Understanding 1031 Exchanges and Delaware Statutory Trusts (DSTs)
An overview of 1031 exchange rules — and how Delaware Statutory Trusts can be used as replacement property.
Educational overview only. Not tax or legal advice.
Six 1031 Exchange Rules Investors Should Understand
Selling an investment property can trigger significant capital gains and depreciation recapture taxes. Section 1031 of the IRS tax code provides a way for real estate investors to defer those taxes by reinvesting proceeds into qualifying real property. To qualify for tax deferral under IRS Section 1031, a real estate exchange must follow specific rules. Failing to meet these requirements can result in immediate taxation.
Like-Kind Property
Both the sold and replacement properties must be held for investment or business use, and Delaware Statutory Trust interests may qualify as like-kind replacement property.
Reinvest All Sale Proceeds
To fully defer taxes, all net proceeds from the sale must be reinvested. Any cash retained—commonly referred to as “boot”—may be subject to taxation.
Equal or Greater Value
The replacement property must be of equal or greater value than the relinquished property. If debt is paid off in the sale, it must be replaced with equal debt or additional cash.
Day 45 Deadline
Replacement property must be identified within 45 days of the sale of the relinquished property through a qualified intermediary.
Day 180 Deadline
The replacement property must be acquired within 180 days of the sale of the relinquished property. This timeline is strict—missing it means the exchange will be disqualified and taxes will be due.
Use a Qualified Intermediary
A qualified intermediary (QI) is required to facilitate the exchange. The investor cannot take receipt of the sale proceeds at any point during the process.
Explore our Roadmap to Navigating 1031 Exchanges
What is a Delaware Statutory Trust (DST)?
A Delaware Statutory Trust (DST) is a legal entity that allows multiple investors to hold fractional ownership interests in institutional-quality real estate.
DSTs are commonly used in 1031 exchanges because properly structured DST interests qualify as like-kind real property under IRS rules. Instead of owning and managing a property directly, investors acquire a beneficial interest in a trust that owns and operates the real estate. DSTs are typically used by investors seeking to remain allocated to real estate while reducing the responsibilities of active property management. DST interests represent ownership in real property — not shares of a REIT or operating business.
Key Characteristics
Qualifies as replacement property under 1031 exchange rules
Fractional ownership in professionally managed real estate
Often backed by stabilized, income-producing properties
Designed for passive ownership rather than day-to-day management
Looking for a replacement property?
Beware of the potential hidden fees of DSTs.
Syndicated DSTs offered through broker-dealers often carry layered upfront costs that can total 10–14%, including selling commissions, dealer manager fees, and other transaction-related expenses.
Acquisition Fee 0%–4%
Selling Commissions 0.5%–6.0%
Managing Broker Deal Fee 1.0%–1.5%
Dealer Manager Fee 1.0%–1.5%
Finance Coordination Fee 0.0%–1.0%
Origin’s Low-Fee DST Approach
Origin Exchange’s fee structure is intentionally streamlined. The DST pays an upfront fee to cover organizational and offering expenses, along with an annual asset management fee during the operational phase. We do not charge acquisition fees or disposition fees, and we do not pay brokerage sales commissions. As a result, a greater portion of invested capital is allocated toward the acquisition of real estate.
Looking for a DST replacement property? Explore Origin Exchange.
Discover DST opportunities available today for 1031 exchange and tax-deferred investing.
LIMITED AVAILABILITY
Nashville Queens DST
A 221-unit, Class A residential property, built in 2023, located in Nashville’s vibrant WeHo submarket.
LIMITED AVAILABILITY
Charlotte NoDa DST
A 323-unit, Class A residential property, built in 2023, located in Charlotte’s lively NoDa submarket.
We are an experienced multifamily real estate fund manager.
Assets Under Management1
Transactions Executed2
Personal Capital Invested By Principals3
FEATURED ON
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WHAT’S INCLUDED:
Origin Exchange Program Overview
Overviews for DST Offerings
Free Guide to 1031 Exchanges
1031 Exchange Tax Savings Calculator
- References to ‘assets under management’ or ‘AUM’ represent the real estate investments managed by Origin Investments’ subsidiaries, including Origin Credit Advisers, an SEC-registered investment adviser, as to which Origin is entitled to receive a fee, preferred return, or carried interest. Origin’s calculation of AUM may differ from the calculations of other real estate asset managers and, as a result, Origin’s measurement of its AUM may not be comparable to similar measures presented by other asset managers. AUM as of 12/31/25.
- As of 12/31/24.
- This is an aggregate amount that has been invested and reinvested in Origin funds since the inception of the company in 2007.