How DSTs Fit Into a Broader Passive Real Estate Portfolio
Posted Jan 31, 2026

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For many investors, building a passive real estate portfolio is an end goal. It’s how you keep earning income after retirement while also securing your wealth for future generations. There are many types of real estate assets that can help you create a passive portfolio, and Delaware Statutory Trusts (DSTs) are one of the most strategic additions. 

DSTs provide passive income, tax-deferral benefits, and enhanced diversification, making them a perfect complement to other real estate assets. Realized 1031 shares insights to help you better understand why integrating DSTs into real estate investments is an advantageous move.

Advantages of DSTs for 1031 Exchange Diversification

What do DSTs bring to the table that makes them a great addition to your portfolio? Aside from the fact that they are 1031 Exchange eligible and are truly passive investments, DSTs give you access to income from institutional-grade assets with creditworthy tenants. 

  • Class A multifamily communities
  • Medical office buildings
  • Industrial distribution centers
  • Corporate-leased retail properties

Due to the restrictions imposed by Revenue Ruling 20040-86, DSTs enjoy true passivity. You simply wait for the monthly distributions to arrive. Compare this to “passive” investments like triple-net leases, which still require some level of oversight on your end.

Even with the total dependence on the performance of the sponsor and their property managers, DST investors can still count on professional management. These parties have the systems and expertise to ensure that the underlying assets perform as expected.

DSTs vs Other Passive Real Estate Vehicles

To see how DSTs fit in a passive real estate portfolio, let’s compare them to other passive investments.

DSTs vs REITs

Real estate investment trusts (REITs) are ideal for liquidity and broad exposure while also providing similar levels of passive investing as DSTs. However, the value of shares can fluctuate depending on stock market sentiment, not just property performance. Plus, REITs are not 1031 exchange-eligible, so a tax management vehicle like a DST helps with managing liability. 

DSTs vs Private Syndications

Syndications can offer value-add upside but often require investor voting, capital calls, or operational risk tied to business plans. DSTs help avoid these complexities, prioritizing stability over aggressive growth. As such, this investment can be used to balance the risk associated with private syndications. 

DSTs vs Turnkey Rentals

Turnkey rentals — such as those under triple-net leases — can provide some level of passive income. However, direct ownership still leaves you with some responsibility. Property oversight, handling of major capital expenditures, and the risk of tenant vacancy and lease negotiation are still yours to manage. 

How DSTs Enhance Portfolio Diversification

DST passive real estate investing also enhances diversification in a few ways. Since the trust can own real estate across various locations and sectors, you can enjoy the following benefits. 

  • Asset Classes: DSTs allow you to earn income from diverse sectors or industries. If one vertical fails to perform, the other asset classes can cushion the losses.  
  • Geographic Diversification: Rather than placing all investments in local rental markets, DSTs offer exposure to growing states and demographics.
  • Tenant Mix Stability: DSTs with multiple assets provide diversity in tenant types, helping manage renewal and vacancy risks. 

Role of DSTs in Building a Passive Income Portfolio

Due to the nature and structure of DSTs, they can serve various functions in your real estate portfolio. 

Core Income Anchor

The predictable cash flow and enhanced diversification of DSTs make them ideal for balancing the risks of more aggressive assets. 

Capital Preservation Vehicle

Thanks to the 1031 Exchange eligibility, DSTs let you preserve more of your wealth for longer. Plus, the conservative underwriting of DSTs and creditworthy tenants makes these trusts far less risky than other investments. 

Estate Planning Tool

The fractional nature of DST beneficial interest makes them ideal for division among heirs. 

Considerations To Keep in Mind

DSTs offer a lot of promise. However, there are certain characteristics that you must consider to ensure that these trusts fit your overall strategy. For one, DSTs are illiquid. This reality may present a challenge if you have no other assets that can be liquidated immediately for cash needs. Plus, the passive nature makes DSTs total hands-off investments. Some investors might find this too limiting, especially if they have other priorities that require more direct involvement in the investment.

Wrapping Up: Delaware Statutory Trust Portfolio Strategy

When considering the next addition to your passive real estate portfolio, DSTs are a versatile option that can provide a wide range of benefits. They help balance risk, enhance diversification, and preserve your wealth for longer thanks to the 1031 Exchange eligibility. When thoughtfully integrated with the other assets, DSTs help shape your portfolio into something that’s balanced, durable, and truly passive. 

Sources:

https://www.law.cornell.edu/wex/triple_net_lease

https://smartasset.com/investing/what-is-real-estate-syndication-types-structures-and-risks 

https://www.mgocpa.com/perspective/delaware-statutory-trust/ 

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