What to Expect After Your DST Investment: A Complete Timeline
What to Expect After Investing in a DST
Key Takeaway
After investing in a DST, you receive comprehensive ongoing support including quarterly/annual performance updates, year-end tax documentation, and advance planning for exit strategies. Your registered representative serves as your single point of contact, while sponsors provide regular communication about property performance. When your DST eventually sells, you'll have multiple exit options including exchanging into new DSTs, direct properties, or realizing gains.
Our previous discussions covered what to anticipate before and during the investment process. Now, we focus on the ongoing support you'll receive once your purchase is finalized, and what to expect from your dedicated registered representative at Anchor1031 when it's time for your investment to be sold.
Ongoing Support: Your Single Point of Contact for DST Portfolio Management
The closing of your 1031 transaction, typically a three to five business day process, involves diligent coordination between our registered representatives, the sponsor's escrow team, and your qualified intermediary. Our commitment doesn't end once the investment is closed.
We serve as your central point of contact for all your DST investment needs. Whether you require quarterly performance reports, end-of-year tax documentation, or any other assistance related to your DST portfolio management, we are just a call away. Our goal is to ensure you and your tax team have all the necessary information for proper oversight of your investment.
What We Handle for You
Administrative Support:
- • Document organization and storage
- • Performance report distribution
- • Tax document coordination
- • Investment record maintenance
Communication Management:
- • Sponsor communication relay
- • Important update notifications
- • Question resolution and clarification
- • Strategic planning discussions
Essential Year-End DST Tax Documentation
As the year concludes, you will receive important tax documents, including a substitute 1099 and a comprehensive tax packet. This documentation is typically filed on Schedule E of your tax return. If you have remaining basis in your investment, it can be utilized for depreciation, potentially offering valuable tax benefits.
Important Tax Reminder
Please remember, Anchor1031 does not provide tax advice. We strongly recommend consulting with your CPA to fully understand your specific tax advantages and to ensure proper compliance.
You will also receive regular updates on your DSTs from each sponsor company. For dynamic assets like multifamily properties, these are typically quarterly. For long-term net-lease assets, updates are usually provided annually. This consistent communication is a cornerstone of effective DST sponsor support.
Tax Documents You'll Receive
- • Substitute 1099: Annual income reporting
- • Tax Packet: Comprehensive filing information
- • Depreciation Schedules: Basis tracking documents
- • Distribution Reports: Cash flow documentation
Update Frequency by Asset Type
- • Multifamily Properties: Quarterly reports
- • Self-Storage Facilities: Quarterly reports
- • NNN Properties: Annual reports
- • Industrial Properties: Quarterly reports
When Your DST Investment Sells: Navigating the Exit
Eventually, your DST will mature, having ideally achieved its business plan by increasing its Net Operating Income (NOI). At this point, the sponsor will look to sell the DST—a process commonly referred to as "going full-cycle." You can expect to be notified several months in advance of a potential sale.
Both the sponsor and your Anchor1031 representative will proactively reach out to ensure you are well-prepared, avoiding any last-minute stress often associated with a 1031 exchange. We'll guide you through preparing for another 1031 exchange, should you choose to defer your capital gains taxes again.
Advance Planning Benefits
- • No Rush Decisions: Months to evaluate your options and plan your strategy
- • Market Research: Time to research available DST properties or direct investment opportunities
- • Professional Consultation: Opportunity to meet with CPAs, advisors, and estate planners
- • Strategy Optimization: Align exit strategy with overall financial and tax planning goals
Your Options When a DST Sells
When your DST investment goes full-cycle, you have several strategic exit options:
1031 Exchange into Another DST
Continue your passive investment strategy and defer capital gains taxes by exchanging into a new Delaware Statutory Trust
Key Benefits:
- • Continued tax deferral
- • Maintain passive investment approach
- • Portfolio diversification opportunities
- • Professional management
1031 Exchange into Your Own Property
Transition back to direct ownership of real estate while still deferring taxes
Key Benefits:
- • Direct control over property
- • Active management opportunities
- • Tax deferral maintained
- • Potential for higher returns
Realize Your Gain
Elect to pay capital gains tax and receive your cash proceeds
Key Benefits:
- • Immediate liquidity
- • No future exchange obligations
- • Simplified tax situation
- • Cash for other investments
Combination Strategy
Strategically combine these options to best suit your financial and investment goals
Key Benefits:
- • Customized approach
- • Risk diversification
- • Tax optimization
- • Flexible allocation
The DST Sale Process
Once a potential sale is announced, Anchor1031 will keep you informed at every stage of the DST sale process. Here is an example of the process and updates you can expect to receive:
Sale Process Timeline & Updates
Selection of the listing broker and marketing strategy development
The call for best and final offers from potential buyers
Initiation of escrow with the selected buyer
When the earnest money becomes non-refundable and contingencies are lifted
Guidance on electing how to receive your funds and whether you intend to perform another 1031 exchange
Empowering Your Choices at Sale
If you opt to "tax out" and realize your gain, the funds will be deposited directly into your bank account. Should you choose to proceed with another 1031 exchange, you will provide your qualified intermediary's information to the sponsor.
The registered representatives at Anchor1031 are committed to assisting you through each phase, ensuring suitable 1031 exchange options are available on the other side of the sale, aligning with your investment objectives.
This seamless process allows you to remain a passive investor, continue deferring your taxes, and continue to grow your family's wealth.
If You Choose to Exchange Again
- • Review available DST properties that match your criteria
- • Coordinate timing with qualified intermediary
- • Consider portfolio rebalancing opportunities
- • Evaluate new asset classes and geographic markets
If You Choose to Cash Out
- • Funds deposited directly to your bank account
- • Capital gains tax applies to appreciated value
- • Complete liquidity and investment flexibility
- • Opportunity to diversify into other asset classes
The Anchor1031 Advantage
Our team's proactive approach means you'll never be surprised by a sale or rushed into decisions. We maintain relationships with multiple sponsors and continuously monitor the market to ensure suitable investment options are available when you need them.
Frequently Asked Questions
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 Journey
DST Exit Strategies Guide
Complete guide to Delaware Statutory Trust exit strategies including traditional sales and 721 UPREIT conversions.
Building Your 1031 Exchange Team
Complete guide to selecting and vetting your 1031 exchange professionals for long-term success.
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.