Capturing the Benefits of Delaware Statutory Trusts (DSTs)

An Introductory Guide for Your Clients Who Own Investment Property

As an investment advisor, you likely have clients who have done well in real estate. Whether they own a small portfolio of residential rental units or a single commercial property, many of these clients now face the same dilemma: What’s next?

Maybe they are tired of the day-to-day management headaches. Maybe they are concerned about rising costs, tenant turnover, or changing market dynamics. Or perhaps they are simply ready to sell and unlock the value they’ve built over the years, but are concerned about the tax hit from capital gains.
 
If this sounds familiar, it may be time to introduce them to the Delaware Statutory Trust (DST), a tax-advantaged investment structure designed to help property owners transition into passive, professionally managed real estate.

What Is a Delaware Statutory Trust (DST)?

A DST is a legally recognized trust structure that allows multiple investors to co-own institutional-grade real estate. This fractional ownership model enables individual investors to access large-scale properties, such as industrial warehouses, healthcare facilities, or multifamily housing communities, that would otherwise be out of reach.

The DST holds title to the property, and investors purchase beneficial interests in the trust. As co-owners, they receive a proportional share of the property’s income and potential appreciation. However, they are not directly involved in day-to-day management decisions. Professional managers handle all leasing, maintenance, and property operations.

How DSTs May Simplify Real Estate Investment for Your Clients

For many property owners, managing real estate becomes more of a burden than a benefit over time. Tenant issues, property upkeep, rent collection, and regulatory compliance all require time, expertise, and energy—resources your clients may no longer wish to expend.

DSTs provide an off-ramp from active property management while allowing clients to maintain their exposure to real estate as an asset class. Investors receive regular income distributions without having to lift a finger to manage the property. The DST’s professional management team handles all operational details, freeing your clients from landlord responsibilities.

Additionally, DSTs simplify the process of completing a 1031 exchange. Rather than searching for a new property, negotiating terms, and closing within strict IRS timelines, your clients can exchange into a pre-packaged DST investment that meets all regulatory requirements. This can potentially help reduce stress, save time, and provide access to higher-quality assets than they might be able to purchase on their own.

Key Benefits of DST Investments

Diversification

One of the primary advantages of DSTs is diversification. By pooling capital with other investors, your clients can access larger, professionally managed properties that might include multiple tenants or even multiple properties in different geographic regions. This reduces concentration risk compared to owning a single property outright.

Reduced Risk

Professional management and tenant diversification can help lower the risk associated with individual property ownership. Many DSTs focus on securing long-term leases with creditworthy tenants in sectors like healthcare, manufacturing, or logistics, helping to provide stability and reduce vacancy risk.

Steady Cash Flow

DST investors typically receive monthly or quarterly distributions of rental income, providing a predictable cash flow stream. While returns are not guaranteed, many DST offerings target stable, long-term leases designed to deliver consistent income over time.

Portfolio Diversification Beyond Stocks and Bonds

Because DSTs are private real estate investments, they are not directly correlated with public market movements. This makes them an attractive option for clients seeking to diversify beyond traditional stocks and bonds, adding resilience to their overall portfolio.

DST Limitations and Considerations

Is a DST Right for Your Clients?

DSTs are not the right fit for every investor. However, they can be a powerful tool for clients who:

• • Own appreciated investment property and are seeking tax deferral through a 1031 exchange.
• • Want to transition to passive income without the burdens of property management.
• • Seek portfolio diversification through fractional ownership of institutional-quality real estate. 
• • Are prepared for a long-term investment and meet accredited investor criteria. 
  

As an investment advisor, introducing DSTs to your clients could unlock new conversations about real estate strategies they may not have previously considered. By helping clients understand the potential benefits and limitations, you can position yourself as a trusted partner in their long-term financial planning.

Ready to Explore DST Opportunities for Your Clients?

At CAI Investments, we specialize in sourcing and managing DST offerings backed by high-quality tenants and essential real estate assets. Our team can help you identify options that align with your clients’ objectives and walk you through the 1031 exchange process from start to finish.

Schedule a call with our team today to explore our current range of DST investment opportunities.