Simple1031

DST Investments — How They Work

Step 1: Sell your relinquished property and route proceeds to the QI. Relinquished Property QI Escrow $500,000 Tired of being a landlord? Consider a DST.

Step 1 · Sell & Fund the QI

The DST path starts like any 1031: you sell your relinquished property and the QI receives the proceeds. The difference is what comes next — instead of buying another building, you'll invest in a Delaware Statutory Trust.

Step 2: A DST is an institutional-grade real-estate trust qualifying for 1031. DELAWARE STATUTORY TRUST Institutional-grade asset Apartments, medical, industrial, retail 100% passive ownership No tenants, toilets, or trash calls Qualifies for 1031 replacement IRS Rev. Ruling 2004-86 Min. investment ~$25K-$100K Diversify across multiple DSTs

Step 2 · What Is a DST?

A Delaware Statutory Trust is a passive co-ownership structure recognized by the IRS as 1031-eligible replacement property. Sponsors buy institutional real estate (apartments, medical, industrial) and divide ownership into beneficial interests.

Step 3: The DST holds the property; you and other investors share beneficial interests. DST holds the property Investor A Investor B YOU Investor C Investor D Investor E Your share: 5% beneficial interest

Step 3 · Co-Ownership With Other Investors

The DST holds legal title to the property. You and other investors hold beneficial interests — treated as direct real-estate ownership for 1031 purposes — proportional to your investment.

Step 4: The DST distributes net rental income to investors quarterly. DST RENTAL INCOME Net of mortgage, fees, reserves ~5-6% annual yield $ Q1 $ Q2 $ Q3 $ Q4 YOU Investor B Investor C Investor D

Step 4 · Quarterly Distributions

The DST sponsor manages the property and distributes net rental income to investors — usually quarterly, often around 5–6% annualized. You report it as rental income on your tax return.

Step 5: After 5-10 years, the DST sells. You can pay tax or roll into another 1031. Year 0 Year 3 Year 5 Year 10 Typical DST hold period: 5-10 years DST PROPERTY SOLD Your share of net proceeds $650,000 ANOTHER 1031 Roll into: · Another DST · Direct property · Diversified portfolio ...or pay capital gains and exit. Your choice at sale.

Step 5 · Exit on Your Terms

Sponsors typically hold DSTs for 5–10 years before selling. When the DST sells, you receive your pro-rata share of proceeds and can either pay capital gains tax — or chain another 1031 into a fresh investment.