To invest in a Delaware Statutory Trust, you first have to qualify as an accredited investor, then review the sponsor’s offering documents, sign a subscription agreement, and wire funds to the trust’s account. If you’re using the investment to complete a 1031 exchange, the money moves through a qualified intermediary rather than your personal bank account. Once the sponsor accepts your subscription, you own a fractional interest in institutional-grade commercial real estate and receive passive income distributions while a professional trustee handles the property.
Qualifying as an Accredited Investor
DST offerings are private placements sold under Regulation D, so participation is limited to accredited investors as defined in SEC Rule 501. Most people qualify on financials. You meet the income test if you earned more than $200,000 individually in each of the two most recent years (or $300,000 jointly with a spouse or spousal equivalent) and reasonably expect the same in the current year.1U.S. Securities and Exchange Commission. Accredited Investors You meet the net worth test if your net worth—alone or jointly with a spouse—exceeds $1 million, not counting equity in your primary residence.2eCFR. 17 CFR 230.501 – Definitions and Terms Used in Regulation D
There is also a licensing path. Holding a Series 7, Series 65, or Series 82 in good standing qualifies you regardless of income or net worth.3U.S. Securities and Exchange Commission. Amendments to Accredited Investor Definition
Before you can subscribe, the sponsor has to verify your status. This is usually done through a signed letter from a licensed CPA, attorney, registered broker-dealer, or SEC-registered investment adviser confirming they’ve reviewed your finances. Verification letters are generally valid for 90 days.
Cash Investment or 1031 Exchange
How you fund your DST changes the mechanics. If you’re investing cash, you wire directly from your own account and the transaction is straightforward. If you’re using proceeds from selling investment real estate, you’re doing a 1031 exchange, and the rules tighten considerably.
Section 1031 of the Internal Revenue Code lets you defer capital gains tax when you exchange investment real property for other like-kind real property.4Office of the Law Revision Counsel. 26 U.S. Code 1031 – Exchange of Real Property Held for Productive Use or Investment Revenue Ruling 2004-86 confirmed that a fractional interest in a qualifying DST counts as real property for this purpose.5Internal Revenue Service. Revenue Ruling 2004-86
Two deadlines run from the day you close on the sale of your old property. You have 45 days to identify replacement property in writing, and 180 days to close on it (or until your tax return is due, including extensions, whichever comes first). Neither can be extended except in a presidentially declared disaster.6Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031
You also cannot touch the sale proceeds. A qualified intermediary (QI) holds the funds in escrow between the sale of your old property and the purchase of your DST interest. Taking control of the cash, even briefly, can disqualify the entire exchange and make all your gains immediately taxable.6Internal Revenue Service. Like-Kind Exchanges Under IRC Section 1031 Your subscription paperwork will require the QI’s name, contact details, and account information so the sponsor can coordinate a direct transfer.
Reviewing the Offering Documents
Once you’ve picked an offering, the sponsor sends two core documents.
The Private Placement Memorandum (PPM) is the primary disclosure. It describes the specific property, the financial projections, the fee structure, the risks, and the trust agreement that governs how the trustee manages and eventually sells the asset. Read it carefully. It is the legal foundation of the investment and the only place where every material risk is formally disclosed.
The Subscription Agreement is the application you sign to enter the trust. It captures your personal information, how you want the investment titled (individual name, living trust, or an entity such as an LLC), and your Social Security or Taxpayer Identification Number for tax reporting. If you’re investing through an entity, have formation documents ready—an LLC operating agreement or corporate resolution—since the sponsor may need to confirm your authority to sign.
Funding and Closing
Most sponsors accept subscription packets through secure electronic signature platforms. The compliance team reviews every field: name, vesting, accredited investor verification, and QI details if applicable. Errors get sent back. If you’re on a 1031 clock, paperwork problems that push closing past day 180 can cost you the tax deferral, so accuracy matters more than speed.
Funding is done by wire. For a 1031 exchange, the wire originates from the QI’s escrow account. For a cash investment, it comes from your own account. Minimum investments vary by offering but commonly start at $100,000, with some DSTs accepting as little as $25,000 and larger properties requiring more.
Most DSTs use non-recourse financing, meaning the loan is secured only by the property. If the trust defaults, the lender can seize the real estate but cannot pursue your personal assets. The PPM discloses the loan terms.
Once the wire clears and the paperwork is approved, the trustee issues a formal acceptance of your subscription. That document confirms your fractional ownership interest and marks the point at which income distributions begin. Closing typically occurs within a few business days of funding.
Fees You’ll Pay
DSTs carry several layers of fees. Upfront costs covering acquisition, placement, and organizational expenses can run roughly 10% to 18% of your invested equity, depending on the offering. Ongoing charges typically include annual asset management and property management fees. When the property is sold, a disposition fee may also apply. All of it is disclosed in the PPM’s fee schedule, and you should work through it before committing capital.
If you’re using a 1031 exchange, the QI charges a separate facilitation fee, generally from several hundred to over a thousand dollars for a straightforward transaction.
What You’re Committing To
A DST is a fixed, passive investment. Under Revenue Ruling 2004-86, the trust agreement must deny the trustee the power to sell and replace the property, renegotiate leases, sign new tenants, refinance the debt, accept additional capital after the offering closes, invest cash speculatively, or make significant property changes.5Internal Revenue Service. Revenue Ruling 2004-86 The property, the lease, and the financing are locked in from day one. Neither you nor the trustee can change course mid-stream.
That structure has practical consequences. There is no established secondary market where you can sell your fractional interest before the trustee sells the property. Plan to hold the investment for the full term, which typically runs five to ten years depending on the sponsor’s strategy and market conditions. If the trust holds a loan with a balloon payment at maturity and the property cannot be sold or refinanced in time, forced liquidation or default becomes a real risk. This is especially relevant for interest-only loans, which are common in DST structures.
When the property is eventually sold, the trust distributes the net proceeds to investors based on their fractional shares. You’ll face a taxable event at that point unless you roll the proceeds into another 1031 exchange. Some sponsors offer a 721 UPREIT exchange at the end of the DST’s life cycle, which converts your interest into shares of a real estate investment trust, though the option isn’t available with every offering and carries its own tax and liquidity implications.
Taxes and Reporting After You Invest
The DST files Form 1065 with the IRS each year and issues each investor a Schedule K-1 reporting your share of income, deductions, and credits. The trust itself generally doesn’t pay income tax; the tax consequences pass through to you and appear on your personal return.7Internal Revenue Service. Partners Instructions for Schedule K-1 (Form 1065) For calendar-year trusts, the K-1 must reach you by March 15, which is also the trust’s filing deadline for Form 1065.8Internal Revenue Service. Publication 509 (2026), Tax Calendars
Your K-1 will reflect rental income, interest expense, depreciation deductions, and other items affecting your tax liability. Depreciation is one of the main tax benefits of DST ownership because it can offset a portion of the income you receive. Keep every K-1 you get: you’ll need the cumulative depreciation figures to calculate your tax basis when the property is sold.
Throughout the holding period, the sponsor sends periodic reports on occupancy, financial performance, and events like upcoming loan maturities. Income distributions are typically deposited electronically on a monthly or quarterly schedule and continue until the trustee sells the property and pays out the final proceeds.