Beyond knowing where to find top-rated Delaware Statutory Trust (DST) offerings to buy, a successful DST investment hinges on understanding the difference between the two key entities you will work with — the sponsor and the service provider.

What a Delaware Statutory Trust Is and How It Works

A DST is a legal arrangement that allows multiple people to co-invest in real estate. Each one holds fractional ownership of the asset. It transfers all property management responsibilities to the sponsor, allowing them to benefit from gains without handling the day-to-day operations.

With a 1031 Exchange, also known as a like-kind exchange, you can defer capital gains tax by selling a property and then reinvesting the proceeds into a new property worth the same amount. Leveraging DST enables you to roll your investment into one or more properties worth much more because it qualifies as direct property ownership for tax purposes.

Essentially, you receive a percentage of ownership in a building while relinquishing your facility management privileges. In doing so, you defer the capital gains taxes that would otherwise be due upon the sale of the original property.

DSTs are complex, illiquid and regulated by the United States Securities and Exchange Commission (SEC). Under SEC regulations, investors must be accredited. This means they must either have a net worth exceeding $1 million or a gross annual income of at least $200,000 for two years in a row, or $300,000 for joint income with a spouse.

The Vital Role of DST Sponsors and Service Providers

The sponsor is the firm that builds and manages the trust. It evaluates the property’s performance, structures the deal, funds the initial purchase and operates the asset. As more people invest, the capital they used to acquire the asset will be displaced. Eventually, the investors will own the property fully.

A sponsor’s role is to do due diligence when sourcing properties. They may specialize in specific sectors, such as office, multifamily or industrial. During the process, the sponsor considers everything from the location to the minimum investment. They are in charge of life cycle and professional management. Their work builds the foundation for the investment’s potential.

A service provider role differs significantly, but is no less critical. They act as investors’ personal guides through the DST marketplace, helping them find and choose an offering from the many available sponsors. In short, a service provider can determine where to find top-rated DST offerings.

Commission-based consultants are paid a set bonus or a percentage of the sale when they convince an investor to choose specific sponsors’ products. This creates a potential conflict of interest, as they may be motivated to push ill-suited options for a higher payout.

Fee-only fiduciary advisers only earn compensation from the client and are legally obligated to act in an investor’s best interest. Ideally, all of their revenue comes from clients to ensure unconflicted adviser-client relationships. This eliminates the possibility of a conflict of interest, ensuring they are aligned with their client’s goals.

Where Can You Find DST Offerings to Buy?

The best DST offerings are subjective, as the choice depends on your budget, risk tolerance, location and estate planning goals. The question is not what to buy, but who to trust for advice — and the answer is to secure conflict-free, expert guidance.

Fiduciary DST Advisers

Fiduciary DST advisers typically specialize in real estate and alternative investments. Those who focus on 1031 Exchanges are well-versed in DSTs, enabling them to provide you with a range of professionally managed, institutional-quality offerings from various sponsors. A good adviser will take the time to understand your financial portfolio and investment goals.

Real Estate and Tax Attorneys

Real estate and tax attorneys can represent individuals, corporations or partnerships in 1031 Exchanges. They may not directly sell DST offerings, but they can often refer you to reputable sponsors or advisers. Additionally, they play a central role in reviewing the legal and tax implications of investing.

Online DST Marketplaces

An online DST marketplace aggregates offerings from various sponsors, allowing you to browse and compare listings in one convenient location. Typically, you can filter the results to find ones that fulfill your criteria.

While these marketplaces provide detailed information about each option — such as asset type, minimum investment amount, 1031 Exchange eligibility and location — you do not receive tailored investment or tax advice.

Real Estate Investment Firms

Some real estate investment firms provide lists of properties eligible for 1031 Exchanges. Since they are often sponsors themselves, they typically have dedicated teams that can walk you through available listings. The only catch is that real estate investment firms do not have a fiduciary obligation to you, so they may be more interested in your funds rather than securing your financial future.

Key Questions You Should Ask Your Service Provider

Once you know where to find DST offerings, you must do your due diligence. Question each service provider to evaluate their business model and philosophy.

Are You Legally Required to Act as a Fiduciary?

Many advisers will say they act in your best interest, but only a fiduciary is bound by law to do so. Asking for confirmation of this standard in writing separates them from those making baseless marketing claims.

At this stage, you should also ask for compensation details. If you move forward with the investment, learn whether they will earn a commission or be paid on a fee-only structure. Request clarification on fees, revenue sharing agreements and pricing frameworks. A true fiduciary will have a straightforward, transparent answer.

Do You Have a Curated List of DST Sponsors?

Some companies have access to the entire market of DST sponsors, while others work from a limited list of approved entities. Having access to the whole market gives you more options, but a curated list is ideal for weeding out low-quality candidates. Generally, you want advice from an independent consultant with a hand-selected list.

What Do You Look for in a New DST Sponsor?

Request a detailed overview of the due diligence process for evaluating new sponsors. High-quality firms go beyond sponsors’ marketing claims, considering financial stability, asset performance and exit options. They should scrutinize the finer details rather than accepting cash flow projections at face value.

Have You Ever Advised Clients Not to Proceed?

If a service provider has ever advised a client not to proceed with a 1031 Exchange, ask them for the circumstances. This question serves as a test of integrity. Not all advisers will have such stories, as they may consistently find DST offerings to buy. However, if they do, it tells you the service provider is prepared to prioritize your needs over a sale.

The Value of Fiduciary Services From DST Advisers

Regardless of which service provider you work with, the team should be deeply aligned with your investment goals. You shouldn’t settle for anything less than specialized advice, tailored recommendations and an unconflicted adviser-client relationship. Rather than focusing only on what to buy, investors may benefit from working with advisers who can provide objective, conflict-aware guidance.

Sera Capital is an independent, fee-only fiduciary firm that specializes in DSTs and 1031 Exchanges. The company offers guidance for investors evaluating available DST offerings and provides support throughout the transaction process.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice.