How Do You Get Out Of A
DST Investment?

Investors who own a Delaware Statutory Trust interest may eventually ask, “How do you get out of a DST investment?” The answer depends on the specific DST, the sponsor’s planned exit strategy, the governing documents, transfer restrictions, ownership structure, and available buyer demand.

DST investments are generally designed to be held for a longer period rather than traded like publicly listed stocks or REITs. Investors may expect to remain invested until the sponsor sells the underlying property or completes another planned liquidity event.

However, some investors may need to pursue an earlier exit because of changing financial circumstances, estate administration, retirement-account requirements, portfolio changes, or a need for liquidity.

Potential exit paths may include waiting for the sponsor’s planned property sale, pursuing a private transfer of the DST interest, evaluating a secondary-market buyer, or discussing a possible 1031-exchange structure with qualified professionals.

No exit method is guaranteed, and each DST interest must be evaluated individually.

How Do You Get Out Of
A DST Investment?

There are generally three potential ways an investor may exit a DST investment:

First, the investor may continue holding the interest until the sponsor sells the underlying property or completes the planned investment exit.

Second, the investor may explore whether the DST interest can be transferred privately to a willing and qualified buyer before the property is sold.

Third, the investor may discuss whether a properly structured transaction could support a Section 1031 exchange or another tax-planning strategy.

The appropriate path depends on the specific investment documents, the investor’s ownership structure, the sponsor’s procedures, the potential buyer pool, and the investor’s tax and financial objectives.

For more information about the private-sale process, see Can I Sell My DST Investment?

Why Is It Difficult To
Exit A DST Investment?

DST interests are generally private, illiquid investments. They typically do not trade on a national securities exchange and may not have a continuous public market or readily available resale price.

The investor may also be required to hold the interest through the sponsor’s anticipated property disposition or another event described in the offering documents.

A prospective transfer may require sponsor approval, trustee review, buyer qualification, custodian coordination, transfer paperwork, and confirmation that the proposed transaction complies with the applicable documents and laws.

A DST may own valuable real estate while the individual beneficial interest remains difficult to sell. The value of the underlying property and the liquidity of the investor’s interest are related but separate considerations.

The SEC explains that private securities may be difficult to resell because there may be fewer buyers and resale restrictions may apply. SEC private secondary-market guidance

Wait For The Sponsor’s
Planned Property Sale

Many DST investors expect to remain invested until the sponsor sells the underlying property or properties.

If the sponsor completes the planned sale, the proceeds may be distributed to the beneficial owners according to the governing documents and the investor’s ownership interest.

The timing of that event may depend on property performance, market conditions, financing, tenant conditions, sponsor strategy, and other factors. The anticipated investment period is not necessarily a guaranteed sale date.

A sponsor may determine that continuing to own the property is preferable to selling at a particular point in the market cycle. Investors should review the offering documents and sponsor communications to understand the expected exit process.

Waiting for the planned property sale may avoid the need for a private transfer, but it may not provide liquidity when an investor needs it.

Sell The DST Interest
Through A Private Transfer

Some investors may explore selling their DST interest before the sponsor sells the underlying property.

A private transfer generally begins with identifying the investment, confirming ownership, reviewing the transfer restrictions, and determining whether a potential buyer may be available.

The transaction may then involve buyer qualification, valuation review, negotiation of economic terms, sponsor or trustee approval, transfer documents, and confirmation that the ownership records have been updated.

A private transfer may provide an earlier potential exit, but it may also involve a discount to the investor’s original investment, estimated net asset value, or the value the investor expects to receive if the sponsor completes the planned property sale.

For a detailed discussion of what occurs during a private sale, see What Happens When You Sell a DST?

Can A DST Interest
Be Transferred?

Under Delaware law, a beneficial interest in a statutory trust is generally transferable unless the trust’s governing instrument provides otherwise. Delaware Code, Title 12, § 3805

This means the specific DST agreement and offering documents are important. They may establish transfer restrictions, approval requirements, buyer qualifications, administrative procedures, or other conditions.

A transfer may also be affected by the registration of the interest. An investment held individually may follow a different process from an interest held through an IRA, trust, estate, partnership, or limited liability company.

The fact that a transfer may be legally permitted does not necessarily mean that a buyer is available or that the interest can be sold at a price acceptable to the investor.

Explore A DST
Secondary-Market Buyer

A specialized secondary-market buyer may review a DST interest to determine whether it fits the buyer’s criteria.

The review may consider the sponsor, underlying property, financing, distributions, remaining investment term, transfer requirements, available documentation, and current market demand.

A potential buyer may also evaluate the risks associated with acquiring an interest that is private, illiquid, difficult to value, or subject to sponsor and transfer restrictions.

A secondary-market review does not guarantee that a buyer will be found or that a transaction will close. The outcome depends on the specific DST and the circumstances existing at the time of review.

AIL provides additional background in DST Secondary Market: How Liquidity And Transfers Work .

Does The Buyer Have To
Be An Accredited Investor?

Buyer requirements depend on the offering structure, governing documents, applicable securities-law exemption, and sponsor or transfer procedures.

Depending on the circumstances, a potential buyer may need to satisfy accredited-investor, sophistication, suitability, financial, or other eligibility requirements.

The SEC explains that certain private offerings, including offerings relying on Rule 506 of Regulation D, may be limited to accredited investors or other qualified purchasers. SEC guidance on accredited investors

Investors should not assume that every DST has the same buyer requirements. The applicable offering documents and transfer procedures should be reviewed before a transaction is pursued.

How Much Is A DST
Interest Worth?

A DST interest generally does not have a single public market price.

A potential buyer may consider the value and performance of the underlying property, occupancy, tenants, lease terms, financing, distribution history, sponsor, remaining hold period, and expectations regarding a future property sale.

Broader market conditions may also affect pricing. Interest rates, financing availability, real-estate valuations, and demand for the property type can influence the buyer’s analysis.

A private-market price may be below the investor’s original investment or an estimated net asset value. A discount may reflect limited liquidity, transfer restrictions, buyer risk, financing considerations, and the time required to hold the investment.

Investors should distinguish between the value of the underlying real estate and the price that may be available for a private transfer of the individual DST interest.

How Do You Exit A DST
Held In An IRA?

A DST held through an IRA or other retirement account may require additional coordination with the account custodian.

The custodian may need to review the transaction, confirm the registration, approve the transfer documents, coordinate payment, and process the proceeds according to the account’s procedures.

The process may be different from selling a DST registered directly in an individual’s name.

Investors should not assume that proceeds can be distributed personally without creating tax or retirement-account consequences. Retirement-account questions should be discussed with the applicable custodian and qualified tax professionals.

How Do You Exit An
Inherited DST?

An inherited DST interest may require additional documentation before a transfer or sale can be considered.

Documents may include a death certificate, probate records, letters of authority, trust documents, beneficiary records, estate records, account statements, or other evidence establishing the current ownership and registration.

The process may take additional time when an estate, trust, multiple beneficiaries, or changing registration is involved.

Estate, tax, and legal matters should be reviewed with the investor’s attorney, tax advisor, executor, trustee, or another qualified professional.

Can A 1031 Exchange
Help You Exit A DST?

A Section 1031 exchange may be relevant in certain DST situations, but it is not an automatic exit strategy and does not apply to every transfer.

Certain DST arrangements may qualify for specific tax treatment under IRS Revenue Ruling 2004-86. However, the ruling addresses a particular structure and set of facts.

If an investor is considering a deferred exchange, the transaction generally must be structured before the sale proceeds are received. Treasury Regulation § 1.1031(k)-1 describes the use of a qualified intermediary and limits the taxpayer’s ability to receive, pledge, borrow, or otherwise obtain the benefits of exchange proceeds during the exchange process. Treasury Regulation § 1.1031(k)-1

The commonly referenced 45-day identification period and 180-day completion period apply to qualifying deferred exchanges. They should not be assumed to apply automatically to every DST sale or private transfer.

Investors considering a 1031 exchange should consult a qualified intermediary and tax advisor before taking steps that could affect the transaction.

What Are The Tax Consequences
Of Exiting A DST?

The tax consequences of exiting a DST depend on the ownership structure, amount realized, adjusted basis, debt, distributions, transaction expenses, holding period, and the investor’s individual circumstances.

IRS Publication 544 explains that gain generally occurs when the amount realized from a sale or exchange exceeds the adjusted basis, while a loss generally occurs when the adjusted basis exceeds the amount realized. IRS Publication 544

Investors should maintain records that may affect the basis of the DST interest, including acquisition documents, distributions, capital adjustments, and other relevant information. The IRS explains that basis is used to determine gain or loss when property is sold or otherwise disposed of. IRS Publication 551

A sale or transfer may also involve tax reporting obligations. Investors should consult their tax advisor before completing a transaction or receiving proceeds.

What Documents Are Needed
To Exit A DST?

A DST exit review generally begins with documents that identify the investment and confirm the investor’s ownership position.

Helpful materials may include:

• A recent account statement
• Subscription or purchase records
• DST offering documents
• Ownership or transfer records
• Sponsor correspondence
• Distribution information
• Custodian or registration details
• Estate or trust documentation, if applicable

Complete documentation can help determine whether the interest may be transferable, which parties must be involved, and whether the position may be suitable for further evaluation.

Sensitive information that is not necessary for an initial review should generally be removed or protected before documents are shared.

How Long Does It Take
To Get Out Of A DST?

The timing varies by investment and exit method.

Waiting for a sponsor’s planned property sale may take months or years depending on the investment cycle and market conditions.

A private transfer may require document review, buyer identification, valuation analysis, negotiation, buyer qualification, sponsor approval, custodian coordination, and completion of transfer paperwork.

Some transactions may be relatively straightforward, while others may require additional documentation or resolution of ownership issues.

No specific completion timeframe can be guaranteed.

Mistakes To Avoid When
Exiting A DST

One common mistake is assuming that every DST has the same exit process. Sponsor requirements, transfer restrictions, buyer qualifications, and administrative procedures can differ significantly.

Another mistake is assuming that a DST interest can be sold for the value of the underlying real estate. Private-market pricing may reflect limited liquidity, transfer restrictions, buyer demand, financing, and remaining hold period.

Investors should also avoid waiting until after a sale begins to consider tax, 1031-exchange, retirement-account, estate, or legal issues.

Finally, a preliminary buyer inquiry, estimated value, or initial review does not guarantee that a transaction will close.

Common Questions About
Exiting A DST

What is the easiest way to get out of a DST?

There is no single easiest method for every investor. Some investors may wait for the sponsor’s planned property sale, while others may explore a private transfer or secondary-market buyer. The appropriate path depends on the specific DST and the investor’s circumstances.

Can I sell my DST before the property is sold?

Potentially. A private transfer may be possible if permitted by the governing documents and if a willing and qualified buyer is available. Sponsor, trustee, custodian, and transfer requirements may apply.

Can the DST sponsor buy me out?

The availability of a sponsor redemption, repurchase, or internal liquidity program depends on the specific investment documents and sponsor policies. Investors should contact the sponsor or transfer administrator to determine whether any program exists.

Can I sell a DST to another investor?

Potentially. The transfer may require buyer qualification, sponsor approval, documentation, and compliance with applicable securities-law requirements. A buyer is not guaranteed.

Does a DST have a maturity date?

Some DSTs may have an anticipated investment term or planned exit period, but the timing of a property sale may depend on market conditions, financing, property performance, and sponsor strategy. An anticipated timeline is not necessarily a guaranteed maturity date.

Can I get out of a DST held in an IRA?

Potentially. A DST held in an IRA may require additional custodian approval and documentation. Investors should coordinate with the custodian and qualified tax professionals before proceeding.

Can I use a 1031 exchange to exit a DST?

A 1031 exchange may be possible in certain circumstances, but it must be structured and timed correctly. Investors should consult a qualified intermediary and tax advisor before selling or receiving proceeds.

What if I cannot find a buyer for my DST?

If a buyer cannot be found or the transfer requirements cannot be satisfied, the investor may need to continue holding the interest until the sponsor completes a planned liquidity event or another permitted exit becomes available.

Will I lose money if I sell my DST early?

A private transfer may occur below the investor’s original investment amount or another estimated value. Pricing may reflect limited liquidity, transfer restrictions, buyer demand, financing, and the risks assumed by the buyer.

Evaluating Your
DST Exit Options

Getting out of a DST investment may be possible, but the available options depend on the specific investment rather than the DST asset class alone.

A meaningful review should consider the governing documents, ownership records, transfer restrictions, sponsor requirements, buyer qualifications, property and financing information, remaining anticipated hold period, and current market demand.

Investors should also compare the potential benefits of an early private transfer with the potential value, timing, and risks of continuing to hold the interest.

A potential DST exit is not guaranteed. Investors should consult their financial, tax, legal, and securities professionals before making a decision about selling, transferring, or exchanging a DST interest.