Delaware Statutory Trust (DST) vs. Tenant-in-Common (TIC): Which is Better for 1031 Investors?
When completing a 1031 Exchange, investors often explore co-ownership structures to meet IRS rules while accessing high-quality real estate. Two common options are Tenant-in-Common (TIC) investments and Delaware Statutory Trusts (DSTs). While both qualify as like-kind replacement property, they function very differently — and those differences can have a major impact on investors.
A Quick Look Back: How TICs Came First
Tenant-in-Common structures became popular in the early 2000s after the IRS issued guidelines for how they could be used in 1031 Exchanges. TICs allowed up to 35 investors to pool capital into a single property. This opened the door for smaller investors to participate in larger deals.
But TICs also came with challenges. Every investor typically had to form a separate LLC, which complicated financing. Lenders often limited the number of TIC participants below the 35-investor cap to simplify underwriting. Decision-making was another problem: major property decisions required unanimous consent, which could slow down or derail important actions.
The Rise of DSTs
In 2004, the IRS approved the Delaware Statutory Trust structure for 1031 Exchanges. DSTs solved many of the issues that TICs faced. Instead of each investor owning a direct interest in the property, they own a beneficial interest in the trust, which itself holds title to the real estate.
This streamlined structure eliminated the need for dozens of LLCs, simplified financing, and gave lenders more confidence. Importantly, DST investors don’t vote on management decisions, which prevents gridlock and makes operations more efficient.
DST Advantages Over TICs
DSTs provide several clear benefits compared to TICs:
No Investor Cap – Unlike TICs, which are capped at 35 owners, DSTs can include many more investors, allowing for lower minimum investment amounts.
Simplified Financing – Lenders only underwrite the DST itself, not each individual investor. This makes financing large transactions easier.
Passive Management – The trustee and sponsor handle all day-to-day decisions. Investors are free from the burden of unanimous voting.
Lower Costs – Investors avoid the legal and administrative fees of setting up multiple LLCs.
Scalability – Larger, institutional-grade properties can be acquired, giving investors access to higher-quality real estate.
What TICs Still Offer
Despite their limitations, TICs haven’t disappeared entirely. Some investors still appreciate the direct ownership aspect, which can provide more control compared to the DST’s passive structure. For those who prefer active involvement and are comfortable coordinating with co-owners, a TIC may still be appealing.
Key Considerations Before Choosing
While DSTs have clear advantages, they aren’t perfect. Investors should be aware of:
Illiquidity – DST investments are typically long-term holds (5–10 years).
Limited Flexibility – DST trustees must follow strict IRS rules known as the “seven deadly sins,” which restrict activities like refinancing or reinvesting sale proceeds.
Lack of Control – Investors give up decision-making authority in exchange for simplified management.
On the other hand, TICs may allow more direct involvement but come with higher costs, more complexity, and voting hurdles.
For many 1031 investors, DSTs have become the preferred option because they remove operational headaches while providing access to diversified, institutional-grade real estate. TICs, while once popular, have largely taken a back seat due to their structural challenges.
At the end of the day, the right choice depends on your goals. If you value control and don’t mind complexity, a TIC might work. If you prefer simplicity, diversification, and passive income potential, a DST may be a better fit.
