Why DSTs Are Gaining Popularity With Retiring Landlords

Owning and managing rental properties can be a rewarding investment—but for landlords nearing retirement, the late-night maintenance calls and tenant turnover can quickly lose their appeal. Many find themselves asking the same question:

"How can I maintain my income without dealing with the headaches of active property management?"

Enter the Delaware Statutory Trust (DST)—a unique, IRS-approved investment structure designed to simplify real estate ownership while providing passive income. DSTs are rapidly becoming the go-to solution for retiring landlords who want to enjoy the benefits of real estate investing without the daily grind.

Here’s why DSTs are surging in popularity and how they offer a seamless pathway from hands-on management to hands-free income.

Passive Income Without Property Headaches

Owning real estate directly is no small feat. From late-night calls about leaking roofs to chasing down rent checks, managing rental properties is a full-time job.

With a DST, all those responsibilities are handled for you by a professional sponsor. This means you still receive regular income (similar to rent payments) but are free from management burdens like lease renewals, maintenance, and tenant disputes.

Key Benefits of DST Passive Income

• Hands-Free Ownership: No maintenance calls, no tenant issues, no property repairs.

• Professional Management: Sponsors handle all operational and financial management.

• Consistent Cash Flow: Receive monthly or quarterly distributions like clockwork.

For landlords transitioning into retirement, this shift is life-changing. It’s not just about preserving income; it’s about reclaiming your time and peace of mind.

1031 Exchange Perks Without Capital Gains Tax

One of the biggest hurdles to selling rental property is the tax burden. Selling a highly appreciated property can trigger significant capital gains taxes and depreciation recapture. For long-time landlords, this tax bill can feel insurmountable.

Fortunately, DSTs are fully 1031 exchange-compliant, meaning they qualify as "like-kind" real estate under IRS rules. This allows landlords to defer capital gains taxes indefinitely by transitioning their property into a DST.

Why DSTs Shine in 1031 Exchanges

• Tax Deferral: Defer capital gains, depreciation recapture, and avoid Net Investment Income Tax (NIIT).

• Portfolio Flexibility: Exchange your property into shared ownership of diversified, high-quality assets.

• No Additional Management: Transition directly into passive income with no new property to oversee.

DSTs deliver the perfect trifecta for landlords retiring from active property ownership: seamless 1031 exchanges, substantial tax deferral, and a hands-free ownership structure.

Diversification Without the Burden of Scaling Alone

For property investors, diversification is a key strategy to reduce risk. But if you’re managing properties alone, scaling your portfolio to include multiple asset types and locations can feel impossible.

DSTs solve this challenge by pooling investor funds to acquire institutional-grade properties, such as Amazon fulfillment centers, Tesla service centers, and premium multifamily housing. Each investor owns fractional shares of these assets, creating a well-diversified portfolio.

How DSTs Empower Diversification

• Access to Premium Assets: Invest in commercial properties typically out of reach for individual owners.

• Geographical and Asset Variety: Spread risk across markets, property types, and tenant sectors.

• Strategy Without Scaling Stress: Enjoy the benefits of a multi-property portfolio without operational demands.

By diversifying through a DST, you’re not just spreading risk—you’re accessing the same high-quality investments as institutional players.

Seamless Estate Planning

Managing inheritance for rental properties can create family tensions. Who should oversee the property? How do you divide a physical asset among multiple heirs? What if one heir wants to sell, but another doesn’t?

DSTs simplify this process. Instead of handing down a physical property, you pass ownership of DST interests to your beneficiaries. These fractional interests are easy to split and require no management on their part.

Estate Planning Made Easy with DSTs

• Equitable Asset Transfer: Divide DST interests easily among heirs.

• Step-Up in Basis Benefits: Deferred capital gains taxes are often eliminated for heirs under the stepped-up basis rules.

• No Management Obligations: Heirs can benefit from passive income without property oversight.

For landlords planning legacy wealth, DSTs represent both a practical and tax-efficient solution.

A Pathway to REITs for Added Liquidity

For landlords craving even more flexibility, some DSTs are designed as transitional vehicles into Real Estate Investment Trusts (REITs) through a 721 exchange, also known as an UPREIT.

This transition allows you to convert your DST shares into Operating Partnership (OP) units in a publicly traded REIT, providing ongoing income plus the added benefit of liquidity.

Advantages of the REIT Conversion Option

• Liquidity on Demand: REIT shares can be sold at any time on the public market.

• Tax Deferral Maintained: Cashing out is optional, so you can continue deferring taxes for as long as you wish.

• Diversified Real Estate Exposure: Expand your portfolio across multiple property sectors and geographies.

This optional pathway gives retiring landlords greater control over their investment strategy, with the opportunity to secure both stability and agility.

A Lifestyle Upgrade in Retirement

Retirement isn’t just about financial security—it’s about finally getting to live life on your own terms. DSTs offer an appealing blend of financial benefits and lifestyle improvements that make them a perfect fit for retiring landlords.

What Retiring Landlords Gain with DSTs

• Freedom From Management: No more late-night tenant complaints or operational headaches.

• Predictable Income: Steady and reliable cash flow through regular distributions.

• Professional Oversight: Your investment is managed by seasoned real estate professionals.

• Peace of Mind: Transition out of the landlord role without sacrificing financial independence.

For many retiring property owners, DSTs aren’t just a financial strategy—they’re the gateway to a better quality of life.

Discover If a DST Is Right for You

If you’re a landlord nearing retirement and want to preserve your income without daily management headaches, a Delaware Statutory Trust may be the ideal solution. With benefits ranging from tax deferral to hands-free ownership, DSTs empower landlords to step away from active property management without stepping away from the financial rewards.

At Medalist REIT, we specialize in 1031 exchange solutions tailored for retiring landlords. Our experts will help you explore DST options that align with your financial goals, estate planning needs, and desire for simplicity.

Contact us today at solution@medalistreit.com for a no-pressure strategy call and take the first step toward reclaiming your freedom.

Start your next chapter stress-free—with income, security, and the time to finally enjoy your retirement.