DST vs. TIC: Why More Investors Choose DSTs
If you’re preparing for a 1031 exchange, you’ve likely encountered two common structures for co-investing in large real estate assets: Delaware Statutory Trusts (DSTs) and Tenants-in-Common (TICs). Both allow investors to own fractional interests in institutional-quality property while maintaining 1031 tax deferral, but the similarities end there.
The differences between DSTs and TICs can dramatically affect your investment experience, ease of management, financing, estate planning, and long-term performance.
And in today’s 1031 marketplace, DSTs have become the preferred choice for the vast majority of investors.
This guide breaks down the distinctions and explains why investors continue shifting toward DSTs for simplicity, stability, and passive income.
Quick Definitions: DST vs. TIC
What Is a DST?
A Delaware Statutory Trust is a legal trust structure that holds title to income-producing real estate. Investors purchase beneficial interests in the trust, giving them passive fractional ownership. Under IRS Revenue Ruling 2004-86, DSTs qualify as like-kind property for 1031 exchanges.
DSTs are fully passive. A professional sponsor makes all management, leasing, and disposition decisions.
What Is a TIC?
A Tenants-in-Common structure allows up to 35 investors to each hold a direct, deeded ownership interest in a property.
TIC investors must participate in major decisions, selling, refinancing, and material changes, requiring unanimous approval.
While TICs qualify for 1031 exchange treatment, they come with far more operational complexity and investor coordination requirements.
Why DSTs Are Often the Superior Choice for Investors
1. Truly Passive Ownership
DSTs eliminate active management entirely.
The sponsor handles:
leasing
repairs
financing decisions
property management
the ultimate sale
With TICs, investors must participate in major decision-making, which can cause delays, disagreements, and operational friction.
DST Benefit: Income without responsibilities
TIC Challenge: Consensus-driven management slows everything down
2. Access to Larger, Higher-Quality Institutional Assets
DSTs can pool capital from far more investors than TICs, allowing them to acquire:
Amazon or FedEx industrial facilities
Tesla service centers
Long-term medical office assets
Corporate headquarters
Large grocery-anchored retail centers
TICs, capped at 35 investors, are generally limited to smaller or mid-market assets.
3. Far Simpler Financing & Higher Lender Confidence
With DSTs, the trust signs the loan, not the individual investors.
This dramatically simplifies underwriting and keeps the financing process consistent.
TICs require every investor to be individually underwritten, which:
slows the loan process
creates risk of a single investor jeopardizing closing
increases lender hesitation
DST Benefit: Streamlined, professional lending
TIC Challenge: Individual underwriting delays and complications
4. Superior Estate Planning Benefits
DST interests are:
easily divisible among heirs
simple to transfer
passive for beneficiaries
not tied to managerial responsibilities
TICs require deeded interests, which may complicate transfers, probate, and family planning.
Bonus Advantage: Potential 721 UPREIT Conversion
Many DSTs (including those from Medalist) provide the option to convert into Operating Partnership (OP) units through a 721 exchange, creating a path to future liquidity and long-term tax deferral.
For estates, this flexibility can be invaluable.
5. Better Performance During Downturns
Because TICs require unanimous investor approval for key decisions, they often struggle during economic disruptions.
Disagreements can:
delay needed capital decisions
prevent refinancing
block timely sales
DSTs avoid this entirely.
The sponsor acts quickly and decisively, an essential advantage when conditions shift.
6. Greater Scalability and Diversification
DSTs typically have lower minimum investment thresholds than TICs, making it easier to diversify across:
markets
asset types
tenants
lease structures
TICs, by contrast, often require larger individual commitments and are limited by the 35-investor cap.
When TICs Still Make Sense
Although DSTs dominate today’s 1031 market, TICs still serve a role for certain investors who:
want direct deeded ownership
prefer shared decision-making
seek specific legal or operational control rights
But for investors prioritizing passive income, simplicity, predictable timelines, and tax-efficient long-term planning, DSTs remain the more practical and investor-friendly choice.
Make the Right Choice for Your 1031 Exchange
Both DSTs and TICs qualify for 1031 exchanges, but the overall experience is dramatically different.
For most investors, DSTs offer:
cleaner compliance
hassle-free passive ownership
access to institutional-grade assets
easier financing
stronger estate planning advantages
smoother long-term management
If you’re evaluating 1031 replacement property and want guidance that aligns with your financial goals, Medalist REIT can help.
Schedule a strategy call:
solution@medalistreit.com
Our team will walk you through the DST landscape, assess your needs, and help you determine whether DSTs are the right fit for your portfolio.
