If you’re a real estate investor who’s ever faced the stress of a 1031 exchange deadline, you know the feeling, that race against the clock to find your next property or risk a massive tax hit. But what if there was a smarter way to defer capital gains, stay liquid, and invest on your terms?
That’s exactly what longtime investor Dave L. discovered when he used a Deferred Sales Trust (DST) to save his 1031 exchange after selling a 128-unit apartment complex. His story offers valuable lessons for anyone seeking financial freedom, flexibility, and purpose beyond traditional real estate investing.
From Hawaii to California: Building Wealth with Purpose
Dave’s journey in real estate began at just 15, investing alongside his father. Over the years, he developed properties across Hawaii, from commercial centers to historic preservation projects, and even launched a successful restaurant with his children. But for Dave, real estate wasn’t just about profits.
“I’ve always seen real estate as a vehicle to support my family and give back to the community,” he explains. “It’s not about billions of dollars; it’s about creating stability and using that security to help others.”
This mindset carried him through decades of market ups and downs, including the 1980s recession, when he famously traded a Rolls Royce into a lot, then into a house, and eventually into a multi-leg 1031 exchange. His creative problem solving would later serve him well when faced with an even bigger decision.
The Turning Point: Why a DST Made More Sense Than Another 1031
Fast forward to 2020. Dave had just sold a 128-unit complex and had significant capital gains tied up in a traditional 1031 exchange. Then, the COVID 19 pandemic hit. The market froze, opportunities dried up, and his funds were sitting with an exchange accommodator.
“I realized I didn’t want to jump back into another big mortgage or buy at the top of the market,” he recalls. “The DST gave me time, the ability to wait, stay liquid, and buy when the timing was right.”
That’s the power of a Deferred Sales Trust: unlike a 1031, which locks you into strict timelines and like kind property requirements, a DST lets you sell your asset, defer capital gains taxes, and reinvest on your own schedule, even outside of real estate.
Timing, Not Location: The Rule That Changed Everything
In real estate, most people swear by “location, location, location.” But Dave’s mantra? “Timing, timing, timing.”
“The DST works perfectly for moments like this,” he says. “You don’t want to buy at the top or even the bottom. Let the sharks feed first, wait for stability, then buy 10 to 15% off the bottom. That’s where the real profits are.”
By moving his sale proceeds into a Deferred Sales Trust, Dave stayed out of debt and kept his capital safe. When the right deals appear, he’ll be ready, but on his terms.
The Pros and Cons of a Deferred Sales Trust
Like any strategy, the DST comes with both advantages and considerations. Here’s how Dave compares it to the traditional 1031 exchange:
Pros of a Deferred Sales Trust:
No strict deadlines: Unlike the 45/180-day window of a 1031, the DST lets you reinvest when the market makes sense.
Diversification: Funds can be allocated into stocks, bonds, hard money lending, or new real estate projects.
Debt freedom: You’re not forced to take on equal or greater debt to defer taxes.
Fresh depreciation schedule: When you reenter real estate, you start with a new depreciation basis.
Tax deferral flexibility: You control how and when to take income from the trust.
Potential Cons:
Complex setup: A DST requires experienced legal and tax professionals to structure properly.
Fees: There are initial and ongoing trustee and legal fees, though typically offset by tax savings.
Less familiarity: Many investors, and even some CPAs, confuse it with a Delaware Statutory Trust, so education is key.
For Dave, the benefits far outweigh the drawbacks: “It’s all about timing, flexibility, and risk management. The DST lets me preserve my gains and stay liquid until the next big opportunity.”
Using Wealth to Make a Difference
Beyond real estate, Dave continues to invest his time and money into meaningful projects. From launching Adopt a Classroom: Stock Our Schools to fund public school supplies in Hawaii, to founding Hotels That Help, a program linking hotel revenues to food banks and homeless shelters, Dave’s mission has always been clear: use success to serve others.
His latest venture, Camp Satori, is a “glamping” and leadership training retreat in Montana designed to teach corporate social responsibility to the next generation of business leaders. “It’s about helping millennials connect purpose with profit,” he says.
Final Thoughts: A Legacy of Smart Moves and Giving Back
When asked what advice he’d give his younger self, Dave’s answer is simple yet profound:
“It’s not how much money you make, it’s what you do to help others with your money.”
For investors exploring smarter, more flexible ways to grow and preserve wealth, the Deferred Sales Trust offers an elegant solution. It’s not just a tax strategy, it’s a tool for freedom, timing, and purpose.
As Dave proved, you don’t have to rush into another deal to win. Sometimes, the smartest move is simply to wait and let the sharks feed first.