How It Works
From active landlord to passive owner.
A clear walkthrough of how a 1031 exchange into a Delaware Statutory Trust works — including the parts most people don't hear about.
A clear walkthrough of how a 1031 exchange into a Delaware Statutory Trust works — including the parts most people don't hear about.
At some point most owners of investment real estate hit the same wall. The property has done its job — it has appreciated, often for decades — but the work has worn thin. The tenants, the repairs, the vacancies, the late-night calls. You're ready to step back.
Then you run the numbers on selling, and a second problem appears: the tax. Capital gains, depreciation recapture, the net investment income tax, and your state's share can together take a meaningful slice of everything you've built. Selling outright can mean handing roughly a third of your equity to the IRS and your state — and watching the rest stop working.
So it feels like two bad options: keep managing a property you're tired of, or sell and absorb the tax bomb. Most people never hear about the third option.
A 1031 exchange lets you defer — not eliminate — that tax by reinvesting the proceeds into other like-kind investment real estate. Defer the whole stack, and your full equity keeps working instead of shrinking at the closing table.
Move that equity into a Delaware Statutory Trust (DST), and it goes to work passively — a fractional interest in professionally managed real estate, with the potential for monthly distributions and none of the day-to-day. You step out of active management without stepping out of real estate.
A 1031 exchange defers, not eliminates, tax. DSTs are securities offered only to accredited investors through a sponsor's PPM; distributions are not guaranteed. Figures are illustrative — individual results vary.
The IRS sets firm deadlines for a 1031 exchange. Missing them can disqualify the deferral, which is why coordination with a qualified intermediary and your tax advisor matters.
A 1031 exchange must be set up before the sale closes — including engaging a qualified intermediary to hold the proceeds. You cannot take receipt of the funds and still defer.
Your relinquished property sells, and the proceeds go to the qualified intermediary — not to you.
You have 45 calendar days from the sale to formally identify replacement property in writing. A DST interest can qualify as that replacement.
The exchange must be completed within 180 days of the sale. Investing into a DST can be faster to close than buying an entire property outright — useful given the deadline.
As a DST investor you hold a fractional, passive interest in professionally managed real estate. The sponsor and trustee handle management; you step out of day-to-day landlording.
Deferral is not elimination, and DSTs are securities with real risks. Anyone considering one should weigh these and review all offering materials and risk factors with their own advisors.
Watch the short briefing or join the live webinar — then book a call to talk through your specific situation with your own advisors involved.