Investor Guide
Accredited Investor Requirements for DST Investments
Delaware Statutory Trust investments are often offered through private securities offerings, which means investor eligibility can be different from purchasing conventional real estate or publicly traded investments.
One term investors frequently encounter is accredited investor.
Accredited investor status is a federal securities classification based on specific financial, professional, or other qualifying criteria. For many DST offerings, meeting these requirements can determine whether an investor is eligible to participate.
This guide explains the current accredited investor requirements, how qualification may be verified, and why accredited status matters when considering a DST as part of a 1031 exchange or broader real estate investment strategy.
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01
Why Accredited Investor Status Matters for DST Investments
Many Delaware Statutory Trust offerings are structured as private securities offerings.
Depending on the exemption used and the terms of the specific offering, participation may be limited to accredited investors.
For someone evaluating a DST as potential 1031 replacement property, two separate questions therefore need to be considered:
These are not the same thing.
Being eligible to purchase a DST interest does not automatically mean the investment is suitable for you. Likewise, qualifying for a 1031 exchange does not automatically make you an accredited investor.
Depending on the exemption used and the terms of the specific offering, participation may be limited to accredited investors.
For someone evaluating a DST as potential 1031 replacement property, two separate questions therefore need to be considered:
- Does the investor meet the requirements to participate in the DST offering?
- Does the DST and the exchange satisfy the applicable requirements for the intended 1031 treatment?
These are not the same thing.
Being eligible to purchase a DST interest does not automatically mean the investment is suitable for you. Likewise, qualifying for a 1031 exchange does not automatically make you an accredited investor.
02
What Is an Accredited Investor?
An accredited investor is an individual or entity that meets one or more criteria established under federal securities regulations.
Accredited investor status is commonly relevant to private investments that rely on exemptions from SEC registration.
Individuals can qualify based on:
Entities can qualify under separate financial, ownership, or institutional criteria.
Accredited status is fundamentally an eligibility classification. It does not mean that the SEC has reviewed or approved the investor, the DST, or any other private investment.
Accredited investor status is commonly relevant to private investments that rely on exemptions from SEC registration.
Individuals can qualify based on:
- Net worth
- Income
- Certain professional securities credentials
- Certain other qualifying relationships or circumstances
Entities can qualify under separate financial, ownership, or institutional criteria.
Accredited status is fundamentally an eligibility classification. It does not mean that the SEC has reviewed or approved the investor, the DST, or any other private investment.
03
How Can an Individual Qualify as an Accredited Investor?
There are several ways an individual may qualify.
An individual may qualify with a net worth of more than $1 million, either individually or together with a spouse or spousal equivalent.
The value of the investor's primary residence is excluded from this calculation.
Liabilities associated with the primary residence can also receive special treatment, so the calculation may be more complicated than simply adding assets and subtracting debt.
An individual may also qualify based on income.
The current thresholds include:
Meeting the threshold for only one prior year generally does not satisfy this qualification method.
Certain professional securities credentials can also qualify an individual as an accredited investor.
The recognized licenses currently include:
The qualifying credential must generally be held in good standing.
Other accredited investor categories may also apply in specific circumstances.
Net Worth Requirement
An individual may qualify with a net worth of more than $1 million, either individually or together with a spouse or spousal equivalent.
The value of the investor's primary residence is excluded from this calculation.
Liabilities associated with the primary residence can also receive special treatment, so the calculation may be more complicated than simply adding assets and subtracting debt.
Income Requirement
An individual may also qualify based on income.
The current thresholds include:
- More than $200,000 in individual income in each of the previous two years, with a reasonable expectation of reaching the same level in the current year, or
- More than $300,000 in joint income with a spouse or spousal equivalent in each of the previous two years, with a reasonable expectation of reaching the same level in the current year
Meeting the threshold for only one prior year generally does not satisfy this qualification method.
Professional Credentials
Certain professional securities credentials can also qualify an individual as an accredited investor.
The recognized licenses currently include:
- Series 7
- Series 65
- Series 82
The qualifying credential must generally be held in good standing.
Other accredited investor categories may also apply in specific circumstances.
04
Does My Primary Residence Count Toward the $1 Million Net Worth Requirement?
Generally, no. The value of your primary residence is excluded when calculating net worth for accredited investor purposes.
Mortgage debt associated with the residence also receives specific treatment.
For example, debt secured by the primary residence generally is not counted as a liability up to the home's fair market value. Debt exceeding the property's value can count as a liability, and certain increases in borrowing against the residence shortly before an investment may also affect the calculation.
Investors who are close to the qualification threshold should carefully review the applicable requirements before assuming they qualify.
Mortgage debt associated with the residence also receives specific treatment.
For example, debt secured by the primary residence generally is not counted as a liability up to the home's fair market value. Debt exceeding the property's value can count as a liability, and certain increases in borrowing against the residence shortly before an investment may also affect the calculation.
Investors who are close to the qualification threshold should carefully review the applicable requirements before assuming they qualify.
05
Can an LLC, Trust, Corporation, or Other Entity Qualify?
Yes. Accredited investor status is not limited to individuals.
Depending on the structure and circumstances, entities such as LLCs, corporations, partnerships, trusts, nonprofit organizations, family offices, investment advisers, banks, and other organizations may qualify.
Common qualification methods can include:
Certain qualifying entities with assets exceeding $5 million may meet the accredited investor definition, subject to the applicable requirements.
Certain entities may qualify based on owning more than $5 million in investments.
An entity may also qualify when all of its equity owners are themselves accredited investors.
The applicable rule depends on the type of entity and its particular circumstances.
Depending on the structure and circumstances, entities such as LLCs, corporations, partnerships, trusts, nonprofit organizations, family offices, investment advisers, banks, and other organizations may qualify.
Common qualification methods can include:
More Than $5 Million in Assets
Certain qualifying entities with assets exceeding $5 million may meet the accredited investor definition, subject to the applicable requirements.
More Than $5 Million in Investments
Certain entities may qualify based on owning more than $5 million in investments.
Accredited Equity Owners
An entity may also qualify when all of its equity owners are themselves accredited investors.
The applicable rule depends on the type of entity and its particular circumstances.
06
How Is Accredited Investor Status Verified for a DST Investment?
The verification process can depend on how the DST offering is structured.
In some private offerings, the issuer must have a reasonable belief that the investor is accredited.
In certain offerings conducted under Rule 506(c), the issuer must take reasonable steps to verify accredited investor status.
Verification may involve reviewing documentation such as:
Depending on the circumstances, verification may also be provided by professionals such as a registered broker-dealer, registered investment adviser, licensed attorney, or CPA who has taken reasonable steps to determine that the investor qualifies.
The exact documentation required can vary by offering.
In some private offerings, the issuer must have a reasonable belief that the investor is accredited.
In certain offerings conducted under Rule 506(c), the issuer must take reasonable steps to verify accredited investor status.
Verification may involve reviewing documentation such as:
- Tax forms or income records
- Bank or brokerage statements
- Documentation of qualifying assets
- Information regarding liabilities
- Credit reports
- Written confirmation from certain qualified professionals
Depending on the circumstances, verification may also be provided by professionals such as a registered broker-dealer, registered investment adviser, licensed attorney, or CPA who has taken reasonable steps to determine that the investor qualifies.
The exact documentation required can vary by offering.
07
Is Checking an “Accredited Investor” Box Enough?
Not necessarily. Simply stating that you are accredited may not satisfy the verification requirements applicable to a particular private offering.
Investors considering DSTs should be prepared to provide documentation supporting the qualification method being used if the offering requires verification.
This is one reason eligibility is often addressed early in the process before a specific private investment is pursued further.
Investors considering DSTs should be prepared to provide documentation supporting the qualification method being used if the offering requires verification.
This is one reason eligibility is often addressed early in the process before a specific private investment is pursued further.
08
Accredited Investor Status and DST 1031 Exchanges
DSTs are frequently considered by accredited investors who are completing a 1031 exchange and evaluating alternatives to purchasing another property individually.
However, accredited investor requirements and 1031 exchange requirements operate separately.
These determine whether you may be eligible to participate in a particular private securities offering.
These determine whether the exchange and replacement property satisfy the applicable rules for the intended tax treatment.
Even if both sets of requirements are satisfied, you still need to determine whether the specific DST investment fits your objectives, risk tolerance, liquidity needs, and financial circumstances.
However, accredited investor requirements and 1031 exchange requirements operate separately.
Accredited Investor Requirements
These determine whether you may be eligible to participate in a particular private securities offering.
1031 Exchange Requirements
These determine whether the exchange and replacement property satisfy the applicable rules for the intended tax treatment.
Investment Evaluation
Even if both sets of requirements are satisfied, you still need to determine whether the specific DST investment fits your objectives, risk tolerance, liquidity needs, and financial circumstances.
09
Does Being Accredited Mean a DST Is Appropriate for You?
No. This is one of the most important distinctions for investors to understand.
Qualifying as an accredited investor does not mean:
Accredited investor status determines whether you may have access to certain private investments.
It does not replace investment due diligence or suitability considerations.
Qualifying as an accredited investor does not mean:
- A DST is automatically appropriate for you
- A private investment has been approved by the SEC
- Your principal is protected
- Distributions are guaranteed
- The investment is liquid
- Projected returns will be achieved
- Every DST is appropriate for a 1031 exchange
- You should invest simply because you are eligible
Accredited investor status determines whether you may have access to certain private investments.
It does not replace investment due diligence or suitability considerations.
10
What Should You Evaluate Before Investing in a DST?
Once investor eligibility has been established, the focus should shift to the actual investment.
Important areas to consider may include:
Understand what the DST owns, where the property is located, the type of asset, tenant profile, lease structure, occupancy, and relevant market conditions.
Consider the sponsor's experience, investment approach, management capabilities, and history with similar properties and DST structures.
Understand whether the property uses leverage and how the financing structure may affect the investment.
Review the costs associated with acquiring, structuring, managing, financing, and eventually disposing of the investment.
DST interests are generally intended to be longer-term investments and may be difficult to sell before the underlying property is disposed of.
Understand what assumptions support projected distributions and the circumstances that could cause income to decline or stop.
Review the sponsor's anticipated strategy while recognizing that actual market conditions may affect when and how the property is ultimately sold.
Consider whether the investment aligns with your objectives, time horizon, liquidity needs, real estate exposure, and tolerance for investment risk.
Important areas to consider may include:
The Underlying Real Estate
Understand what the DST owns, where the property is located, the type of asset, tenant profile, lease structure, occupancy, and relevant market conditions.
The Sponsor
Consider the sponsor's experience, investment approach, management capabilities, and history with similar properties and DST structures.
Financing
Understand whether the property uses leverage and how the financing structure may affect the investment.
Fees and Expenses
Review the costs associated with acquiring, structuring, managing, financing, and eventually disposing of the investment.
Liquidity
DST interests are generally intended to be longer-term investments and may be difficult to sell before the underlying property is disposed of.
Distributions
Understand what assumptions support projected distributions and the circumstances that could cause income to decline or stop.
Expected Holding Period and Exit
Review the sponsor's anticipated strategy while recognizing that actual market conditions may affect when and how the property is ultimately sold.
Overall Fit
Consider whether the investment aligns with your objectives, time horizon, liquidity needs, real estate exposure, and tolerance for investment risk.
11
Why Are DSTs Often Limited to Accredited Investors?
Many DST opportunities are offered through private placements rather than registered public securities offerings.
Private investments can differ significantly from publicly traded investments.
They may involve:
The accredited investor rules determine access to certain private offerings, but they should never be interpreted as an indication that those investments are safe or appropriate.
Private investments can differ significantly from publicly traded investments.
They may involve:
- Limited liquidity
- Less publicly available information
- Longer investment periods
- Investment-specific eligibility requirements
- Significant risk, including possible loss of principal
The accredited investor rules determine access to certain private offerings, but they should never be interpreted as an indication that those investments are safe or appropriate.
When Should Accredited Investor Status Be Considered in a 1031 Exchange?
If you are considering a DST as part of your replacement property strategy, it is useful to understand your accredited investor status before the exchange timeline becomes restrictive.
Starting earlier can provide time to:
- Determine whether you meet the applicable investor requirements
- Gather documentation if verification is necessary
- Understand how DSTs differ from directly owned real estate
- Review potential replacement property strategies
- Evaluate available DST opportunities
- Coordinate with your Qualified Intermediary and tax professionals
Eligibility is only one part of the process, but addressing it early can prevent unnecessary complications when replacement property decisions need to be made.
Speak With Doug Zator
Doug leverages deep industry experience in alternative real estate to help you navigate complex transitions and understand your unique financial objectives.
Whether you are evaluating a 1031 exchange or exploring passive Delaware Statutory Trusts, he provides customized strategies aligned with your goals.
Do not let strict exchange deadlines dictate your future. Schedule a consultation today to map out a confident, proactive investment plan.
Evaluate Eligibility and the Investment Separately
Accredited investor status can provide access to certain private real estate investments, including many Delaware Statutory Trust offerings. But eligibility should never be confused with investment quality or suitability.
If you are considering a DST as part of a 1031 exchange or broader real estate strategy, Customized 1031 can help you understand available opportunities and evaluate how they may fit within your objectives.