Potential Benefits and Risks

Potential DST Benefits

With varied benefits of ownership through trusts, DSTs have become increasingly popular for executing 1031 exchanges. Here are a few potential benefits:

  • No personal loan recourse for investors on property-level debt
  • Lower minimum investment
  • Potential for multi-property diversification
  • Multiple, more flexible, exit strategies

Potential DST Risks

Along with the benefits, investors should be aware of several potential risks associated with DST exchange programs. Here are a few potential risks:

  • Limited transferability, lack of liquidity and less control over operating decisions for individual investors
  • If the trustee violates one of the mandatory tax restrictions, investor income could become immediately taxable
  • The tax code could change, negatively impacting the tax deferment