Risks Associated with a DST

This disclosure is required on all DST offerings

“The risks of investing in a DST include but are not limited to: the risk of relying upon the program sponsor and their continued competency and success; the risk of sponsor insolvency; and the risks associated with giving complete discretion regarding the management, leasing or disposition of the property to a third party. If the property held by the DST is leveraged, there is the risk of being unable to re-finance the program at the end of the term of said loan. Also, there is the risk of possible conflicts of interest with program sponsors, trustees, or property managers.

*All real estate and DST investments carry the risk of a complete loss of invested capital and that returns/cash flow/appreciation/distributions after appreciation are not guaranteed and could be lower than anticipated. The Sponsor may potentially utilize equity or financing in the form of a bridge loan, first mortgage, preferred equity or mezzanine financing regarding the acquisition of the Property. This poses a level of risk to investors if the Sponsor was unable to raise the entire offering amount and retire the equity or financing, including foreclosure and a complete loss of investor capital.

In addition, there are tax-related risks when using a DST ownership structure for the purpose of a 1031 exchange. While DST offerings are designed for this, there is no guarantee that the IRS will approve each individual DST structure or each individual exchange.


Other issues include:

  • Illiquidity (there is currently no secondary market)
  • Tax status risk which may result in immediate tax liabilities, including penalties
  • The fact that substantial fees associated with the purchase of the investment may, in certain cases, outweigh the tax benefits
  • The significant tax risks for acquiring interests as replacement property
  • The risks of using leverage in real estate
    The investment is speculative and involves a high degree of risk
  • The risks associated with fractionalized ownership in real estate and investment contracts as securities
  • Property appreciation is not guaranteed
  • The potential for loss of principal invested; and
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