Understanding Your Options After a DST Investment Sells
Delaware Statutory Trusts (DSTs) have become a popular option for investors seeking passive income and tax-deferral benefits through a 1031 Exchange. But many investors wonder—what happens when the DST property sells? Can you take control again and own your next investment directly?
The answer is a clear YES—and here's how it works.
What Is a DST in a 1031 Exchange?
A Delaware Statutory Trust allows investors to co-own a fractional interest in institutional-grade real estate. It’s a hands-off, passive investment solution ideal for those wanting to defer capital gains without the day-to-day management of owning property directly.
Investors often enter DSTs through a 1031 Exchange, which allows them to defer taxes when selling a property and reinvesting in another like-kind investment.
So, What Happens When the DST Property Sells?
DSTs aren’t designed to be held forever. Most DSTs are structured to hold properties for 5–7 years before liquidation. When that happens, investors receive their share of the sale proceeds—at which point they face a choice:
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Pay the capital gains tax
OR -
Reinvest the proceeds through another 1031 Exchange
And here’s where it gets exciting…
Yes, You Can 1031 Out of a DST Into Your Own Real Estate
Many investors don’t realize this: **you can take your share of the DST proceeds and roll them into a new 1031 Exchange—**including the purchase of real property you own and manage directly.
In other words, you’re not locked into DSTs forever. When the DST sells, you have the flexibility to:
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Buy a rental property you self-manage
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Invest in a vacation rental
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Purchase a commercial building
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Exchange into another DST
-
Build a portfolio of smaller properties
As long as you follow IRS 1031 rules (such as identifying your new property within 45 days and closing within 180 days), you can continue deferring taxes and gaining more control over your investment strategy.
Why This Matters
This flexibility gives DST investors the best of both worlds:
- Tax deferral now through a passive DST investment
- Control later by converting back to direct real estate ownership
- Ongoing opportunity to continue building wealth through 1031 Exchanges
Whether you’re looking to simplify your life or take back the reins on your portfolio, the DST structure doesn’t limit your options—it opens the door for more strategic growth.
Final Thoughts
The bottom line? Yes, you absolutely can 1031 out of a DST and buy your own real estate.
If your DST investment is approaching its sale window, this is a great time to plan your next move. By working with a knowledgeable 1031 Exchange advisor or real estate professional, you can set yourself up for another tax-deferred success.
