Joining a Delaware Statutory Trust (DST) can be a tax-deferred strategy for real estate investors using a 1031 exchange. By buying fractional interests using proceeds from a 1031 exchange, you may defer capital gains taxes and potential for passive income from institutional-grade assets. Since you don’t have direct property ownership, you can also enjoy a more hands-off involvement in the DST.
Still, not all DSTs are equal. One important aspect of this investment strategy is the broker you choose. A Delaware Statutory Trust broker serves as the licensed financial professional who helps investors evaluate fractional ownership interests. Given the importance of this role, investors should seek out a DST broker who is certified, experienced, and knowledgeable — not just with the process but with your specific needs.
In this guide, Realized 1031 shares the key characteristics to look for in a DST advisor or broker and the red flags to avoid.
DST brokers are securities-licensed professionals who specialize in offering Delaware Statutory Trusts as 1031 exchange-eligible investments. While they are not real estate agents, DST brokers bring real estate investment knowledge alongside the regulatory expertise required to evaluate and present securities-based real estate offerings. Here are some of a DST broker’s key responsibilities.
Given the important role of the DST broker, finding a well-qualified one is a key part of managing risk and aligning with your investment goals. If you’re just starting out, here are a few characteristics to look for when choosing your DST advisor.
Before anything else, confirm that the DST broker has the appropriate securities licenses. These typically include the FINRA Series 7 or Series 22 license, along with a Series 63 or 66 for state registration. These credentials indicate that the broker is authorized to offer securities products such as DSTs and is subject to regulatory oversight. You can verify a broker’s licensing and disciplinary history using FINRA’s BrokerCheck.
Experience matters, especially when it comes to complex, tax-sensitive investments like DSTs. Look for a broker with direct experience in the DST space. While past results do not guarantee future outcomes, a broker's history of working with similar investors may help you assess their process, transparency, and professional approach. Ask for client testimonials, case studies, or references that speak to their professionalism and results. A reputable broker should be transparent about their performance history and willing to share how they’ve helped other investors meet their goals.
DST offerings or private placement memorandum carry a lot of information. Any DST broker worth their salt must be able to dig deep and see things that may not be obvious in the offering at first glance. This due diligence helps them gain a deeper understanding of each offering and how they may suit your needs. Plus, rigorous offering assessments help protect investors from unnecessary risks. Areas that a DST broker should look into include the following:
An effective broker will take the time to understand your financial situation rather than offering one-size-fits-all solutions. Find one that is keen on understanding aspects such as the following.
Importantly, they should take the time to explain the pros and cons of each offering in plain language. This characteristic is a marker of a broker who wants to empower you to make informed decisions instead of obscuring issues with technical language.
Finally, you’ll want to work with a DST advisor who can maintain clear lines of communication. Given the strict timelines of 1031 exchanges, having a broker who is accessible is important. You should also find a broker who can provide ongoing communication even after you join the DST. With consistent support, you’ll have access to performance updates and get answers for any concerns down the road.
While there are many trusted DST brokers around, not all of them may have your best interests in mind. Some may be looking to get a quick commission, and some may practice unethical behavior to push certain DST products that may not fit your investment goals. Here are a few cautionary signs to keep an eye out for.
Engaging with professionals for guidance in a DST transaction is critical. A DST broker can help you evaluate available offerings and guide you through the investment process. Look for professionals who hold appropriate credentials, have relevant experience, maintain access to a range of DST sponsors, and communicate clearly throughout the exchange. These qualities can support a well-informed investment process that aligns with your goals and risk tolerance.
The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
Article written by: Story Amplify. Story Amplify is a marketing agency that offers services such as copywriting across industries, including financial services, real estate investment services, and miscellaneous small businesses.
Sources:
https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx
https://www.investopedia.com/articles/financialcareers/07/securities_licenses.asp