DSTs 101: Passive Income Without Landlord Headaches

So, What’s a DST?

A Delaware Statutory Trust (DST) is kind of like a real estate co-op for investors. Instead of buying and managing your own building, you team up with other investors to own a piece of a bigger, professionally managed property—like a medical center, apartment complex, or storage facility.

A company called a “sponsor” buys and manages the property. You just invest and collect monthly income—without lifting a finger to fix a toilet or chase down rent.

Why Oʻahu Property Owners Are Paying Attention

If you’re a Hawai‘i real estate investor who’s ready to stop being a landlord but still wants regular income, a DST might be the perfect middle ground.

Here’s what makes them appealing:

• Zero landlord duties – Seriously. No repairs, no tenants, no calls at midnight.

• You stay in real estate – You’re still an owner, just passively this time.

• Diversify your risk – Invest outside Hawai‘i in sectors like healthcare or logistics.

• 1031 exchange-friendly – DSTs qualify as “like-kind” property, so you can defer capital gains taxes when you sell a property and reinvest.

  
  

A Real-Life Example

Let’s say someone sells their Waikīkī condo for $1.2 million. After paying off the mortgage and closing costs, they have $900,000 to reinvest in a 1031 Exchange.

Instead of buying another rental on-island, they decide to spread that money into two DSTs:

• $500K into a medical office DST in Arizona

• $400K into an industrial warehouse DST in Texas

Now, they get monthly income from both—without managing anything. They still live in Hawai‘i, but their real estate is working for them nationwide.

Important Rules and Things to Know

DSTs are great for many investors—but they’re not a fit for everyone. Here are a few key points to keep in mind:

1031 Eligible

Thanks to IRS Revenue Ruling 2004-86, most DSTs qualify for 1031 exchanges. That means you can sell a rental, reinvest in a DST, and defer capital gains taxes.

No decision-making

Once you invest, the sponsor calls the shots. You don’t get to weigh in on how the property is run.

There are fees

Sponsors charge fees for acquiring, managing, and eventually selling the property. These are built into the deal, so always read the fine print.

Not liquid

DSTs are long-term plays—usually held for 5–10 years. You can’t just sell your share whenever you want.

Sponsor quality matters

Do your homework. You’re relying on the sponsor’s ability to manage the property and pay out income. Choose a company with a strong track record. We are here to connect you with our experienced wealth managers who only deal with the best sponsors with the highest gains.

Quick Recap: Why Investors Like DSTs

Benefit	What It Means for You
Passive income	Regular monthly or quarterly payments—without the stress
Tax-deferred growth	Use a 1031 exchange to avoid paying capital gains taxes (for now)
Diversification	Spread your investments across locations and property types
Hassle-free ownership	Let professionals handle the work while you enjoy your life
Great for estate planning	Shares can be passed to heirs easily, often with a step-up in basis

Who Should (and Shouldn't) Consider a DST

A DST could be a great fit if:

• You're tired of managing rentals

• You’re selling a property and want to defer taxes

• You want steady income and long-term investment growth

• You want to keep investing—but without the hands-on work

• You want to be able to donated a property without having to pay all the taxes

It might not be a good fit if:

• You need quick access to your money

• You want control over management decisions

• You’re not comfortable with long-term commitments or sponsor risk

Ready to Explore DSTs?

Selling a property in Hawai‘i? Thinking about a 1031 exchange? We can walk you through the DST process, connect you with experienced sponsors, and help you find options that match your income and lifestyle goals.

Contact us to schedule a free consultation or get a personalized DST overview.