DST – 1031 – FAQs 2020-06-01T16:00:44-06:00

Frequently Asked Questions

A Delaware Statutory Trusts, (DSTs), allow owners of real estate to sell their rental properties and potentially defer capital gains taxes. DSTs are derived from Delaware Statutory law as a separate legal entity.

DSTs also qualify as a 1031 like-kind exchange. Well known to real estate investors, a 1031 like-kind exchange allows you to defer the capital gains tax on the sale of investment property by reinvesting the proceeds into a similar qualifying property, and potentially permanently eliminating capital gains and depreciation recapture to your heirs.

As a result DSTs have become an investment vehicle for investors who want the benefits of owning real estate investors who no longer want the day-to-day responsibilities of being a landlord, and those landlords that are concerned about future maintenance obligations of their aging properties.

While DSTs and REITs have some similarities and both invest in real estate, there are some major differences

An DST qualifies as a 1031 like-kind exchange to defer the taxes on the sale of your highly appreciated property, a REIT does not

A REIT typically owns more properties than a DST

A REIT can be integrated to diversify part of your qualified retirement plan, a DST can not

A REIT can be a publicly traded entity, or a private placement investment. A DST is a private placement investment

A REIT generally is more liquid than a DST.

A 1031 like-kind exchange allows an investor to potentially defer the capital gains tax on the sale of highly appreciated investment property by reinvesting the proceeds into qualifying investment real estate.

Yes, a DST qualifies as a 1031 like-kind exchange. That means you may be able to defer your tax bill AND still be invested in an income producing property.

REITs (publicly traded) are generally large, own older buildings, buildings are highly depreciated, and trade like a stock, therefore, are volatile in valuation.

Private REITs often own more newly acquired real estate that isn’t highly depreciated. Many are liquid after one year, on a quarterly basis. Private REITs may be preferable to public REITs and DSTs when an investor does not need a 1031 exchange.

A DST can be a great way to enjoy the benefits of real estate ownership without dealing with the Terrible T’s of being a landlord; Tenants, Trash, and Toilets. As an investor in a DST you are not responsible for the property management.

A DST also qualifies as a 1031 like-kind exchange which means you may be able to defer the taxes on the sale of your highly appreciated property.

A DST can preserve the ability for a step-up in basis, potentially eliminating capital gains and depreciation recapture from income tax permanently.

With a DST you can invest in properties that are already income producing.

A DST can be easily divided amongst your heirs as part of your legacy planning.

DSTs typically invest in newer properties that have little repairs or deferred maintenance issues.

DSTs can offer diversity by property type and geographic location.

No, in order to participate in a DST an investor must be an Accredited Investor. An Accredited Investor is defined as having a minimum of 1 million dollars of net worth (excluding the value of the investors primary residence) and or annual income of at least $200,000 individual, or $300,000 as spousal income in each of the prior two years and “reasonably expects the same for the current year.”

Yes, you have the opportunity to select the properties you want to invest in. At Arlington Capital Management, we partner with a team of CPAs and investment advisors that use a disciplined set of investment criteria as part of their vetting process. This is all done before we present any opportunities to you.

Yes, each DST quotes a different yield which comes from collected rents. You will receive monthly net rent checks from each DST investment

Yes, a DST is an easily divided asset you can leave to your heirs as part of your legacy plan.

Yes, depending on the property type. When the property is eventually sold you will receive your share of any appreciation and repair reserve balances.

Here is a list of the possible property types available. Usually there are 2-4 DST types available at any given time.

I. Apartment complexes

II. Office

III. Retail

IV. Self Storage

V. Medical

VI. Industrial

Not normally, one DST might own 4 apartment complexes in 4 states. DSTs have a minimum investment of $100,000 each, so you would likely want to diversify into several DSTs.

Usually about 4-5.25% net of fees on equity, plus appreciation on the DSTs.



*To be an “accredited investor,” an individual must have had earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and “reasonably expects the same for the current year.” Or, the individual must have a net worth of more than $1 million, either alone or together with a spouse, excluding one’s primary residence.

The information included in this material is for informational purposes only and should not be relied upon for any financial or legal purposes. Before you determine to proceed with a recommendation to invest in a Delaware Statutory Trust (DST), we urge you to read and understand the risks associated with such investment, as disclosed in that DST’s private placement memorandum.  ACM cannot and does not guarantee the performance of any investment, including DST investments.  ACM is a registered investment adviser with the SEC. Our registration with the SEC or with any state securities authority does not imply a certain level of skill or training, nor are we selling you any product.  Rather, we are seeking to provide you with advisory services. DST investments are only available to accredited investors and are offered solely through the offering documents provided by DST’s sponsor. The DST sponsor determines whether to accept any individual’s subscription documents.  DSTs are subject to the same risks as a direct property investment, as well as additional risks, such as regulatory, tax and execution risk.  Additional fees will be charged by the DST sponsor.  Please consult with your own tax and legal advisers before investing.

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