Most experienced real estate owners do not struggle with acquiring property. They struggle with concentration, management burden, and timing decisions as portfolios mature.
Delaware Statutory Trusts (DSTs) are often misunderstood as a replacement for direct ownership. In practice, they are more commonly used as a complement. When used thoughtfully, they can address specific portfolio gaps without displacing core holdings.
In most cases, DSTs tend to work best when they solve a specific portfolio gap upon conducting a 1031 exchange, or when an investor is looking to change an active-management lifestyle.”
This article explains how DSTs can complement a traditional real estate portfolio, when they are most useful, and where their limitations should be clearly understood.
What a Traditional Real Estate Portfolio Often Looks Like
Most long-term real estate portfolios evolve in a predictable way.
Common characteristics
These traits are not mistakes. They are often the result of successful execution over many years.
DSTs provide access to institutional-scale real estate through a passive ownership structure. Investors do not manage the asset and do not make operational decisions.
What they can introduce
The value is not higher returns. The value is diversification and simplification.
DSTs are most effective when they are used to offset specific risks already present in a portfolio.
Typical use cases
They often serve as a counterbalance rather than a core driver.
DSTs are frequently used as part of a 1031 exchange, particularly when reinvesting sale proceeds from actively managed properties.
Why this matters
This flexibility is often more important than yield or appreciation projections.
DSTs involve clear trade-offs that should be acknowledged upfront.
Key considerations
These constraints are not flaws. They are structural features that must align with investor expectations.
Direct ownership and DSTs serve different roles within a portfolio.
Simplified comparison
Understanding these differences prevents misalignment.
DSTs tend to disappoint when they are used for the wrong reasons.
Frequent mistakes
DSTs are most effective when they are positioned deliberately, not opportunistically.”
DSTs should be evaluated in the context of the entire balance sheet, not as isolated investments.
Key questions
The answers to these questions matter more than the specific offering.
DSTs are not designed to replace traditional real estate ownership. They are designed to complement it.
When used intentionally, they can reduce concentration risk, simplify management, and add scale to a portfolio that has grown organically over time. When used without context, they often create frustration.
A structured planning discussion can help determine whether DSTs support broader portfolio objectives or whether direct ownership remains the better tool for the next phase of ownership.
This material is provided for informational and educational purposes only and is based on information from sources we believe to be reliable. However, its accuracy is not guaranteed, and it is not intended to be the sole basis for investment decisions or to meet specific investment needs.
Wealthstone Group does not offer tax or legal advice. This content should not replace professional advice tailored to your individual situation.
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