INVESTMENT GUIDE
DSTs vs NNNs vs TICs: A Comprehensive Comparison
1. Delaware Statutory Trusts (DSTs)
Pros
- Hands-Off Investment – Fully passive; no management responsibilities
- Diversification – Access to institutional-grade properties with lower capital requirements
- 1031 Exchange Eligible – Allows for easy 1031 exchange participation without active management
- Limited Liability – Investors have no personal debt liability
- Predictable Income – Often structured with long-term, stable cash flow
Cons
- Lack of Control – Investors cannot influence property management decisions
- Lower Liquidity – Typically a long-term hold (5–10 years), with no easy exit before the sponsor sells
- Sponsor Fees – High upfront fees (often 10–15% of equity) reduce net investment value
- Returns are not actual returns but based on Internal Rate of Returns (IRR), which are based on projected cash flow and projected sales price
- Sponsors get paid regardless of DST's performance
- Returns are typically less than NNNs and TICs due to sponsor's fees
- Returns are not guaranteed
- Limited Upside – Appreciation potential is capped compared to direct ownership
- Investors must be accredited
2. Triple Net Lease (NNN) Properties
Pros
- Passive Income – Tenant pays taxes, insurance, and maintenance (no landlord involvement)
- Stable, Predictable Cash Flow – Long-term leases with creditworthy tenants
- Appreciation Potential – Can increase in value over time, especially in high-growth areas
- 1031 Exchange Eligible – Easily used for 1031 exchanges, making it tax-efficient
- Direct Ownership – Full control over lease terms, sales timing, and management
- Typically Provides Higher Returns than DSTs – Since there are no sponsor fees, net returns are often stronger
Cons
- Higher Capital Requirement – Typically requires $1M+ investment for high-quality properties
- Tenant Risk – If the tenant defaults or leaves, re-tenanting can be costly
- Market Risk – Value depends on cap rates, interest rates, and tenant stability
- Geographic Concentration – Unless you own multiple NNNs, you're exposed to the performance of a single location
3. Tenant-in-Common (TIC) Investments
Pros
- Shared Ownership – Allows smaller investors to participate in larger properties
- 1031 Exchange Eligible – Can be structured for 1031 exchange tax deferral
- More Control than DSTs – TIC investors have a say in major decisions, unlike DST investors
- Potential for Higher Returns – TICs often invest in value-add properties with upside potential
- Investors do not need to be accredited
Cons
- Majority Decision-Making – Major decisions require most co-owners' agreement, which can cause conflicts
- Management Complexity – More involvement compared to DSTs; some investors may need to take on active roles
- Liquidity Concerns – Selling your share can be difficult and requires finding a buyer
- Higher Risk than DSTs – No built-in asset diversification like a DST portfolio
Quick Comparison Table
| Feature | DSTs (Delaware Statutory Trusts) | NNN (Triple Net Lease) | TIC (Tenant-in-Common) |
|---|---|---|---|
| Investor Control | None | Full | Limited (Majority) |
| Management | Fully Passive | Passive (no landlord involvement) | Semi-Active |
| 1031 Exchange Eligible | ✓ Yes | ✓ Yes | ✓ Yes |
| Liquidity | Low (5-10 years) | Moderate (Sell Anytime) | Low |
| Returns | Based on IRR projections, not actual performance | Typically higher than DSTs | Potentially higher than DSTs |
| Sponsor Fees | High (10-15%) | None | Lower than DSTs |
| Risk Level | Low to Moderate | Moderate | Higher |
| Tenant Risk | Diversified (multiple properties) | Single-Tenant Risk | Shared Tenant Risk |
| Capital Requirement | Typically $100K-$500K+ | $1M+ | Varies (Lower entry possible) |
| Accredited Investor Required? | ✓ Yes | ✗ No | ✗ No |
| Exit Strategy | When sponsor sells (~5-10 years) | Sell property anytime | Need to find a buyer for TIC share |