DST vs. REIT: What's the Difference?
Both offer passive real estate exposure, but only one qualifies for a 1031 exchange.
Ownership structure
A REIT is a company; you own shares of the company, which in turn owns real estate. A DST gives you a beneficial interest in specific property held by the trust.
1031 eligibility
REIT shares are securities and don't qualify as like-kind replacement property. Properly structured DST interests can.
Liquidity
Publicly traded REITs can typically be sold any trading day. DSTs are illiquid and are usually held until the sponsor sells the property, often after 5 to 10 years.
Which is right?
If you're completing a 1031 exchange and want to defer gain, a REIT generally isn't an option for the exchange proceeds. Some investors use a 721 exchange later to move from a DST into an operating partnership of a REIT; that has its own trade-offs.
Have questions about your situation?
Book a complimentary strategy call with Creative Capital Wealth Management Group.
Schedule a Strategy CallEducational information only; not tax, legal, or investment advice. DSTs involve risk, including loss of principal, and are available only to accredited investors. Consult your own advisors.