If you are considering a 1031 exchange into a Delaware Statutory Trust, ask your financial advisor questions that clarify tax-deferral requirements, suitability, fees, liquidity, sponsor quality, and exit options. The goal is not just to complete the exchange, but to understand whether a passive, longer-term DST investment fits your objectives, risk tolerance, and cash-flow needs.
A good first conversation is about execution risk. A 1031 exchange has strict rules, including the 45-day identification deadline, the 180-day acquisition deadline, and the requirement to use a qualified intermediary. Missing those rules can trigger a taxable event.
Ask your advisor:
• How will this DST help me meet the 45-day and 180-day deadlines?
• Will I need to invest all net proceeds and replace debt to fully defer taxes?
• Who is coordinating with the qualified intermediary and my tax professional?
• What happens if my exchange timing changes or a DST offering closes before I invest?
These questions help you understand whether the DST is being used as a practical replacement property solution or simply presented as a last-minute option.
DSTs are passive investments. That can be a benefit for owners who want to step back from landlord duties, but it also means giving up control over operations, financing decisions, and the eventual sale.
Ask your advisor:
• Why is a DST appropriate for my goals instead of direct property ownership?
• Am I comfortable being a passive investor with no management control?
• How long should I expect my capital to remain invested?
• Do I have any foreseeable liquidity needs that could make this structure a poor fit?
Many DSTs have holding periods of roughly five to ten years, and there is generally no public market for resale. Early exit may be limited or unavailable.
A DST is only as strong as the real estate, the structure, and the sponsor managing it. Your advisor should be able to walk you through the private placement memorandum and explain the key facts in plain English.
Ask your advisor:
• What does the private placement memorandum say about the property, debt, risks, and projected cash flow?
• What is the sponsor’s track record with similar assets and market cycles?
• How does the sponsor communicate with investors after closing?
• What due diligence have you completed on this sponsor and this specific offering?
You should also ask about the property itself, including location, tenant profile, lease structure, financing terms, and business plan.
DSTs can involve real estate risk, sponsor risk, illiquidity, and higher fees than some investors expect. Your advisor should be able to explain what you are paying for and what could go wrong.
Ask your advisor:
• What are the upfront and ongoing fees, including commissions, management costs, and disposition expenses?
• What are the main risks in this offering: property-level, financing, market, or sponsor-related?
• How could lower income, refinancing issues, or unexpected capital needs affect results?
• What is the planned exit strategy, and what options might I have when the property is sold?
This is also the right time to ask how the investment may fit with your broader income needs, estate-planning goals, and future exchange opportunities.
The most important question is whether the DST is suitable for your specific goals, liquidity needs, and risk tolerance. A DST may help satisfy 1031 exchange requirements, but it is still a private, illiquid, long-term real estate investment that should be evaluated on its own merits.
Yes. The sponsor plays a central role in acquiring, structuring, financing, operating, and eventually selling the DST property. Ask about the sponsor’s experience, reporting practices, fees, communication standards, and performance history, while remembering that past performance does not guarantee future results.
In some cases, yes. Because DST interests are pre-structured replacement property options, they may help investors meet tight 1031 deadlines more efficiently than sourcing and closing on a whole property. Even so, investors still need to review suitability, risks, fees, and holding period constraints before investing.