When it comes to buying and selling investment properties, a great real estate agent can make all the difference. However, if you’ve brought up the idea of replacing your property with a Delaware Statutory Trust (DST), you may have found that your agent has never heard of it.

The truth is, this is not uncommon. While billions of dollars flow in and out of DSTs each year, it is an extremely niche industry. We often find that knowledgeable professionals like real estate agents, attorneys, and CPAs are unfamiliar with these investments and the potential benefits they offer. There are a few reasons for this:

Advertising Restrictions

While there are plenty of educational events, webinars, and books that will teach you about the basics of DSTs and 1031 exchanges, advertising is not as common due to how an offering is filed with the Securities Exchange Commission (SEC).

DST offerings filed under 506(b) of Regulation D (Reg D) cannot be generally solicited or advertised to market the security. So, unless your real estate agent or other trusted professional had a reason to investigate DSTs, it’s likely that they simply would not have come across them.

Accredited Investor Requirements

We believe one of the best ways to learn more about specific DST offerings is to read through a copy of the private placement memorandum (PPM). However, not only will you not see these advertised, you also can’t simply call and request them.
The U.S. Securities and Exchange Commission (SEC) restricts sales of DSTs to “accredited investors.” This is defined as an individual or couple who:

1. Earned a gross income of $200,000 or more ($300,000 for couples) in the past two years and expects to earn the same or more this year

OR

2. Has over $1,000,000 individual or joint net worth, excluding your primary residence

Before a financial professional can send an investor information about a DST offering, a substantive relationship must be established and financial details to confirm you’re an accredited investor should be provided. This limited access further increases the chances that the professionals you’re working with may not have knowledge about DSTs.

Choose the Right Professionals

Owning a DST offers potential benefits including portfolio diversification, access to institutional-grade properties, and the ability to have a back-up plan for your 1031 exchange replacement property. However, these investments are not suitable for everyone and it’s critical to do your research. 

While not all professionals have experience with DSTs, there are plenty out there who do. If you’re considering engaging in a DST 1031 exchange, it’s important to make sure you fully understand the ins and outs of how they work. You’ll also want to surround yourself with professionals who are both experienced and knowledgeable about the intricacies of the process, as this is one of the best ways to ensure you don’t inadvertently make an expensive mistake.

If you’re interested in learning more about DSTs and whether they might make sense for you, download our free eBook: The Essential Intro Into 1031 Exchanges and DSTs.

This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance.

Because investor situations and objectives vary, this information is not intended to indicate suitability or a recommendation for any individual investor.  

Investments in commodities may have greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity-linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Use of leveraged commodity-linked derivatives creates an opportunity for increased return but, at the same time, creates the possibility for greater loss.

Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

A direct participation program (DPP) is a pooled entity that offers investors access to a business venture's cash flow and tax benefits. Also known as a "direct participation plan," DPPs are non-traded pooled investments in real estate or energy-related ventures over an extended time frame.

Investment advisory services offered through Bangerter Financial Services, Inc. A state Registered Investment Advisor. Registered Representative and securities offered through Concorde Investment Services, Inc. (CIS), member FINRA/SIPC. Bangerter Financial Services, Inc. is independent of CIS.