The short answer
Buying into a DST takes seven steps: sign with a qualified intermediary before your sale closes, complete the broker-dealer's suitability review and accredited investor verification, identify the trusts in writing by day 45, sign the sponsor's purchase agreement, have the intermediary wire the funds, and receive the sponsor's acceptance and its entry of your percentage in the ownership records by day 180. You sign no loan documents, because the trust is the borrower. Your first distribution follows on the schedule in the trust agreement, monthly or quarterly, after fees and reserves.
At a glance
| Before the sale closes | Exchange agreement with a qualified intermediary that bars you from touching the money |
|---|---|
| Identification | Signed writing sent before day 45 ends, naming each trust unambiguously |
| Accreditation proof | Rule 506(c) offerings verify it, for example with a professional's letter dated within three months |
| When you own it | When the sponsor records your percentage in the trust's ownership records |
| Deadline to receive | Day 180 or your return due date for the year of sale, whichever is earlier |
| Loan documents | None for you; the trust is the borrower and the loan is nonrecourse to owners |
| Distributions | Monthly or quarterly per the trust agreement, after fees and reserves |
Steps one and two happen before your sale closes: the intermediary agreement and the suitability file
Step one is the exchange agreement. Under Reg. section 1.1031(k)-1(g)(6) the qualified intermediary safe harbor works only if the agreement says you have no right to receive, pledge or borrow the money before the exchange ends, except after day 45 if nothing was identified or once you have received everything identified. Sign it before closing so the buyer's money goes to the intermediary, not to you; see do I need a QI to exchange into a DST.
Step two is the broker-dealer's file. Most DSTs are sold only to accredited investors, and in a Rule 506(c) offering the sponsor must take reasonable steps to verify your status, for example by reviewing two years of IRS forms for the income test, statements dated within the prior three months for net worth, or a letter from a broker-dealer, registered adviser, attorney or CPA who verified you within three months. Under Regulation Best Interest the recommending firm also builds your investment profile. Start both early: proof of accreditation is often the slowest document.
Step three is the 45-day identification, and a DST is identified by its name
Reg. section 1.1031(k)-1(c) requires a written document signed by you and sent before the end of the 45-day period to the intermediary or another person involved in the exchange who is not your agent or relative. The property must be unambiguously described, and real property may be described by legal description, street address or a distinguishable name, so the trust's full legal name works. You may name any three properties, or more if their total value stays within 200% of what you sold.
Anything you actually receive before day 45 counts as identified automatically. How to word the notice, and what happens if a named trust fills, is covered at how to identify replacement property and how many properties to identify.
Steps four and five are the subscription and the intermediary's wire
Step four is signing the sponsor's purchase agreement. In a filed DST trust agreement, signing the purchase agreement is what binds you to the trust agreement, the manager must give you a copy of the trust agreement at or before the time you become an owner, and you represent that you are not buying with a view to resale and understand the transfer restrictions. The same agreement sets your dollar amount and percentage share. This is where you also give the bank account for distributions.
Step five is the wire. You instruct the intermediary to send the exchange funds directly to the sponsor or its escrow, in the exact amount on the purchase agreement. Because nothing is being underwritten, there is no inspection or appraisal period; the trust bought, financed and leased the property before the offering opened, which is why a DST can close in days once documents are complete; see how quickly a DST can close.
Step six is the sponsor's acceptance, and you own the interest when it is entered in the ownership records
In the filed agreement, investors contribute cash and the trust issues interests to each contributing investor in proportion to their percentage, using the cash to repurchase a matching part of the sponsor affiliate's interest so the trust's size never changes. A transfer occurs only on its entry in the manager's ownership records. That entry is your evidence of receipt, so ask the sponsor to confirm it in writing, and it must happen by day 180 or the due date of your return for the year of sale, whichever is earlier, under section 1031(a)(3).
You do not assume the loan. In Rev. Rul. 2004-86 the trust takes over the note and neither it nor its owners are personally liable, and a lender's DST memo says owners are not typically underwritten unless one holds 25% or more. Your share of the trust's debt still counts when you replace the debt you paid off; see does a DST loan count as replacement debt.
Step seven is the paper trail and the first distribution, whose timing the trust agreement sets
Keep the identification notice, the purchase agreement, the wire confirmation and the sponsor's acceptance. Form 8824 asks for the date of written identification on line 5 and the date you received the replacement property on line 6, per the IRS instructions; with several trusts, see Form 8824 with multiple DSTs.
Distribution timing depends on the document. One filed agreement distributes available cash quarterly; another monthly; a third monthly beginning the month after the trust acquired its property, after fees, reserves and debt service. Your first payment may cover a partial period, and none is assured: distributions depend on rent actually paid. Year-end reporting is covered at DST tax forms and reporting.
Related questions
Can I close on a DST before day 45?
Yes. Under the regulation, replacement property received before the end of the identification period is treated as identified, so a fast closing doubles as identification.
Do I get a settlement statement like a normal real estate closing?
Not for the DST purchase itself, since no deed passes to you. Your records are the intermediary's accounting of the exchange funds, the signed purchase agreement and the sponsor's confirmation of your percentage.
Do I sign the trust's loan documents?
No. The trust is the borrower; individual owners below the lender's 25% threshold are typically not underwritten.
What if the offering fills after I identify it?
An identification does not reserve an allocation. Name backups within the three-property or 200% limits so you can still buy something you identified.
Can I take some cash out at closing?
Any money released to you is boot and taxable. If you need cash, decide before the wire how much to take, and confirm the tax with your CPA.
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.
- Treas. Reg. section 1.1031(k)-1, deferred exchanges
- 26 U.S.C. section 1031
- 17 CFR 230.506, Rule 506 of Regulation D
- 17 CFR 240.15l-1, Regulation Best Interest
- Form of DST trust agreement, exhibit 10.21 to a non-traded REIT Form 10-K (2020), SEC EDGAR
- Form of amended and restated DST trust agreement, exhibit 10.1 to a non-traded REIT filing (2019), SEC EDGAR
- Second amended and restated DST trust agreement, exhibit 10.2 to a non-traded REIT Form 8-K (November 2021), SEC EDGAR
- Rev. Rul. 2004-86 (IRS)
- Freddie Mac Multifamily, Legal FYI: Delaware Statutory Trusts (August 2014)
- IRS, Instructions for Form 8824