DST or similar 1031 Exchange

[Zach White]

Hi,

I'm looking at my first 1031 exchange, and stumbled across the Delaware Statutory Trust option. The sites I've found in searching its details don't mention in detail the parameters of that deferred tax burden, specifically if the deferred tax amount from the 1031 is due upon sale of the DST. I've gathered that DST's should be held for "2 to 5 years", but am curious as to what the tax ramifications are of selling at/around 5 years? If the deferred tax burden isn't dissolved or reduced over a length of time, I'm inclined to buy another rental, live in it for 2 of 5 years, rent it for 3, then sell it tax-free. (single, and hat-hanging flexible with a somewhat minimalist lifestyle)

I've been a landlord since the '99, and would rather streamline my properties at this point than acquire a new rental, especially considering the high cost of residential property in my area compared to the relatively low rental rates these days - roughly 5% ROI factoring in a month of vacancy per year, but not accounting for appreciation/depreciation of the property itself. Historically not bad, but if I can invest the same money for similar ROI into a hand's off venture, that's more attractive.

Buying property outright, or close to it, isn't how I've historically invested in real estate, either. So having to commit the large sum the 1031 would require for single-digit gains is motivation to look for another 1031-friendly investment avenue. I also like the idea of investing only the exact amount needed in a DST(assumedly rounded to the nearest $10k or similar), verses inevitably buying a property that requires needing to invest a sizable sum of money into said property since the loan avenue is blocked by my semi-retired, lowish-income situation. Just found out that traditional lenders don't count rental income towards income-to-debt on primary residences, which was ~half of my income the last three years via STR. With that, and counting other rental income at 75%, a reasonable loan basically isn't an option.