We’ll never forget the call we got from Sarah last spring. She’d just sold a rental property in Portland and was staring down a massive capital gains tax bill. “I have 180 days to figure this out,” she said, her voice tight with stress.

“Someone told me about DSTs for my 1031 exchange, but I keep hearing you two talk about syndications. Which one do I choose?”

We hear some version of this question almost weekly. And honestly? It’s one of the most important conversations we have with investors because the answer isn’t one-size-fits-all.

Both Delaware Statutory Trusts (DSTs) and multifamily syndications are powerful tools for building passive income and wealth through real estate—but they serve different purposes and different seasons of your investment journey.

So let’s walk through this together, the same way we did with Sarah. We’ll share what we’ve learned from our own investments and from working with hundreds of investors who’ve chosen one path or the other (or both!).

The Fundamental Difference That Changes Everything

Here’s the thing that matters most: DSTs are specifically designed to qualify for 1031 exchanges, while traditional multifamily syndications are not.

If you’re sitting on a property you need to sell and you’re trying to defer capital gains taxes, a DST might be your answer.

The IRS recognizes your ownership interest in a DST as direct real estate ownership, which means you can roll your proceeds from one property into a DST and keep deferring those taxes—potentially indefinitely if you execute the strategy correctly.

Multifamily syndications, on the other hand, are typically structured as securities. You’re investing in an LLC or LP that owns the property. It’s an incredible wealth-building vehicle, but it doesn’t check the boxes the IRS requires for a 1031 exchange.

That single structural difference ripples through everything else—from how much control you have to how liquid your investment is to what kind of returns you might see.

What Your Investment Journey Actually Looks Like

We always tell people: think beyond just the numbers on a projected returns sheet. Think about your actual experience as an investor.

With a DST: You’re buying into a fully packaged, ready-to-go property. The structure is rigid by design (it has to be for that 1031 qualification). You can’t vote on decisions. You can’t change property management.

The trustee makes every decision, and you’re along for the ride. Your monthly distributions typically start right away since the property is already stabilized, which is beautiful for investors who need that immediate cash flow.

With a multifamily syndication: You have more flexibility in structure. Most syndications give limited partners some voting rights on major decisions—things like selling the property or firing the sponsor.

You’re typically investing in a specific business plan (value-add, ground-up development, stabilized cash flow), and your returns are tied to how well the sponsor executes that plan. You might have a ramp-up period before distributions hit their stride.

The Money Talk: Minimums and Returns

Let’s talk practical numbers, because this is where the rubber meets the road.

As of 2026, most DSTs we’re seeing require minimum investments of $100,000 to $250,000, with the sweet spot around $150,000. Multifamily syndications typically start at $50,000 to $100,000, making them more accessible if you’re earlier in your investing journey.

Both require accredited investor status, which means you need to meet certain income or net worth thresholds. (If you’re not there yet, that’s okay—it just means we need to focus on getting you there first.)

Return profiles tend to differ too. DSTs often project 4-6% annual cash-on-cash returns with more modest appreciation potential, while syndications might target 6-9% cash-on-cash with higher equity upside. But here’s what we always say: projected returns are just projections. We’ve seen both underperform and outperform, which is why sponsor selection matters so much.

The Tax Story Gets Interesting

We love talking tax strategy because this is where sophisticated investors separate themselves from the pack.

If you’re doing a 1031 exchange, the DST’s tax advantages are hard to beat. You’re deferring capital gains, potentially forever if you keep exchanging. Some investors even pass DST interests to heirs who get a stepped-up basis, essentially erasing the tax liability altogether.

But syndications have their own tax magic: depreciation benefits that can offset your other income. Many syndications use cost segregation studies to accelerate depreciation, creating paper losses that shield your distributions from taxes and sometimes even offset your W-2 or business income (if you qualify as a real estate professional or meet other IRS criteria).

Here’s how we think about it: DSTs for capital gains deferral, syndications for ongoing income tax reduction. Sometimes we see investors use both strategically across their portfolio.

The Liquidity Reality Check

We need to be straight with you about this: both DSTs and syndications are illiquid investments.

You’re typically looking at 3-7 year hold periods with very limited options to exit early. DSTs occasionally have secondary markets through sponsors or third-party platforms, but don’t count on them. Syndication interests rarely trade, and even if you find a buyer, you’ll need sponsor approval for the transfer.

This is money you need to be comfortable not touching for years. We tell every investor: only invest capital you won’t need for your lifestyle, emergencies, or other opportunities that might come up.

How to Actually Choose

When Sarah called us back after our conversation, she’d gotten clear on her priorities. She needed the 1031 exchange benefit, she wanted immediate cash flow, and she was comfortable giving up control in exchange for simplicity. A DST was her answer.

But we work with plenty of investors who choose syndications because they want the depreciation benefits, they prefer having some decision-making rights, or they’re building a portfolio from cash rather than exchanging out of property.

Here’s our framework for deciding:

• Choose a DST if: You need a 1031 exchange solution, you want immediate distributions, you prefer completely passive ownership, and you’re comfortable with zero control
• Choose a syndication if: You’re investing cash (not exchanging), you want depreciation benefits for tax strategy, you value having voting rights on major decisions, and you’re willing to potentially wait longer for the investment to mature

And honestly? Many sophisticated investors end up using both. We certainly do. They’re tools in your wealth-building toolkit, each with their own purpose.

Frequently Asked Questions

Can I use my retirement account to invest in DSTs or syndications?

Yes, you can use a self-directed IRA to invest in both DSTs and multifamily syndications, though you’ll need a custodian who’s experienced with alternative investments. If you have a 401(k), you’ll typically need to roll it over to an IRA first.

But here’s something important we always point out: if you’re using IRA funds for a DST, you’re losing the 1031 exchange benefit since retirement accounts are already tax-deferred. That often makes syndications more attractive for retirement funds since you’re not giving up any tax advantages.

What happens if the sponsor or trustee doesn’t perform well?

This is why we’re so intense about sponsor due diligence. With a DST, you have essentially no recourse—the trustee makes all decisions including whether to sell or restructure, and you have no voting rights. With a syndication, you typically have more protection through the operating agreement, which might include provisions for removing the sponsor or voting on major decisions. In both cases, you’re really betting on the management team’s capabilities and integrity, which is why we spend so much time evaluating track records, alignment of interests, and communication practices before we invest.

How long will my money be locked up?

Plan for 3-7 years in both cases, and honestly, assume you won’t be able to access your capital until the sponsor executes the planned exit strategy through a sale or refinancing. We’ve seen some DSTs offer secondary markets, but they’re not guaranteed and often come with discounts if you need to sell.

Syndication interests are even harder to transfer—you’d need to find a buyer and get sponsor approval. This is why we always say: only invest money you can truly afford to set aside for the long term.

Which investment offers better returns?

We wish there was a simple answer here, but it really depends on the specific deal and sponsor. Generally, DSTs offer more conservative projected returns—think 4-6% cash-on-cash with moderate appreciation—because they’re stabilized properties. Syndications might project 6-9% annually with higher equity upside, especially on value-add deals.

But we’ve seen both exceed and fall short of projections. The “better” return is the one that actually materializes, which is why we focus so much on sponsor quality, market fundamentals, and conservative underwriting rather than chasing the highest projected numbers.

Do I need to be an accredited investor for both?

Yes, both DSTs and most multifamily syndications require accredited investor status. That means you need either $200,000 in annual income ($300,000 with your spouse) for the past two years with expectation of the same this year, or $1 million in net worth excluding your primary residence.

Some syndications might accept sophisticated investors under certain exemptions, but it’s less common. If you’re not accredited yet, focus on building your income or net worth first—these opportunities will still be here when you qualify.