Complete 1031 Exchange into DSTs: 2025 Guide
A Comprehensive Guide to the 1031 Exchange Process
Watch: The Exchange Process
Second video covering what happens during the 1031 exchange process, working with sponsors, making reservations, and closing on DST investments.
Key Takeaway
The DST investment process is streamlined and efficient, typically taking 3-5 business days from paperwork submission to closing. The process involves portfolio construction, document preparation, dual compliance reviews (broker-dealer and sponsor), qualified intermediary coordination, and final closing. Registered representatives quarterback the entire transaction while investors never handle funds directly, ensuring compliance and security throughout the process.
Completing a 1031 exchange into Delaware Statutory Trusts requires understanding the step-by-step process, timeline requirements, and documentation needed for successful completion. This guide covers everything from DST replacement property identification to the final fund transfer, ensuring you can defer capital gains while building a diversified real estate portfolio. Following our detailed exploration of how DSTs come to market, we now focus on your direct experience as an investor.
1. Common 1031 Exchange into DST Mistakes to Avoid
Critical Mistakes That Can Derail Your Exchange
- • Missed Deadlines: Not completing DST replacement property identification within 45 days
- • Inadequate Due Diligence: Rushing sponsor and property evaluation without proper research
- • Insufficient Diversification: Concentrating too much capital in a single DST or sponsor
- • Documentation Errors: Incomplete or incorrect paperwork causing compliance delays
- • Poor Timing: Starting the process too late in your 180-day exchange window
2. A Streamlined Process for Your DST Investment
After initial conversations and thorough education, we assist our clients in constructing a diversified portfolio using DST replacement properties. This involves introducing them to various sponsor groups and educating them on potential partnerships to complete their 1031 exchange into Delaware Statutory Trusts.
At Anchor1031, we are committed to making the paperwork involved in building a Delaware Statutory Trust investment portfolio as seamless and efficient as possible. Investors simply inform us of their preferred properties and the allocation they intend for each. Our team then manages all the logistical aspects, preparing the necessary purchase documents for your signature.
Our Commitment to Simplicity
- • Document Management: We handle all purchase document preparation
- • Logistics Coordination: Our team manages all administrative aspects
- • Dedicated Support: Your registered representative quarterbacks the entire transaction
- • End-to-End Service: From inception to completion, we guide you through every step
Our dedicated team is always available to guide you, with your registered representative quarterbacking the entire transaction from inception to completion.
3. The Role of Your Registered Representative
A registered representative plays a crucial role in navigating investors through the complexities of the 1031 exchange process. We provide essential education on:
Delaware Statutory Trusts
Understanding their structure, benefits, and risk considerations for informed decision-making.
Sponsor Groups
Evaluating reputable sponsors and their offerings to match your investment criteria.
1031 Exchange Process
Step-by-step breakdown to ensure compliance with IRS requirements.
We collaborate closely with your legal team and CPA to ensure you possess all the necessary information to fully grasp the investment risks and adhere to IRS requirements for a successful 1031 exchange. We also act as your advocate, interacting with sponsors, broker-dealers, qualified intermediaries, and all other involved parties to facilitate a smooth and successful exchange.
4. The Rigorous Review Process
Once you, the exchanger, complete the necessary paperwork, it is submitted to Great Point Capital, our broker-dealer, and subsequently submitted to the sponsor for review. Our team at Great Point conducts a meticulous review of all purchase agreements and supporting documents, ensuring every detail is accurate and compliant.
Upon their approval, the documentation is sent to the sponsor. The sponsor also performs their own comprehensive compliance review to confirm that all paperwork is in excellent order.
Dual Review System
Great Point Capital Review:
- • Purchase agreement accuracy
- • Supporting document completeness
- • Compliance verification
- • Investor suitability confirmation
Sponsor Compliance Review:
- • Final paperwork verification
- • Legal documentation review
- • Accreditation confirmation
- • Investment allocation verification
5. The Critical Closing Process: Understanding Your 1031 Exchange Timeline
Following approval from Great Point, the sponsor contacts the qualified intermediary, providing a closing statement and a fully executed purchase agreement to request the funds. The qualified intermediary then reaches out to you, the investor, to verify the accuracy of the information provided by the sponsor.
If these documents are accurate and the closing statement is correct, you will authorize the qualified intermediary to wire the funds directly to the sponsor.
Important Security Note
It is important to note that the registered representative and Anchor1031 never handle investor funds directly. All fund transfers occur between the qualified intermediary and the sponsor, ensuring maximum security and compliance.
Your 1031 Exchange Timeline: From Submission to Closing
Once the funds are wired, your Delaware Statutory Trust investment is officially closed! This process typically concludes within three to five business days on average. At this point, you will receive:
Closing Documentation
- • Comprehensive closing statement
- • Fully executed purchase agreement
- • Investment confirmation documents
QI Documentation
- • Detailed fund flow ledger
- • All associated expenses itemized
- • Complete transaction records
Record Keeping
- • Complete transaction history
- • Tax documentation preparation
- • Future reference materials
This streamlined process is repeated for each DST within a 1031 exchange. We strive to make this process as straightforward as possible for our investors. From the moment proper paperwork is submitted to our broker-dealer until the qualified intermediary wires the funds, the average 1031 exchange timeline to close is typically three to five business days.
6. Streamlined Efficiency for Multiple DST Investments
For investors diversifying across multiple DST properties, our process scales efficiently. Each DST investment follows the same streamlined procedure, allowing for coordinated closings that align with your 1031 exchange timeline.
Multiple DST Coordination
- • Simultaneous Processing: Multiple DST investments can be processed concurrently
- • Timeline Alignment: Coordinated to meet your 45-day identification and 180-day exchange deadlines
- • Diversification Benefits: Spread investment across different sponsors, asset classes, and geographic markets
- • Risk Management: Avoid concentration risk while maintaining efficient processing
Ongoing Support Throughout Your Investment Journey
Our commitment to your success extends beyond the closing process. Throughout your DST investment journey, we provide:
Transaction Support
- • Document preparation and review
- • Timeline coordination and management
- • Multi-party communication facilitation
- • Problem resolution and troubleshooting
Educational Resources
- • Risk assessment and mitigation strategies
- • Market updates and sponsor performance
- • Tax implications and planning guidance
- • Portfolio optimization recommendations
About Thomas Wall
Thomas Wall has nearly a decade of experience in alternative investments and real estate. He has helped financial advisors at banks and wirehouses navigate a broad spectrum of equity, debt, and retirement investments at AIG which contributed to over $200MM of capital invested. From there, Thomas specialized in helping real estate investors navigate the transition from active management to passive real estate investing. He advises high-net-worth investors on 1031 exchanges, DSTs, private real estate offerings, and REITs. He has helped investors through hundreds of 1031 exchanges, placing over $230MM of equity into real estate. Today, with Anchor1031, he focuses on providing his investors with the tools they need to accurately assess risk and successfully defer taxes when repositioning their real estate portfolio and making the transition from active manager to passive investor.
Complete Your DST Education
What to Expect After Investing
Ongoing support, tax documentation, portfolio management, and exit strategies for DST investors.
DST Risk Management Strategies
Comprehensive analysis of DST fees, debt risks, and investment considerations for informed decisions.
Ready to Discuss Your 1031 Strategy?
Schedule a call with our 1031 exchange specialists and let us help you navigate the benefits and risks of DSTs and TICs.
Disclosure
Tax Complexity and Investment Risk
Tax laws and regulations, including but not limited to Internal Revenue Code Section 1031, bonus depreciation rules, cost segregation studies, and other tax strategies, contain complex concepts that may vary depending on individual circumstances. Tax consequences related to real estate investments, depreciation benefits, and other tax strategies discussed herein may vary significantly based on each investor's specific situation and current tax legislation. Anchor1031, LLC and Great Point Capital, LLC make no representation or warranty of any kind with respect to the tax consequences of your investment or that the IRS will not challenge any such treatment. You should consult with and rely on your own tax advisor about all tax aspects with respect to your particular circumstances. Please note that Anchor1031 and Great Point Capital, LLC do not provide tax advice.
The information contained in this article is for general educational purposes only and does not constitute legal, tax, investment, or financial advice. This content is not a recommendation or offer to buy or sell securities. The content is provided as general information and should not be relied upon as a substitute for professional consultation with qualified legal, tax, or financial advisors.
Tax laws, regulations, and IRS guidance regarding 1031 exchanges are complex and subject to change. Information herein may include forward-looking statements, hypothetical information, calculations, or financial estimates that are inherently uncertain. Past performance is never indicative of future performance. The information presented may not reflect the most current legal developments, regulatory changes, or interpretations. Individual circumstances vary significantly, and strategies that may be appropriate for one investor may not be suitable for another.
All real estate investments, including 1031 exchanges, are speculative and involve substantial risk. There can be no assurance that any investor will not suffer significant losses, and a loss of part or all of the principal value may occur. Before making any investment decisions or implementing any 1031 exchange strategies, readers should consult with their own qualified legal, tax, and financial professionals who can provide advice tailored to their specific circumstances. Prospective investors should not proceed unless they can readily bear the consequences of potential losses.
While the author is a partner at Anchor1031, the views expressed are educational in nature and do not guarantee any particular outcome or create any obligations on behalf of the firm or author. Neither Anchor1031 nor the author assumes any liability for actions taken based on the information provided herein.