A Delaware Statutory Trust is one of the most powerful tools available to commercial real estate investors who want passive income, tax deferral, and access to institutional-grade property — without the day-to-day burden of active management. As a CRE broker, I see more clients each year turning to DSTs to solve a very specific problem: how to stay invested in income-producing real estate while stepping away from the headaches of being a hands-on landlord.
This guide breaks down what a DST is, how it works in CRE, and whether it might fit your investment goals.
What Is a Delaware Statutory Trust?
A Delaware Statutory Trust (DST) is a separate legal entity formed under Delaware law that holds title to one or more income-producing commercial properties. Investors purchase a fractional, undivided interest in the trust and become beneficial owners — receiving their pro-rata share of cash flow, depreciation, and any appreciation. Rather than being limited partners, each investor is treated as a direct owner of real estate for tax purposes.
This structure lets smaller, independent investors access the same caliber of commercial assets historically reserved for pension funds, insurance companies, and REITs.
How DST Investing Works in Commercial Real Estate
A professional firm known as a DST sponsor identifies, acquires, finances, and manages the underlying real estate. Once acquired, the sponsor packages the offering and brings it to market through licensed brokers. Investors then buy in based on the equity required — for example, a $1 million stake in a $5 million equity offering equals 20% ownership and 20% of the distributions and depreciation.
The properties held inside DSTs typically include multifamily communities, single-tenant net lease retail, industrial and distribution centers, self-storage facilities, and medical office buildings.
DSTs and the 1031 Exchange
The biggest driver of DST popularity is 1031 exchange eligibility. DSTs qualify as “like-kind” replacement property, allowing investors to defer capital gains taxes when they sell an appreciated asset. If you’re new to the mechanics, start with our breakdown of Understanding 1031 Exchange Guidelines: 7 Simple Rules.
DSTs are especially useful when exchange proceeds don’t divide neatly into a single replacement property — you can place the exact dollar amount needed across one or more trusts. That flexibility connects directly to a common question we answer here: Can you buy multiple properties in a 1031 exchange? And if you’re still weighing your options before exchanging, our comparison of a 1031 Exchange vs. Cash Refinancing is worth a read.
Key Benefits of DSTs
- 1031 exchange eligibility for deferring capital gains taxes.
- Truly passive income — no tenants, maintenance, or financing to manage.
- Diversification across multiple asset classes and geographies.
- Low minimums, often starting around $100,000.
- Estate planning advantages, including a stepped-up basis for heirs.
Who Should Consider a DST?
DSTs are offered only to accredited investors and are best suited for those nearing the end of a 1031 exchange window, investors ready to retire from active management, or anyone seeking CRE exposure without operational responsibility. They aren’t for everyone — illiquidity and loss of direct control are real trade-offs worth discussing with an advisor.
The Bottom Line
A Delaware Statutory Trust offers a compelling middle ground between owning property outright and stepping out of real estate altogether. For the right investor, it delivers tax-advantaged passive income from professionally managed commercial assets. If you’re weighing a 1031 exchange or simply want a more hands-off path to real estate income, a DST is worth a serious look.
Thinking about whether DST investing fits your portfolio? Book a call with our team to talk through your options.