Delaware Statutory Trust in lieu of 1031 exchange

[Evanthia V.]

Hi everyone. I'm new to the BP community and am absolutely loving the exchange of information I've seen on the forums and blog posts. I've been consuming both podcasts and loving them as well.

Here's my question: I have a single family investment property that has appreciated significantly and I am looking to sell the property to obtain a better ROI. A sale will result in a significant capital gains tax bill, which I would prefer to defer. While a 1031 exchange in theory is a wonderful option to defer the taxes, I've come to realize that being a landlord is not for me. I would be open to purchase another residential investment property provided I find a property manager to handle the day to day operations. So a 1031 is not completely off the table. Another challenge is that the 1031 timing rules make it incredibly challenging to find a replacement property or properties to invest in with a desirable cap rate in my city, so I would be interested in an out of state investment, which would put even greater pressure on locating a replacement property considering I haven't even started to consider which states I could potentially invest in.

While doing a bit of Googling, I came across the Delaware Statutory Trust (DST) that is a completely passive investment in real estate that allows for the deferral of capital gains on the sale of the investment property.

I've read the pros and cons that the DST providers list on their websites, but I would love to hear from individuals with real life experience who have opted to use a DST in lieu of a 1031 exchange and from those who did the analysis and decided a DST was not right for them. Basically I'm looking for real life pros and cons I should be considering.

Thanks so much!