Defer capital gains, keep monthly income, stop dealing with tenants. The DST is the cleanest exit ramp for Miami investors over 50.
Key Takeaways
- A Delaware Statutory Trust (DST) lets a Miami investor sell appreciated rental property, defer 100% of capital gains via a 1031 exchange, and receive passive monthly income with zero landlord responsibilities.
- DST minimum investments typically start at $100K, but most Miami exits I see involve $1M–$8M in trapped equity from properties bought 15–25 years ago.
- The catch: DST shares are illiquid (typically 5–10 year holds) and you give up direct property control — but for sellers ready to exit active landlord life, the trade is often clearly worth it.
Every Miami real estate investor I work with eventually hits the same wall.
They've owned the Coral Way duplex, the Doral fourplex, or the Edgewater small condo building for 18 years. The cash flow is fine. The mortgage is mostly gone. The property is worth four times what they paid. And they are exhausted. Tired of midnight calls about broken AC. Tired of evictions. Tired of the contractors who don't show up. Tired of being a landlord.
But they can't sell — because the moment they do, they hand a quarter-million to a million dollars in deferred capital gains and recapture tax to the IRS.
That is the problem the Delaware Statutory Trust solves. It is, for the right Miami investor, the cleanest exit ramp in the entire U.S. tax code. And it's having a moment in 2026.
What a DST Actually Is
A Delaware Statutory Trust is a legal entity that holds title to one or more large institutional-grade investment properties — typically Class A apartment buildings, grocery-anchored retail centers, industrial distribution facilities, or medical office portfolios across the country. The trust is structured so that each investor in the DST is treated, for IRS purposes, as owning a direct beneficial interest in the underlying real estate — which is the magic word, because the IRS allows that interest to qualify as "like-kind" property for a 1031 exchange.
In practical terms: you sell your Miami rental, the proceeds go to a qualified intermediary, you identify and close on a DST interest within the IRS 1031 timelines (45 days to identify, 180 days to close), and your capital gains and depreciation recapture are deferred — exactly as if you had bought another building yourself. Except now you don't own the building. The trust does. You own a passive beneficial interest, and you receive monthly or quarterly distributions like a rent check, without ever speaking to a tenant again.
I covered the core mechanics of a standard 1031 exchange in "Depreciation and 1031 Exchanges: The Miami Real Estate Tax Strategy Your CPA Hasn't Fully Explained." The DST is the next chapter — for owners who want the tax benefits of the exchange but are done with operating.
Why DSTs Are Surging Among Miami Sellers Right Now
Three things are converging in 2026 to make DSTs the most-discussed exit strategy I see at the table.
First, the demographic wave. A generation of Miami investors who bought rental properties between 2000 and 2010 are now in their early-to-mid 60s. They're past the active-management phase of their life. They want passive income and freedom from operations. The numbers on their actual properties make full exits prohibitive without a 1031 — but they don't want to take on more direct real estate.
Second, the Florida insurance and assessment environment. Anyone holding a Miami condo or small multifamily building has watched insurance double or triple since 2022. Special assessments from the Florida condo reserve law have created chaos for landlords. Many owners are looking at a rental that used to clear $4,000 a month and now barely breaks even after insurance, taxes, and a $90,000 special assessment hitting next year. They want out — but not at the cost of writing a tax check that wipes out the gain.
Third, the broader cooling. With Miami's market splitting (luxury condo glut, commercial rents at record highs — see "Miami Office Rents Just Crossed $200/SqFt") many owners see this as the window to sell appreciated rentals before any further softening in 2027–2028.
What the Math Looks Like on a Real Miami Exit
Let me show you a typical case. A client owns a Brickell duplex bought in 2003 for $410,000. Today it's worth $1.65M. After mortgage payoff, they net roughly $1.45M in proceeds. Their original basis after 22 years of depreciation is around $260,000. Total taxable gain plus depreciation recapture: approximately $1.39M.
If they sell outright in Florida: Federal long-term capital gains (assume 20% bracket): $208,000 Depreciation recapture (taxed at 25%): roughly $100,000 Net Investment Income Tax (3.8%): $52,000 Total IRS check: approximately $360,000
Net to client after taxes: roughly $1.09M.
Now the DST version. Same sale, same $1.45M of proceeds. All $1.45M rolls into a DST portfolio of, say, three Class A multifamily properties in Texas, North Carolina, and Arizona, plus an institutional-grade Walmart-anchored retail property in the Midwest. Annual cash distribution: typically 4.5%–5.5% of equity, paid monthly. On $1.45M, that's roughly $65,000–$80,000 a year of passive income — no tenants, no calls, no contractors.
And critically: when the client eventually passes the DST interest to heirs, the basis steps up to fair market value at death. The deferred gain is permanently extinguished. This is called the "swap til you drop" strategy, and it is one of the most powerful estate-planning structures in U.S. tax law.
The Real Risks Nobody Should Skip Past
I would be doing you a disservice if I sold you the dream without the discipline. DSTs have real risks.
Illiquidity. Once you're in, you're in. Most DSTs target a 5–10 year hold before the sponsor sells the underlying properties and returns capital (which then becomes another taxable event unless you 1031 again). You cannot sell your interest the way you'd sell a condo. If you may need access to the principal, this is the wrong structure.
Sponsor risk. The quality of the sponsor (the company that puts the DST together and manages the underlying property) matters enormously. There are excellent institutional-grade DST sponsors with 25-year track records. There are also marginal sponsors. Vet hard — track record, AUM, deal pipeline, audited financials.
No control. You do not vote on property management decisions. You do not approve refinances. The sponsor runs the property. If you are the kind of investor who needs control, you will hate this.
Fees. DSTs carry meaningful upfront fees — typically 7–10% of equity all-in (placement, acquisition, financing, organizational). That's real money. The math still works for most exits I see, but you need to understand it.
Limited upside. DSTs are structured for predictable income, not for outsized appreciation. Don't go in expecting to triple your money.
Who DSTs Are Wrong For
Anyone under 50 who still wants to actively grow a portfolio. Anyone who may need liquidity in the next 7 years. Anyone with under $200K in total exchange value (the math typically doesn't work below that). Anyone who actually enjoys being a landlord. Anyone who wants direct control.
For everyone else over 55 sitting on a paid-down Miami rental with seven figures of trapped equity — this is one of the most efficient retirement structures the U.S. tax code permits.
Miami Market Snapshot — June 2026:
- Estimated Miami-Dade rental owners 60+ with 15+ years of holding: over 31,000 individual owners
- Median Miami small-multifamily (2–4 unit) appreciation since 2005: roughly 280%
- Active 1031 intermediary volume in South Florida YTD 2026: up 41% vs same period 2025
- Typical Florida 1031-eligible exit window (45-day identification): 92% of DST identifications happen in the final 14 days — start early
Frequently Asked Questions
Q: Can I do a DST exchange from a Miami primary residence? A: No. A 1031 exchange — including any DST structure — only works for investment or business-use property. A primary residence does not qualify. However, if you've converted a former primary residence into a rental and held it as such for at least 2 years (ideally longer), you can 1031 the rental portion. Talk to a tax attorney before assuming.
Q: How much do I need to start a DST exchange in 2026? A: Most institutional DST sponsors set a $100K minimum investment per offering. In practice, the Miami exits where the math truly works tend to involve $500K–$8M in proceeds, because the structure is most efficient when you can diversify across multiple DST offerings rather than concentrating in one.
Q: What happens when the DST eventually sells the underlying property? A: When the sponsor exits the underlying real estate (typically year 5–10), each investor receives their pro-rata share of proceeds. That triggers a taxable event — unless you immediately 1031 the proceeds into a new DST or qualifying property. Many investors stack 1031s over decades and ultimately pass the position to heirs with a stepped-up basis.
Q: Are DSTs SEC-regulated, and how do I find a reputable sponsor? A: DSTs are sold as private placement securities under Regulation D and require an SEC-registered broker-dealer or RIA to facilitate. Always work with a 1031 specialist who is an active securities professional, not just a real estate agent. I work with vetted DST advisors I trust and can introduce you when the time is right.
When you're ready to exit active landlord life without giving the IRS a million-dollar tip, let's talk. Partnership Realty / Partnership Realty Inc / +1 (561) 629-0358 / carloscabalerealtor.com
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Content Team · Partnership Realty Inc
+1 (305) 340-6251 · partnershiprealtyinc.com