Chapter 8
DST Portfolio Diversification
How Delaware Statutory Trusts Support Portfolio Diversification.
Many investors who have built wealth through real estate eventually reach a point where concentration risk becomes a concern. Owning one or two large properties can expose a significant portion of their net worth to a single asset, location, tenant, or market. Delaware Statutory Trusts (DSTs) offer a practical way to diversify while maintaining tax deferral through a 1031 exchange.
Reducing Single-Asset Risk
When an investor sells a property and reinvests the proceeds into multiple DSTs, they spread their capital across different properties, sponsors, and asset classes. This reduces the impact that any single vacancy, repair, or local market downturn can have on their overall portfolio.
Diversification Across Asset Classes
DSTs are available in a wide range of property types, including:
- Multifamily communities
- Industrial and logistics properties
- Self-storage facilities
- Built-to-rent housing
- Student housing
- Net-lease and necessity retail properties
- Senior housing
This variety allows investors to build a more balanced portfolio rather than remaining concentrated in one sector (such as residential rentals).
Geographic Diversification
Direct ownership often limits investors to properties in familiar markets. DSTs frequently own assets across multiple states and regions. By allocating amongst several DSTs, investors can gain exposure to different economic drivers and reduce reliance on any single local economy.
Tenant Diversification
Investing in multiple DSTs can also diversify tenant risk. Instead of depending on one or two tenants, investors gain exposure to dozens or even hundreds of tenants across different properties and industries.
Practical Approach to Diversification
At 1031 DST Solution, presented by Corcapa 1031 Advisors, we generally recommend that investors consider allocating their exchange proceeds across multiple DSTs rather than concentrating the equity in a single offering. A well-diversified DST portfolio typically includes:
- Different asset classes
- Multiple sponsors
- Varying levels of leverage (when appropriate)
- Properties in different geographic markets
While diversification does not eliminate risk, it can meaningfully reduce the volatility and concentration risk that often comes with direct ownership of individual properties. The portfolio can also benefit from taking advantage of multiple growth markets. We can adjust the DST selections to suit the investor’s individual goals.
If you would like help designing a diversified DST portfolio aligned with your 1031 exchange goals, schedule a consultation or a brief call today by calling (949) 722-1031.
This content is educational and is not tax or legal advice. Please consult your CPA and attorney.
This content is educational and is not tax or legal advice. Please consult your CPA and attorney.
Request Current 1031 Exchange Property Listings
Browse replacement property offerings for your 1031 exchange.
Register
Prospective clients can register to receive current 1031 exchange property listings.
Browse Properties
Once approved, you can login anytime and view current 1031 DST investment properties.
1031 Advisor Guidance
Our qualified team will provide guidance and make recommendations based on your goals.