When a 1031 investor wants fractional ownership of institutional real estate rather than buying a whole property alone, two structures dominate: the Delaware Statutory Trust (DST) and the tenancy-in-common (TIC). Both let multiple investors co-own a single property and both can qualify as like-kind replacement property in a 1031 exchange — but they are built very differently. A TIC, the older structure, gives each investor a deeded fractional interest with real voting rights, but caps ownership at 35 co-owners, makes each investor a separate borrower on the loan, and requires unanimous consent for major decisions. A DST holds the property in a single trust with unlimited investors, a single bankruptcy-remote borrower, and no investor voting — the trustee acts. After Revenue Ruling 2004-86 confirmed DSTs as 1031-eligible, DSTs largely replaced TICs for passive 1031 investors. This guide compares the two across financing, investor count, decision-making, and the situations where each fits. Note that DST and TIC interests are securities offered through a broker-dealer to accredited investors after a suitability review; verify the current rules with your advisor, and confirm tax treatment with your CPA.
DST vs. TIC Basics
Both a Delaware Statutory Trust (DST) and a tenancy-in-common (TIC) let several investors co-own a single piece of real estate, and both can serve as 1031 replacement property — but the legal form is different. A TIC is a form of direct co-ownership: each investor holds a deeded, undivided fractional interest in the property itself and is a co-owner of record. A DST is a Delaware trust that owns the property; investors hold fractional beneficial interests in the trust rather than a deed to the real estate, and Revenue Ruling 2004-86 treats those beneficial interests as direct interests in the underlying real property for federal tax purposes.
That structural difference drives nearly everything else. Because TIC investors are co-owners of record, each has a real ownership stake with voting rights — but the structure is capped at 35 co-owners, each is typically a separate borrower on any loan, and major decisions generally require unanimous consent. Because DST investors hold beneficial interests in a trust managed by a trustee, the DST can have unlimited investors, a single borrower (the trust itself), and no investor voting — the trustee makes operating decisions within strict limits. So a TIC is fractional deeded ownership with control; a DST is fractional beneficial ownership without it.
So the basics come down to legal form: a TIC gives you a deeded co-ownership interest with voting rights but a 35-investor cap and unanimous-consent decision-making, while a DST gives you a beneficial interest in a trust with unlimited investors, a single borrower, and a trustee who acts in your place. DST vs. TIC basics — a tenancy-in-common being direct, deeded fractional co-ownership (capped at 35 co-owners, with voting rights and separate borrowing), versus a Delaware Statutory Trust being a beneficial interest in a property-owning trust (unlimited investors, a single borrower, and no investor voting, with Rev. Rul. 2004-86 making it 1031-eligible) — frames the entire comparison. One offers control; the other offers passivity and scale. Understanding the legal form explains the financing and decision-making differences that follow.
Financing & Lender Treatment
Financing is where the DST and TIC structures diverge most sharply, and it's the main reason DSTs came to dominate. In a TIC, the loan structure is fragmented: because each co-owner holds a separate deeded interest, lenders have historically treated each investor as a separate borrower, which means separate underwriting, multiple borrowing entities, and a more complex loan to assemble. Some lenders limited how many borrowers they would underwrite, and the fragmented borrower structure made TIC financing slower, costlier, and harder to close — and harder to refinance or work out if problems arose.
A DST flips this. The trust itself is the single borrower on a single, non-recourse loan, and the trust is structured to be bankruptcy-remote — meaning an individual investor's financial trouble can't reach the property or the loan. Lenders strongly prefer this: one borrower, one loan, one bankruptcy-remote entity, and no need to underwrite dozens of individual investors. That makes DST financing cleaner and more lender-friendly, which is part of why DST sponsors can arrange institutional-quality, non-recourse debt that individual 1031 investors then 'inherit' to satisfy the debt-replacement requirement of their exchange without personally qualifying for or guaranteeing the loan.
So on financing, the contrast is stark: a TIC fragments the loan across up to 35 separate borrowers (slow, complex, lender-unfriendly), while a DST consolidates it into one bankruptcy-remote borrower on one non-recourse loan (clean and lender-preferred). Financing and lender treatment — TICs making each co-owner a separate borrower (fragmented underwriting, multiple entities, lender reluctance, and refinancing difficulty), versus DSTs using a single bankruptcy-remote borrower on one non-recourse loan that investors inherit for debt replacement — is the central practical difference between the structures. Lenders favor the DST's single-borrower model. This financing advantage helps explain why DSTs largely supplanted TICs for passive 1031 investors who need to replace debt.
A TIC can split one property's loan across up to 35 separate borrowers; a DST puts the entire loan on a single bankruptcy-remote borrower — which is exactly why lenders prefer DSTs.
Investor Count & Decision-Making
Investor count and decision-making are the second major divide. A TIC is limited to 35 co-owners — a hard ceiling that constrains how a sponsor can syndicate a property and means each TIC interest tends to be larger (and the minimum higher) than a comparable DST interest. More importantly, because each TIC co-owner holds a real deeded stake, major decisions — refinancing, selling, signing a new major lease, capital expenditures — generally require unanimous consent. Any one of up to 35 co-owners can hold up or block a decision the others want, which can become a deal-killer in practice.
A DST has no investor cap (it can have hundreds of investors, enabling smaller minimums) and removes investor voting entirely. The trustee — the sponsor's signatory trustee operating within strict limits — makes operating decisions on the trust's behalf, and individual beneficial-interest holders don't vote on refinancing, sales, or management. This is the trade-off at the heart of the DST: investors give up control and voting rights in exchange for a fully passive, professionally managed interest that can't be paralyzed by a single dissenting co-owner. For 1031 investors who want truly hands-off ownership, the absence of voting is a feature, not a bug.
So on investors and decisions, a TIC offers control at the cost of coordination risk (up to 35 co-owners, unanimous consent), while a DST offers passivity and scale at the cost of control (unlimited investors, no voting, trustee acts). Investor count and decision-making — TICs capping ownership at 35 co-owners who each hold voting rights and must generally agree unanimously on major decisions (creating gridlock risk), versus DSTs allowing unlimited investors with no voting where the trustee acts within strict limits — distinguish how the two structures are governed. The TIC empowers co-owners; the DST empowers the trustee. For passive 1031 investors who don't want to manage or vote, the DST's governance model is the draw — but it means surrendering the control a TIC preserves.
Why DSTs Largely Replaced TICs
DSTs largely replaced TICs as the dominant passive 1031 co-ownership structure for a combination of the reasons above, crystallized by a single IRS ruling. In 2004, Revenue Ruling 2004-86 confirmed that a beneficial interest in a properly structured DST is treated as a direct interest in real property for federal tax purposes, making it valid 1031 replacement property. That gave sponsors and investors the tax certainty they needed to embrace the DST structure — and once they did, the DST's structural advantages over the TIC became decisive.
Those advantages compounded after the 2008 financial crisis, when fragmented TIC loans proved difficult to refinance and work out: properties with up to 35 separate borrowers were hard to restructure when markets turned, and the unanimous-consent requirement made collective action slow. The DST's single bankruptcy-remote borrower, unlimited investor base, smaller minimums, and trustee-driven governance avoided these problems. Lenders preferred DSTs, sponsors could syndicate them more efficiently to more investors, and passive 1031 investors got a cleaner, more reliable structure. By the 2010s and 2020s, DSTs had become the default for fractional 1031 replacement property, with TICs relegated to specific niche uses.
So DSTs replaced TICs because Rev. Rul. 2004-86 gave the structure tax certainty, and because the DST's single-borrower financing, unlimited investors, smaller minimums, and trustee governance solved the TIC's biggest weaknesses — fragmented loans and unanimous-consent gridlock — especially after the financial crisis exposed them. Why DSTs largely replaced TICs — the tax certainty of Revenue Ruling 2004-86 combined with cleaner single-borrower financing, no 35-investor cap, smaller minimums, lender preference, and trustee-driven governance that avoided the TIC's refinancing and unanimous-consent problems (painfully exposed after 2008) — explains the market's shift. The DST simply worked better for passive investors and lenders alike. Today the DST is the default fractional 1031 vehicle, with the TIC surviving mainly for the narrow cases where its features still matter.
- A TIC is direct deeded co-ownership (capped at 35 investors, with voting rights); a DST is a beneficial interest in a property-owning trust (unlimited investors, no voting).
- Financing is the key divide: a TIC splits the loan across separate borrowers, while a DST uses a single bankruptcy-remote borrower on one lender-preferred, non-recourse loan.
- TIC decisions generally require unanimous consent among up to 35 co-owners (gridlock risk), while a DST trustee acts within strict limits and investors don't vote.
- Rev. Rul. 2004-86 gave DSTs tax certainty, and their structural advantages — clean financing, scale, smaller minimums, passivity — led them to largely replace TICs.
When a TIC Still Makes Sense
Despite the DST's dominance, a TIC still makes sense in specific situations — generally when investors want something the DST structure can't provide. The first is control: because TIC co-owners hold deeded interests with voting rights, a TIC suits investors (or a small group) who want a real say in major decisions — refinancing, leasing, selling — rather than ceding everything to a trustee. If having voting power and direct ownership matters more than passivity, a TIC delivers it where a DST does not.
The second is financing flexibility. A DST is bound by strict restrictions (the 'seven deadly sins' behind Rev. Rul. 2004-86) that, among other things, prohibit the trust from refinancing or taking on new debt — so a DST can't do a later cash-out refinance to pull equity out tax-free. A TIC has no such prohibition: co-owners can refinance, restructure debt, or pursue a cash-out down the road. A TIC can also make sense when investors want to exceed the loan size or leverage that a particular DST offering allows, or when a small group of known investors wants to assemble a deal on their own terms rather than join a syndicated trust.
So a TIC still makes sense when control and voting rights matter, when investors want the ability to refinance or do a later cash-out (which DST rules prohibit), or when they want to exceed a DST's loan limits or assemble a bespoke deal among a small group. When a TIC still makes sense — when investors prioritize control and voting rights over passivity, want the flexibility to refinance or pursue a cash-out later (which the DST restrictions forbid), need to exceed a DST's loan or leverage limits, or want a small known group to structure a deal on its own terms — defines the TIC's surviving niche. The DST fits passive investors; the TIC fits those who want a hand on the wheel. Choosing between them is really a choice between control and financing flexibility (TIC) and passivity, scale, and clean financing (DST).
Choose a TIC when you want control, voting rights, and the freedom to refinance later; choose a DST when you want a passive, professionally managed interest with clean, lender-friendly financing.
Comparing the Two in Practice
In practice, choosing between a DST and a TIC comes down to matching the structure to what you actually want from the investment and the exchange. Start with control: if you want voting rights and a deeded stake, lean TIC; if you want to be fully passive and let a professional trustee operate the property, lean DST. Then consider financing: if you need to replace debt cleanly without personally qualifying for a loan, the DST's single bankruptcy-remote, non-recourse borrower is a major advantage; if you want the ability to refinance or do a cash-out later, only a TIC permits it.
Next, weigh investor scale and minimums: DSTs accommodate many investors at lower minimums and let you diversify a single exchange across several offerings, while TICs cap at 35 co-owners with larger per-investor stakes. Finally, factor in coordination and timing: a 1031 exchange runs on tight 45- and 180-day clocks, and a DST — pre-packaged, pre-financed, and ready to close quickly — is often easier to use within those deadlines than assembling a TIC group and arranging fragmented financing. For most passive 1031 investors today, the DST wins on financing, scale, and speed; the TIC wins narrowly on control and refinancing flexibility.
So comparing the two in practice means weighing control versus passivity, refinancing flexibility versus clean single-borrower debt, larger TIC stakes versus smaller diversified DST interests, and the slower assembly of a TIC versus the speed of a pre-packaged DST within exchange deadlines. Comparing the two in practice — matching the structure to your priorities across control (TIC) versus passivity (DST), refinancing flexibility (TIC) versus clean non-recourse single-borrower debt (DST), investor scale and minimums (DST advantage), and closing speed within the 45- and 180-day deadlines (DST advantage) — turns the comparison into a concrete decision. Most passive investors land on the DST; control-focused investors who want refinancing flexibility land on the TIC. The right answer depends on your goals, your debt-replacement needs, and how much control you want over the property.
How Baker 1031 Helps You Compare DST and TIC Structures
Baker 1031 Investments helps investors compare DST and TIC structures — the basics of each, how financing and lenders treat them, investor count and decision-making, why DSTs largely replaced TICs, and when a TIC still makes sense — so you can choose the co-ownership structure that fits your goals, your control preferences, and your debt-replacement needs in a 1031 exchange.
DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. We help you understand the trade-offs between a DST and a TIC — control versus passivity, fragmented versus single-borrower financing, voting versus trustee governance, and refinancing flexibility versus the DST restrictions behind Rev. Rul. 2004-86 — and, when a DST is suitable for you, access institutional offerings that can serve as 1031 replacement property and satisfy your debt replacement with non-recourse loans. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific tax situation, including how each structure affects your exchange, basis, and any future refinancing, which can be technical. Nothing here is a promise of income or returns — DST and TIC interests are illiquid, carry real estate and structural risk, and past performance does not guarantee future results. Our role is to help you compare the structures clearly and invest only when suitable for your goals.
Frequently Asked Questions
What is the difference between a DST and a TIC?
A DST (Delaware Statutory Trust) and a TIC (tenancy-in-common) are both ways for multiple investors to co-own a single property as 1031 replacement property, but they're structured differently. A TIC gives each investor a deeded, undivided fractional interest in the property itself — you're a co-owner of record with voting rights, but the structure caps ownership at 35 co-owners, makes each investor a separate borrower on the loan, and generally requires unanimous consent for major decisions. A DST holds the property in a trust; you own a fractional beneficial interest in the trust rather than a deed, the trust can have unlimited investors, there's a single bankruptcy-remote borrower on the loan, and investors don't vote — the trustee acts. Revenue Ruling 2004-86 treats a DST beneficial interest as a direct interest in real property for tax purposes, so it qualifies for 1031. So a TIC offers control; a DST offers passivity and cleaner financing. Confirm the specifics with your advisor.
Can both a DST and a TIC be used in a 1031 exchange?
Yes — both DSTs and TICs can qualify as like-kind replacement property in a 1031 exchange, which is why they're often compared. A TIC interest is a deeded, undivided fractional interest in real property, so it's directly like-kind to other real estate. A DST beneficial interest qualifies because Revenue Ruling 2004-86 holds that a beneficial interest in a properly structured DST is treated, for federal tax purposes, as a direct interest in the underlying real property — not as an interest in a partnership or a security — so it too is like-kind real property. Both therefore let you defer capital-gains tax by exchanging into them. The difference isn't whether they qualify for 1031 — both do — but how they're structured: financing, investor count, decision-making, and flexibility. So the choice between them is about structure and fit, not about 1031 eligibility. Confirm tax treatment for your specific exchange with your CPA, since the rules can be technical.
Why are TIC interests limited to 35 co-owners?
The 35-co-owner limit on TIC interests comes from IRS guidance — specifically Revenue Procedure 2002-22, which set out the conditions under which the IRS would treat a tenancy-in-common interest as real property eligible for a 1031 exchange (rather than as a partnership interest, which would not qualify). One of those conditions was a cap of 35 co-owners on the property, intended to keep the arrangement looking like genuine co-ownership of real estate rather than a partnership or business entity. Because exceeding the cap could risk the TIC being recharacterized as a partnership — and partnership interests aren't 1031-eligible — sponsors generally kept TICs at or under 35 investors. This cap is one of the structural constraints that made TICs harder to syndicate and gave DSTs an advantage, since a DST has no such investor limit. So the 35-investor ceiling is a tax-driven constraint specific to the TIC structure. The DST avoids it because Rev. Rul. 2004-86 addresses the trust structure differently.
Why do lenders prefer DSTs over TICs?
Lenders generally prefer DSTs because of how the borrowing is structured. In a TIC, each co-owner typically holds a separate deeded interest and is treated as a separate borrower, so a single property's loan can be fragmented across up to 35 borrowers — each requiring underwriting, and any one of whom could create complications. That made TIC loans slower and harder to assemble, and especially hard to refinance or work out if trouble arose. A DST consolidates everything: the trust itself is the single borrower on one non-recourse loan, and the trust is bankruptcy-remote, meaning an individual investor's financial problems can't reach the property or the loan. From a lender's standpoint, one bankruptcy-remote borrower on one loan is far cleaner than dozens of individual borrowers. This is a major reason DSTs largely replaced TICs and why DST sponsors can arrange institutional-quality, non-recourse debt that investors inherit for debt replacement. So the single-borrower, bankruptcy-remote structure makes the DST lender-friendly.
What is the role of unanimous consent in a TIC?
In a TIC, because each co-owner holds a real deeded ownership interest, major decisions about the property generally require unanimous consent among all the co-owners. Decisions like refinancing the loan, selling the property, signing a major new lease, or making significant capital expenditures typically can't proceed unless all co-owners — up to 35 of them — agree. The intent is to protect each co-owner's ownership rights, but in practice it can create gridlock: any single co-owner can hold up or block a decision the majority wants, which can become a deal-killer, especially in a difficult market when collective action is needed quickly. This was one of the TIC structure's biggest practical weaknesses, painfully exposed after the 2008 financial crisis when fragmented TIC ownership made restructuring difficult. A DST avoids this entirely by removing investor voting — the trustee makes operating decisions within strict limits. So unanimous consent gives TIC co-owners control but introduces real coordination and gridlock risk.
Do DST investors have any voting rights?
No — DST investors generally don't have voting rights over the property's operation. In a Delaware Statutory Trust, investors hold fractional beneficial interests in the trust, and the trustee (the sponsor's signatory trustee, operating within strict limits) makes operating decisions on the trust's behalf. Individual beneficial-interest holders don't vote on refinancing, sales, leasing, or day-to-day management. This is a deliberate feature of the structure: it keeps the investment fully passive and prevents a single dissenting investor from blocking decisions, which is one of the DST's advantages over the TIC, where unanimous consent among co-owners can create gridlock. The trade-off is that DST investors give up control in exchange for passivity and professional management — you're trusting the sponsor and trustee to manage the property well. For investors who want truly hands-off ownership, the absence of voting is a benefit; for those who want a say in major decisions, it's a reason a TIC might fit better. So the DST is passive by design.
Can a DST refinance or do a cash-out later?
No — a properly structured DST cannot refinance the property or take on new debt, and it cannot do a later cash-out to pull equity out tax-free. This restriction comes from the conditions behind Revenue Ruling 2004-86 — often called the 'seven deadly sins' — which require the trust to hold the property passively: the trustee can't accept new capital contributions, can't refinance or renegotiate the existing debt, can't reinvest sale proceeds, and can make only minor, non-structural improvements. These restrictions are what allow a DST beneficial interest to qualify as direct real property for 1031 purposes, but they also limit the trust's flexibility. So if your strategy depends on being able to refinance or do a cash-out refinance down the road, a DST won't permit it — that's actually a situation where a TIC, which has no such prohibition, may make more sense. So the DST's tax qualification comes at the cost of financing flexibility. Discuss your plans with your advisors before choosing.
When does a TIC make more sense than a DST?
A TIC tends to make more sense than a DST in a few specific situations. First, when control matters: because TIC co-owners hold deeded interests with voting rights, a TIC suits investors who want a real say in major decisions — refinancing, leasing, selling — rather than ceding everything to a trustee. Second, when financing flexibility matters: a DST is prohibited from refinancing or doing a cash-out (under the restrictions behind Rev. Rul. 2004-86), while a TIC can refinance or pursue a cash-out later. Third, when investors want to exceed the loan size or leverage that a particular DST offering allows, since a TIC group can structure its own financing. And fourth, when a small group of known investors wants to assemble a bespoke deal on their own terms rather than join a syndicated trust. So the TIC's surviving niche is investors who prioritize control and financing flexibility over passivity and clean single-borrower debt. For most passive 1031 investors, though, the DST is the better fit.
Are DST and TIC interests securities?
Yes — both DST and TIC interests offered through sponsors are generally treated as securities, even though they represent real estate ownership for 1031 purposes. They're typically offered as private placements under Regulation D, which means they're sold through a broker-dealer to accredited (and otherwise suitable) investors after a suitability review, not bought on a public exchange. The fact that they're securities for offering purposes doesn't conflict with their being real property for 1031 purposes — a DST beneficial interest, for instance, is treated as direct real property under Revenue Ruling 2004-86 for tax-deferral purposes while still being a security in how it's sold. This dual nature is normal for fractional real estate offerings. For investors, it means you'll go through a broker-dealer, likely verify or confirm your accredited status, and review offering documents before investing. Baker 1031 offers DST interests through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC). So expect a securities-style process even though you're acquiring real estate.
Did DSTs completely replace TICs?
Not completely, but largely. After Revenue Ruling 2004-86 gave DSTs tax certainty in 2004, and especially after the 2008 financial crisis exposed the TIC structure's weaknesses — fragmented loans across up to 35 separate borrowers that were hard to refinance, and unanimous-consent requirements that created gridlock — DSTs became the dominant structure for passive, syndicated 1031 replacement property. By the 2010s and 2020s, the DST was the default fractional 1031 vehicle, and the volume of new TIC offerings shrank dramatically. However, TICs didn't disappear: they survive in specific niches where their features still matter — investors who want control and voting rights, who want the ability to refinance or do a cash-out later (which DST rules prohibit), who want to exceed a DST's loan limits, or who want a small group to assemble a bespoke deal. So DSTs largely replaced TICs for mainstream passive investing, but the TIC remains a viable, niche alternative. Which fits depends on whether you prioritize control or passivity.
What does bankruptcy-remote mean for a DST?
'Bankruptcy-remote' means the DST is structured so that the financial troubles of any individual investor — or of the sponsor — can't reach the trust's property or trigger problems with its loan. In practice, the trust is set up as a separate, isolated entity whose sole purpose is to hold the property, with provisions designed to insulate it from the bankruptcy of its investors or affiliates. This is a key reason lenders favor DSTs: a single bankruptcy-remote borrower on one non-recourse loan is far cleaner and safer from the lender's perspective than a TIC's fragmented structure, where up to 35 separate borrowers each create potential exposure. For investors, bankruptcy-remoteness is part of what makes DST financing institutional-quality and lender-friendly, and it's part of why a DST can carry attractive non-recourse debt that you inherit to satisfy the debt-replacement requirement of your 1031 exchange. So bankruptcy-remoteness protects the property and loan from individual-investor risk — a structural strength of the DST compared with the TIC.
Which structure has lower minimum investments?
DSTs generally have lower minimum investments than TICs. Because a TIC is capped at 35 co-owners, each co-owner's stake in a given property tends to be larger, which pushes the per-investor minimum higher. A DST, by contrast, has no investor cap — it can have hundreds of investors in a single property — so a sponsor can divide the trust into smaller beneficial interests, allowing lower minimums (often in the range of $25,000 to $100,000 for DSTs, though this varies by offering). The lower minimum is one of the DST's practical advantages: it lets a 1031 investor spread a single exchange across several DST offerings to diversify by property type, geography, and sponsor, rather than concentrating in one or a few large TIC stakes. So if accessibility and the ability to diversify across multiple properties matter to you, the DST's lower minimums are an advantage. As always, minimums vary by specific offering, so confirm them in the offering documents and with your advisor before investing.
How do the two structures handle property management?
Both DSTs and TICs typically use professional property management, but the governance differs. In a DST, the sponsor and trustee handle everything — the trust owns the property, the trustee makes operating decisions within strict limits, and investors are fully passive with no voting role. Management is centralized and professional, and you simply receive your share of income. In a TIC, the co-owners collectively own the property and usually hire a professional manager too, but because each co-owner holds a deeded interest with voting rights, the co-owners retain decision-making authority — major decisions generally require unanimous consent. So while both use professional managers day-to-day, the DST removes investors from decision-making entirely (the trustee acts), whereas the TIC keeps co-owners involved in major decisions. This is the control-versus-passivity trade-off again: the DST is hands-off and centralized, while the TIC keeps you in the loop but also requires coordination among up to 35 co-owners. So choose based on whether you want to be involved in or insulated from property decisions.
Can I diversify across multiple DSTs in one exchange?
Yes — and this is one of the DST's practical advantages over the TIC. Because DSTs have lower minimum investments and no investor cap, a 1031 investor with a meaningful exchange balance can spread the proceeds across several DST offerings in a single exchange — for example, dividing the funds among a multifamily DST, an industrial DST, and a net-lease retail DST in different regions. This lets you diversify by property type, geography, and sponsor, reducing your concentration in any one property or market, all while keeping your 1031 deferral intact. A TIC makes this harder: with larger per-investor stakes and a 35-co-owner cap per property, assembling diversification across several TICs requires larger amounts and more coordination. So the DST's smaller minimums make it well suited to building a diversified replacement-property portfolio within one exchange. Just be mindful of the exchange's 45- and 180-day deadlines and identification rules, and confirm the approach with your qualified intermediary and advisors. Diversification reduces concentration but doesn't eliminate risk.
How does Baker 1031 help me choose between a DST and a TIC?
We help investors compare DST and TIC structures — the basics of each, how financing and lenders treat them, investor count and decision-making, why DSTs largely replaced TICs, and when a TIC still makes sense — so you can choose the co-ownership structure that fits your goals, control preferences, and debt-replacement needs. DST interests are securities offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), to accredited investors after a suitability review. We help you weigh the trade-offs — control versus passivity, fragmented versus single-borrower financing, voting versus trustee governance, and refinancing flexibility versus the DST restrictions behind Rev. Rul. 2004-86 — and, when a DST is suitable, access institutional offerings for your exchange. Baker 1031 does not provide tax or legal advice; your CPA and attorney handle your specific situation, including how each structure affects your exchange and any future refinancing. Nothing here is a promise of income or returns — these interests are illiquid and carry real risk, and past performance doesn't guarantee future results.
Glossary
- Delaware Statutory Trust (DST)
- A trust that owns real estate; investors hold fractional beneficial interests.
- Tenancy-in-Common (TIC)
- Direct, deeded fractional co-ownership of a property.
- Beneficial Interest
- A DST investor's fractional stake in the property-owning trust.
- Undivided Interest
- A TIC co-owner's deeded fractional share of the whole property.
- Rev. Rul. 2004-86
- The IRS ruling making DST interests 1031-eligible real property.
- Rev. Proc. 2002-22
- IRS guidance that set the 35-co-owner cap for 1031 TICs.
- Single Borrower
- The DST trust itself as the sole borrower on one loan.
- Separate Borrower
- Each TIC co-owner treated individually on the loan.
- Bankruptcy-Remote
- Structured so an investor's trouble can't reach the property or loan.
- Non-Recourse Loan
- Debt secured only by the property, not the investor personally.
- Unanimous Consent
- The TIC requirement that all co-owners agree on major decisions.
- Trustee
- The party who operates a DST within strict limits; investors don't vote.
- Debt Replacement
- Matching the relinquished property's debt in the replacement property.
- Cash-Out Refinance
- Pulling equity out via new debt — permitted in a TIC, barred in a DST.
- Seven Deadly Sins
- The DST restrictions (no new debt, no refinancing, etc.) behind Rev. Rul. 2004-86.
- Accredited Investor
- An investor meeting income or net-worth thresholds for private offerings.
Sources & References
- IRS. Revenue Ruling 2004-86 (Delaware Statutory Trusts and 1031)
- Cornell Legal Information Institute. 26 U.S. Code § 1031 — Exchange of real property held for productive use or investment
- IRS. Like-Kind Exchanges — Real Estate Tax Tips
- FINRA. Real Estate Investments
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
