TIC vs. DST: Two Ways to Co-Own Real Estate in a 1031 Exchange

Tenants-in-common arrangements and Delaware Statutory Trusts solve the same problem — letting multiple 1031 exchangers own institutional-quality real estate together — with very different machinery. Choosing between them is less about which is “better” and more about how much control you want, and what you’re willing to accept to get it.

What a TIC actually is

In a tenant-in-common structure, each investor holds a direct, undivided deeded interest in the property itself. Under IRS Revenue Procedure 2002-22, a qualifying TIC can include up to 35 co-owners, and each interest can qualify as like-kind replacement property in a 1031 exchange. You are on title. You can generally finance your interest individually, vote on major decisions, and — in principle — sell or exchange your slice independently.

What a DST changes

A DST inverts the trade. Under Revenue Ruling 2004-86, investors own beneficial interests in a trust that holds the real estate; the sponsor-affiliated trustee makes property decisions. You give up control — entirely — and in exchange the structure removes the co-owner coordination problem: no unanimous votes, no partner who can’t fund a capital call, no negotiating with 34 strangers when the lender needs a decision by Friday. Financing is in place at the trust level, minimums are typically far lower, and closings can happen in days — which matters when a 45-day clock is running.

Where TICs earn their keep

Control has real value in the right hands. Investors who want a voice on refinancing, sale timing, or management — or who are assembling a deal with family members or known partners rather than strangers — often prefer the TIC structure. It can also accommodate investors who want to place their own debt against their own interest.

Where TICs get into trouble

The same features cut the other way. Major decisions in a qualifying TIC generally require unanimous co-owner consent — and unanimity among up to 35 unrelated investors is exactly as easy as it sounds. A single co-owner’s financial distress, disagreement, or estate complication can stall the entire property. Lenders know this, which is one reason TIC financing became scarce after the structure’s difficulties in the 2008 downturn, and why the securitized 1031 market shifted decisively toward DSTs in the years since.

The honest comparison

Neither structure escapes the fundamentals: both are illiquid, both depend on the underlying real estate performing, and both carry sponsor and fee considerations that deserve line-item scrutiny in the offering documents. The choice is narrower than the brochures suggest: if you need control and can live with coordination risk, a TIC deserves a look. If you want passivity, speed, and structural simplicity — and can accept a trustee making the calls — the DST is usually the cleaner instrument.

If you’re weighing the two for an exchange in motion, bring us the deal. We’ll walk through both structures against your timeline, your debt-replacement requirement, and your tolerance for other people’s decisions.