews all of these risks with clients as part of the portfolio design process.

Most DSTs require a minimum equity investment of $100,000 for 1031 replacement property interests. Some programs allow lower minimums for non-1031 direct cash investments. The low minimum threshold makes it practical to diversify exchange proceeds across multiple strategies instead of one whole-property purchase.

Yes. Many DSTs include long-term, fixed-rate, non-recourse financing obtained by the sponsor before the DST is offered to investors. Debt is allocated pro-rata to each investor based on their ownership percentage. Because the DST is the borrower, investors satisfy their debt replacement requirement without personally guaranteeing any new loan.

No. DST interests are private placement securities. Current offerings and terms are discussed privately after a portfolio design session and after client eligibility has been reviewed. The representative examples on the Current Opportunities page are illustrative only.

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DST investments are available to accredited investors only. Offerings and current terms are discussed privately after a qualification conversation. Securities offered through Saxony Securities, Inc., member FINRA / SIPC. Check background on FINRA BrokerCheck.