In the evolving world of real estate investing, savvy investors are increasingly looking for low-maintenance options that still deliver solid returns. One structure that has garnered growing interest is the Delaware Statutory Trust (DST). With its unique benefits and IRS-friendly structure, the DST has become a preferred choice for those seeking the best passive real estate investment options. When paired with available DSTs that match investor needs, this vehicle becomes a powerhouse for building long-term, hands-off wealth.
In this article, we’ll break down how DSTs work, why they’re gaining traction among passive investors, and how to identify the best available DSTs for your portfolio.
What Is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust (DST) is a legally recognized trust that allows multiple investors to own fractional interests in real estate assets—such as commercial buildings, apartments, or industrial properties. The trust holds title to the properties, and investors benefit from rental income, appreciation, and tax deferral through 1031 exchanges.
DSTs are managed by professional real estate sponsors, which means investors don’t have to deal with tenants, toilets, or time-consuming property management. That passive nature is what makes DSTs incredibly appealing in today’s market.
Why DSTs Are Considered the Best Passive Real Estate Investment
When evaluating real estate investment options, especially from a passive standpoint, there are several criteria to consider: cash flow, time commitment, diversification, and tax advantages. Here’s how DSTs deliver on all fronts:
1. True Passive Income
Unlike direct ownership where investors handle maintenance, leasing, and property decisions, DSTs are 100% managed by professionals. Investors receive monthly or quarterly distributions while the asset is operated and maintained by experienced sponsors. This makes it a strong contender for the best passive real estate investment available today.
2. 1031 Exchange Eligibility
One of the biggest attractions of DSTs is their qualification under Section 1031 of the IRS tax code. This means investors can sell appreciated property and defer capital gains taxes by reinvesting into available DSTs, preserving more capital for future investments.
3. Access to Institutional-Quality Assets
DSTs allow everyday investors to own fractional interests in large-scale commercial real estate—assets that would normally require millions in capital to acquire independently. This includes properties like Amazon distribution centers, large apartment communities, and medical facilities.
4. Geographic and Sector Diversification
Because minimum investment thresholds for DSTs are often as low as $25,000–$100,000, investors can spread their capital across multiple properties or even multiple sponsors. This allows for strategic diversification across geography and asset classes.
The Rising Popularity of Available DSTs
The rise in DST popularity isn’t just anecdotal—it’s backed by data. According to industry reports, DST investment volume has surged over the past five years. Several factors are fueling this growth:
- Aging baby boomers looking to offload active real estate management duties
- Increased awareness of 1031 exchange benefits
- Demand for stable income in uncertain economic times
This uptick means there are more available DSTs on the market than ever before—giving investors a wider selection of asset types, locations, and risk profiles to choose from.
How to Evaluate Available DSTs
Not all DSTs are created equal. Here are some key things to look at when considering investment options:
1. Sponsor Reputation
The sponsor is the company that structures and manages the DST. Look for sponsors with a solid track record, transparent reporting, and a portfolio of successful past offerings.
2. Asset Type and Location
Some DSTs focus on multifamily units in growth markets, while others may include office buildings or healthcare facilities. Match the offering to your risk tolerance and investment goals.
3. Projected Income and Exit Strategy
DSTs often have a target holding period (typically 5–10 years). Review the projected income, expected return of capital, and potential appreciation to ensure alignment with your timeline.
4. Debt Structure
Some DSTs use financing to increase returns, while others are all-cash. Each approach carries different risks and benefits, so it’s important to understand the leverage involved.
Why Financial Advisors Recommend DSTs
Many wealth managers and financial planners now include DSTs in their real estate investment strategies for high-net-worth clients. The appeal lies in their combination of tax efficiency, passive management, and steady income.
For clients coming out of a 1031 exchange or looking to exit the landlord lifestyle, DSTs offer a simplified, hands-off way to continue generating real estate income without giving up the asset class entirely. When selecting from available DSTs, advisors help align opportunities with client goals, risk tolerance, and income needs.
Common Misconceptions About DSTs
Despite their popularity, DSTs are sometimes misunderstood. Let’s clear up a few myths:
- Myth: DSTs are illiquid and risky.
While DSTs are typically held for a set period and aren’t traded on public exchanges, they’re structured conservatively and focus on capital preservation. - Myth: DSTs don’t offer control.
It’s true that investors have no say in daily operations, but that’s actually the point for passive investing. You’re trading control for convenience and peace of mind. - Myth: DSTs are only for large investors.
With lower minimums than most private equity real estate funds, DSTs are accessible to accredited investors with a range of capital levels.
DSTs vs. Other Passive Real Estate Investments
When comparing DSTs to REITs (Real Estate Investment Trusts) or crowdfunding platforms, there are some clear distinctions:
| Feature | DSTs | REITs | Crowdfunding |
| 1031 Eligible | ✅ | ❌ | ❌ |
| Direct Property Ownership | ✅ (fractional) | ❌ | ✅ (some cases) |
| Liquidity | Low | High | Medium |
| Passive Income | High | Moderate | Varies |
| Tax Deferral | ✅ | ❌ | Limited |
The unique combination of 1031 eligibility and direct property ownership sets DSTs apart as one of the best passive real estate investment choices for accredited investors.
Final Thoughts: Are DSTs Right for You?
If you’re an accredited investor looking for passive income, portfolio diversification, and tax deferral, DSTs are worth serious consideration. The growing inventory of available DSTs means you have more flexibility than ever to find the right fit for your goals.
Before jumping in, consult a qualified advisor and carefully review each offering’s PPM (Private Placement Memorandum), asset strategy, and risk disclosures. When chosen wisely, DSTs can serve as a reliable vehicle for wealth generation and preservation.
