The risks embedded in private real estate investments are structural before they are market-driven. Understanding which risks belong to which structure, and which the investor absorbs directly, is the precondition for any serious portfolio decision.
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The PPM Is the Governing Document
DST offerings are private placements sold exclusively to accredited investors under SEC Rule 506(c). A sponsor's marketing materials sit outside the legal perimeter; the PPM sits inside it. Accredited investors reviewing DST offerings should treat the PPM as the primary risk document. It is not a formality. It contains the specific leverage ratios, asset-level encumbrances, and operational cost structures that determine actual exposure. Any representation made outside that document, including general-market commentary, does not alter or supplement the PPM's disclosures.
Private placements also carry inherent illiquidity. Unlike publicly traded securities, DST interests cannot be sold on an exchange. Exit depends on a liquidity event orchestrated by the sponsor, typically a full-property sale, or a secondary-market transaction, which may occur at a discount and on uncertain timelines. Investors should calibrate holding-period expectations before committing capital.
Where Each Risk Lives
Each structural risk gets its own short brief:
- What happens when a leveraged DST loan comes due
- What a debt-free DST gives up for zero foreclosure risk
- Net lease or gross lease: who absorbs operating-cost inflation
- How limited partnerships and QOF rules add risk
Accredited investors map their situation against current offerings via the partnered broker-dealer's intake, confirm accreditation to proceed.