Eligible for both 1031 and 1033 exchanges, undeveloped land-based DSTs focus on high-demand infill assets positioned for development. Exchange investors have an option to decide between growth only and income only undeveloped land DSTs.

 

Growth Only

This an all-equity investment that focuses on acquiring land in high-growth US markets for future residential development. ​The DST buys the property and holds it off-balance sheet for the homebuilder so they can access just-in-time land without owning it, reducing capital requirements and balance sheet risk.

 

Through negotiations, the land is sold at paper lot value, allowing for competitive pricing. The homebuilder’s investment during the entitlement phase further adds value, which is shared with DST investors upon sale. The growth only DST typically targets a shorter hold period of 3+ years and prioritizes long-term appreciation over immediate income.

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Income Only

This is a land lease offering comprised of undeveloped tracts of land that are purchased by the DST and then leased back to a homebuilder. Investors receive an attractive monthly cash distribution that is a combination of rent and option installment payments for holding the land for future residential development. This income only DST typically targets a 3 to 7 year hold period with cash yields typically much higher than traditional DSTs. The downside is there is no growth potential at the exit, just a return of the original exchange equity.

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