The Hidden Tool Every Investor Should Know: How DSTs Help You Defer Capital Gains (and Save a 1031 Exchange)
The Hidden Tool Every Investor Should Know: How DSTs Help You Defer Capital Gains (and Save a 1031 Exchange)
If you own rental or commercial real estate, you’ve probably had that moment where you think, “I want to sell, but I don’t want to get crushed by capital gains taxes.” You’re not alone. That fear keeps a lot of investors stuck longer than they want to be.
Add in tenant headaches, maintenance problems, and struggling to find a suitable replacement property—and many investors stay trapped in real estate they don’t even want anymore.
That’s why I interviewed Jennifer Sotelo, a specialist in Delaware Statutory Trusts (DSTs). Most investors and even many realtors have never heard of DSTs, but they can be a powerful option for anyone doing a 1031 exchange.
A Simple Story to Make This Make Sense
A 1031 exchange is like musical chairs. When you sell, the timer starts. You only have 45 days to identify your next property. If the music stops and you don’t have a chair—you owe taxes. A DST acts like having a few extra chairs reserved in the corner.
What Is a Delaware Statutory Trust (DST)?
A DST lets investors buy a fractional share of a large, institutional-grade property without having to manage anything. Examples include:
• Class A apartment buildings
• Self-storage facilities
• Medical office
• Industrial and distribution centers
• Amazon fulfillment centers
• Student housing
A professional sponsor manages the entire property. You get passive income and maintain 1031 exchange benefits.
Why Investors Use DSTs
• Defer capital gains taxes
• Avoid property management
• Diversify across several asset classes
• Save a 1031 exchange if a deal collapses
• Stay in real estate without the stress of owning doors
• Access institutional-quality investments not available to individual investors
How DSTs Fit Into a 1031 Exchange
When you sell a property, you have 45 days to identify replacement options and 180 days to close. Many investors don’t know they can identify their main property AND list 1–2 DSTs as backups. If the main deal falls apart, you still have options.
What If You Miss the 45-Day Deadline?
If your deal collapses after the deadline and you didn’t identify a DST, you may still have one more option—a Bonus Depreciation Fund. It’s not a DST, but it can help offset capital gains even if you're outside the 45-day window.
Why Realtors Should Care
Realtors often lose listings because clients are terrified of the capital gains tax. DSTs allow them to sell, stay invested, and avoid becoming landlords again. It’s not competition—it’s a tool that helps move deals forward and can even save exchanges that are collapsing.
Real Example From the Interview
Jennifer shared a story about a client doing a 1031 exchange into a Dollar General. The seller stopped responding and the deal fell apart. The agent was about to lose their commission. They moved the client into a DST and saved the entire exchange.
Who DSTs Might Be Right For
• Investors worried about capital gains
• Burned-out landlords
• Those struggling to find a replacement property
• Investors wanting passive income
• People wanting diversification
• Realtors trying to save investor deals
FAQ: Delaware Statutory Trusts (DSTs) & 1031 Exchanges
What is a Delaware Statutory Trust?
A DST is a legal structure that allows investors to buy fractional ownership in professionally managed real estate.Do DSTs qualify for a 1031 exchange?
Yes. DSTs are approved by the IRS as like-kind replacement property.Can a DST save my 1031 exchange?
Yes—if it was identified within the 45-day window.What if I miss the identification deadline?
A Bonus Depreciation Fund may help offset taxes even after day 45.Are DSTs truly passive?
Yes. The sponsor handles all management.Can I diversify my 1031 exchange with DSTs?
Yes, many investors split their exchange into multiple DSTs.Are returns guaranteed?
No investment is guaranteed.Do DSTs work for retirees?
Yes—they’re very popular with retirees seeking passive income.Are DSTs a good fit for realtors?
Yes. DSTs help unlock listings and save deals.How do I know if a DST is right for me?
You should speak with a DST specialist who can evaluate your goals and tax needs.
Watch the Full Interview on YouTube
https://youtu.be/Kevr3ijVJoU
Contact Information for Jennifer Sotelo
Phone: 310-988-8422
LinkedIn: Jennifer Sotelo
Email: [email protected]
Disclosure: Jennifer Sotelo is a Registered Representative of Cabin Securities, Inc, Member FINRA. All information provided is general in nature and for educational purposes only, not a recommendation to buy or sell any specific investment. DSTs involve risk and are not suitable for everyone. Opinions expressed do not necessarily reflect those of Cabin Securities, Inc. Consult your financial advisor before considering a DST or any investment.
If you'd like help understanding whether a DST or 1031 exchange is the best option for your investment plan, I’m happy to walk through it with you.
Book a free 15-minute call: https://interconnectmortgage.com/calendar
Contact Interconnect Mortgage
Interconnect Mortgage
Palm Beach Gardens, FL
Phone: 561-373-0371
Website: https://interconnectmortgage.com
Email: [email protected]
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