The short answer
You cannot choose the date. In our cash out DSTs the property may be refinanced after a defined period, at which point investors can receive 80 to 90% of their exchange value as cash; that period is set by the offering, not requested by you after closing. Nothing in the Code or regulations names a safe waiting time. What the rules do fix is the outer frame: no access to exchange money before the exchange ends, a trustee who cannot refinance on its own initiative under Rev. Rul. 2004-86, and a step-transaction doctrine that treats a refinance built into the exchange as part of it. Read the refinance terms in the memorandum before you identify the trust.
At a glance
| Who sets the date | The offering documents, as a defined period after closing |
|---|---|
| Cash available | 80 to 90% of your exchange value, as our offering description states |
| Statutory waiting period | None in the Code or regulations |
| During the exchange | No right to receive, pledge or borrow exchange funds before it ends |
| Trustee limit | A DST trustee cannot refinance the acquisition loan on its own |
| Loan proceeds | Not income, because they must be repaid |
| Main risk | A refinance integrated with the exchange can be treated as boot |
The refinance follows a period fixed in the offering, not a request you make
Our cash out DSTs are zero cash flow trusts: all operating income services and amortizes a non-recourse loan, so there are no distributions. Our description of the sequence is that after the exchange closes and the structure is in place, the property may be refinanced after a defined period, and that refinance lets investors take out a large share of their original equity, often 80 to 90%, without tax.
The defined period is part of the offering you subscribe to. It is not a date you pick after closing, and it is not the same for every trust. Ask for it, in writing, from the memorandum and loan documents before you place the trust on your 45-day list.
That fixed sequence is also what lets the structure serve as a way to sell today and buy later: the exchange is complete when the trust closes, and the liquidity comes afterward.
Rev. Rul. 2004-86 is why the refinance has to be planned at the start
The ruling lists the powers a DST trustee may not hold if the trust is to stay a grantor trust whose interests count as real property. One of them is the power to "renegotiate or refinance the obligation used to purchase" the property; a trustee with that power makes the trust a business entity taxed as a partnership.
So a refinance cannot be an improvised decision years later. It has to follow a path the offering documents set out on day one, which may involve the trust converting under a springing LLC provision. A conversion changes what you own, from a trust interest to a partnership interest, and affects your next exchange.
Our seven deadly sins page lists every trustee limit; the refinance clause is the one to read most carefully in a cash out offering.
Loan proceeds are not income, unless the loan is really part of the exchange
The Supreme Court in Commissioner v. Tufts explained that because a borrower must repay, "the loan proceeds do not qualify as income to the taxpayer." That is the basis for describing a refinance as tax-free.
The limit is the step-transaction doctrine. In Commissioner v. Clark the Court described it this way: "interrelated yet formally distinct steps in an integrated transaction may not be considered independently of the overall transaction." A refinance that is in substance a way of handing you exchange value as cash at the closing risks being treated as boot under section 1031(b).
During the exchange itself the answer is absolute. Reg. section 1.1031(k)-1(g)(6) requires the intermediary agreement to deny you any right "to receive, pledge, borrow, or otherwise obtain the benefits of money or other property before the end of the exchange period."
Hypothetical: a $500,000 position from sale to refinance
Round numbers, hypothetical. Your sale closes on day 0 and $500,000 reaches the intermediary. You identify a cash out DST by day 45 and the trust closes well inside 180 days, completing the exchange.
Nothing more happens until the defined period in the offering has run. When the refinance occurs, 80 to 90% of your exchange value would be $400,000 to $450,000 of cash. You owe no tax on receiving loan proceeds, but the larger loan now sits against your share of the property, the deferred gain is unchanged, and the debt will count against you at the next sale or exchange.
Whether the refinance cash is taxable in your specific case, and how it is reported, depends on the offering's mechanics. Run your own numbers with your CPA and ask for the tax opinion that covers the refinance.
What to confirm before you identify the trust
The general refinancing principles, and the facts that separate a refinance from the exchange, are in our refinance timing guide. For a cash out DST, these are the specific items to pin down.
- The defined period before the refinance, and any conditions such as lender approval or property value.
- Who decides whether the refinance happens, and whether any investor can opt out.
- Whether the trust converts to an LLC to refinance, and what that does to your future exchanges.
- The expected range of proceeds and how they are distributed to investors.
- The tax opinion or disclosure covering the refinance, for your CPA to review.
Related questions
Can I refinance my own share of the DST?
No. You do not own the loan or hold title; the trust does. Your interest also cannot be pledged freely; see pledging a DST as collateral for what lenders will and will not accept.
Is there a safe number of months to wait?
No statute, regulation or ruling sets one. The less the refinance depends on the exchange, and the more time and independent business reasons separate them, the harder it is to treat the two as one transaction.
Can the cash come to me at the DST closing?
No. Cash at the closing of your replacement is boot. The refinance is a later event under the offering's terms, after your exchange is complete.
Does the refinance restart any 1031 clock?
No. Your exchange ended when you received the replacement property. A later refinance is a financing event, not a sale or exchange.
What if the property value falls before the refinance?
Lenders size loans on value and rent, so a lower value can mean less cash or no refinance. The 80 to 90% figure describes the design, not a guarantee.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.