Because a DST qualifies for 1031 Exchanges, investors can acquire larger properties that otherwise could not be purchased individually. Historically, larger, institutional-quality assets were usually invested by large Real Estate Investment Trusts, pension funds, insurance companies, college endowments. 

The Internal Revenue Service has qualified DSTs eligible for 1031 Exchanges (Rev. Rul. 2004-86) because it is considered as a separate entity from its investors. Creditors of the beneficial owners of DST may not assert claims directly against an owner of a DST because they are entitled to the same limitation on personal liability that is extended to stockholders of Delaware corporations.

DST investments offer investors the option to continue partaking in real estate investing without the management responsibilities and headaches of dealing with troublesome tenants, toilets, and trash, while potentially receiving a steady income. DSTs provide owners the potential for annual appreciation and depreciation (tax shelter), with the minimum investment amount as low as $25,000, allowing investors to build tailored DST portfolios across asset-class and geographies, diversifying their asset allocation and lowering some of the risks.

Some investors have referred to any income received from DSTs as “mail-box” money since the sponsor makes monthly direct deposits to investors bank accounts with quarterly and annual reports that can be sent directly to your accountant or CPA. The income and expense received from DST investments are treated just like any other rental property, from a tax perspective.