DST investments have never been easier to find, and that is part of the problem.
A DST investment stands for a Delaware Statutory Trust. It is a legal entity that lets multiple people pool their money to own a piece of large, high-end commercial real estate. Investors hold a fractional, beneficial interest in the trust and earn passive income without dealing with daily property management.
It’s a very popular way to invest in commercial real estate, but first you’ll have to choose a sponsor.
Sponsors raised roughly $5.5 billion through July 2026. That is a 31% jump over the same stretch in 2025. This is in part because of DSTs. Open inventory set a record too. But just because you have more deals to choose from doesn’t necessarily mean that you’ll make better choices. Sometimes, more is just more.
In this article, we’ll cover what DST investments cost, how to read a sponsor’s record, the hard limits no amount of homework can undo, and how the whole package stacks up against owning a building outright.
Key Takeaways
- ▸Upfront loads on DST investments often run 7% to 12% of the equity put in, and some deals clear 15%, so a yield number tells only part of the story.
- ▸Full cycle programs, not total money raised, show whether a sponsor can deliver an exit.
- ▸The rules that make a DST passive also make it rigid: no new debt, no new money, and no real resale market for five to ten years.
- ▸Anyone who wants control and the full upside of one asset should weigh 100% direct ownership first.
What Are DST Investments, in Short?
A Delaware Statutory Trust holds title to income-producing property and sells fractional stakes to accredited investors. They’re a popular way to invest in commercial real estate since DST investments count as a 1031 replacement property.
Investors often choose this option for two reasons: 1) speed and 2) reliability.
The sponsor already closed on the building, so you can 1031 into a DST relatively quickly. If you’re an investor who’s on day 39 of a 45-day identification window, that’s an incredibly attractive option. Another major benefit is reliability. There are no hard-and-fast numbers on this, but in our experience working with traditional brokerages, roughly 40% of commercial real estate deals fall through even after an investor has signed the contract and sent over their earnest money. DSTs avoid a lot of the issues typically associated with closing.
By and large, though, this piece assumes that you know the basics. If this is all new to you, our complete Delaware Statutory Trust guide covers a lot of ground. This guide is more focused on how to evaluate DSTs and other 1031 options, not necessarily on what they are.
Why a Record Number of Offerings Makes Selection Harder
Psychologists Sheena Iyengar and Mark Lepper famously used 24 flavors of jam versus 6 flavors to illustrate something important: When consumers have more choices, they become paralyzed. You’d think that more is better. If you have more jam flavors, consumers will buy more jam.
In reality, they see all those jam flavors and become overwhelmed. Instead, their attention drifts elsewhere and they buy nothing.
Investors are the same way, and right now there are more options than ever.
As of May 2026, the DST market held a record $3.9 billion of open equity across roughly 100 offerings. One national qualified intermediary said its DST volume rose 55% in a year.
Growth that fast pulls in new sponsors. Some bring decades of experience; others are new to the structure and have never taken a program full cycle. To the untrained eye, they both appear to be the same: Similar forecasts, similar “total equity raised,” so on and so forth.
There is a sales wrinkle as well. DST deals reach buyers through broker dealers and advisors who earn a fee on the sale. So the first programs an investor sees are not always the best ones. They’re just the programs that salespeople are incentivized to sell.
For anyone still mapping out the exchange itself, our guide on how a 1031 exchange works walks through the deadlines and the ID rules.
What Do DST Investments Actually Cost?
As of 2026, upfront fees often run 7% to 12% of the equity put in. Some deals sold through brokers clear 15%. There are also additional annual fees. A program that projects a 6% cash yield can net closer to 4% once every layer clears.
Sales fees paid to the selling broker dealer: up to 7% of contributed equity.
A buying fee: 1% to 3% of the purchase price.
Legal, audit, and offering costs add more.
Then come the annual fees.
Asset management fees often run 0.75% to 1.5% a year.
There’s also a sale fee of 1-2% at exit.
The downside here is the same downside as with many syndications: Sponsors and investors are sometimes misaligned. Sponsors earn the bulk of their money with these fees, not necessarily on making great investment decisions.
To be fair, direct buyers pay costs too: brokerage, legal, title, lender fees, third party reports. The difference is what the buyer can see before closing. A DST buyer gets one bundled price and the fees are scattered throughout the entire lifetime hold of the asset.
Schedule a Call to Compare Your Options →
How Should Investors Read a Sponsor’s Track Record?
When evaluating a sponsor, pay attention to full cycle deals, not total money raised. A sponsor can raise billions and still have never sold a building and paid investors back. So ask how many deals have gone full cycle, over what hold periods, and how real payouts lined up with the first forecast.
Sponsors publish these figures on their own, and they are often unaudited. That does not make them wrong, but it does mean a buyer should be wary.
For example, let’s say you read that a fund had a total return of 150% over seven years. Sounds great, but if you think about the Rule of 72, that means they earned significantly less than 10% annualized.
Always read the Private Placement Memorandum very carefully. It’s probably also a good idea to have a lawyer review it.
With sales fees as high as 7%, it’s also a good idea to ask: “How much are you making on this deal?” Here at Custom, we’re very straightforward about our fees. That isn’t the case for all DST sponsors or all syndicators.
Lastly, ask what happens if a deal never fully sells out. Some sponsors use a bridge loan to close first, then repay it as money comes in. If the raise stalls, those loan terms become the buyer’s problem too.
The Structural Limits That No Diligence Can Undo
Every DST has the Seven Deadly Sins.
Once the trust closes, it cannot take in new money. The trustee cannot refinance old debt or add new debt. Leases usually cannot change unless a tenant goes broke. If a key tenant leaves in year three, the trust has few ways to fix the asset, refinance, or raise fresh equity the way a sole owner could.
Debt makes that rigidity worse. Many programs carry loans at 50% to 65% of value. Debt magnifies gains, and it magnifies losses the same way. And because the trust cannot refinance, a balloon due date in a soft market can force a sale at a bad time.
Then there is the lockup. Hold periods often run five to ten years or longer, and no real resale market exists for these stakes. Sponsors who offer a buyback do so at a discount and at their own choice. So plan around the full hold, not an early exit.
A note on the 721 exit. Many current programs aim at a 721 UPREIT swap, where the stake becomes units in a REIT. That step keeps the tax deferral going and can add liquidity later. But it also ends the 1031 chain, because REIT shares are not like kind property. Anyone who plans to keep exchanging should confirm the exit path first.
These limits are the price of a hands off role, and pooled deals share a version of the same tradeoff. Our piece on what to know before investing in a real estate syndication digs into that pattern.
Talk to an Investment Associate →
DST Investments or 100% Ownership of an NNN Property?
Speed, convenience, and reliability are reasons why investors would choose a DST over direct ownership of a NNN asset. Sometimes, 1031 investors are looking for a way out of direct ownership. They want to move on to something more passive. If they have no experience with NNN, they don’t really have an idea of what the landlord responsibilities might be, so they just assume it’s the inferior option.
However, the downside is that a DST investor only owns a slice of the building. Their control is limited. They cannot make key decisions about the property. They don’t decide who will be the tenant, how long the lease term will last, and when to sell. And they carry a fee load that can be very, very significant.
Direct ownership of a single tenant absolute NNN property doe the exact opposite.
The owner holds 100% of the asset and keeps all of the upside, not a slice net of fees. Under an absolute NNN lease, the tenant covers taxes, insurance, and upkeep, so landlord duties stay low. The owner still holds the asset and its risks, but every key decision is their own.
The usual pushback is that assets of this quality take institutional scale to buy and finance. If you search for NNN leases, you’ll typically find cap rates in the 4-5% range.
That used to be the case. Custom Capital was built to solve this problem. The firm has facilitate transactions of more than $460 million in real estate across 125 or more closed deals on that model. Our four step acquisition process shows how a deal moves from sourcing to closing.
Speed, however, is another issue. It is also why we argue that NNN properties work well as 1031 replacement assets when you plan in advance.
The Bottom Line: When DST Investments Make Sense
DST investments are built for someone who wants passive income, holds for the long term, does not expect to need the money back early, and values estate planning.
For everyone else, other options deserve a second look. The total fee load can average 10%+ and you’re fully reliant on one sponsor’s judgment.
Investors who want the whole asset, the whole upside, and a say in what happens to it tend to do better owning the property outright.
If you’re weighing an offering right now, or want to compare it against owning 100% of an absolute NNN property, our investment associates can help.
This article is provided for informational purposes only and does not constitute tax, legal, or investment advice, nor an offer to sell or a solicitation of an offer to buy any security. Fee ranges, hold periods, and market figures cited are general industry estimates and vary by sponsor and offering. Review the offering documents and consult independent legal, tax, and financial advisors before investing.
Own 100% of an Absolute NNN Property
If you would rather hold the whole asset than a fractional stake, our investment associates can walk through what that looks like for your exchange.
For accredited investors. No obligation, and no pressure to move on anything.
Frequently Asked Questions
What is the minimum investment for a DST?
Minimums vary by sponsor and deal. Most programs start between $50,000 and $100,000, and $100,000 is the more common floor for exchange buyers. Only accredited investors can take part, since sponsors sell these stakes as private placements under Regulation D.
Can DST fees be negotiated?
Usually not. The sponsor sets the terms and the fee load before a program launches, and every buyer comes in on the same terms. What a buyer can do is compare loads across deals, ask the advisor what they earn on the sale, and check the loaded purchase price against the appraised value in the PPM.
How can I verify a sponsor’s track record?
Ask for full cycle results, not assets under management. Request the number of programs sold, the hold periods, and real payouts measured against the first forecast. Sponsor figures are often unaudited, so read the footnotes and ask which deals the totals leave out.
What happens if a DST offering does not fully subscribe?
The sponsor often closes on the building first with a bridge loan, then repays it as equity comes in. If the raise falls short or runs long, those loan terms can squeeze the trust. The PPM should spell out the debt, so it is worth asking about head on.
Can you 1031 exchange out of a DST?
Yes. When the sponsor sells the building, investors get their share of the money and can roll it into another 1031 exchange to keep deferring tax. The one exception is a 721 UPREIT swap, which keeps the deferral going but ends the chain, because REIT shares are not like kind property.
