The direct answer: when you invest a dollar of equity in a typical DST, materially less than a dollar goes into the real estate. Across the industry, total front-end costs are commonly disclosed in the range of roughly eight to twelve percent of equity raised — and on some offerings more. Every program is different; the exact figure is in your private placement memorandum under a heading like “Estimated Use of Proceeds,” and it is the first page we read.
Nobody hides DST fees. That is worth saying plainly, because it surprises people: every fee described in this guide is disclosed, usually in detail, in the offering’s private placement memorandum. The PPM will tell you the selling commission to the tenth of a percent, the dealer-manager fee, the sponsor’s acquisition fee, and — if you know where to look — what the sponsor paid for the property versus the price at which it was contributed to the trust.
So why do so many investors reach the closing table without a clear picture of what they are paying? Three reasons, in our experience.
First, the disclosure is structural, not conversational. The fees live in a table most investors are never walked through, inside a document that routinely runs past two hundred pages. Disclosure that is never discussed functions, in practice, like no disclosure at all.
Second, the headline number points the other way. The first number you hear about any DST is the projected distribution rate. It is designed to be compared against a bank CD, it sounds like a return, and it does an enormous amount of work in the sale — precisely because it draws the eye away from the use-of-proceeds page.
Third, several fees never appear as line items on anything you sign. The sponsor’s markup is embedded in the trust’s purchase price. The master-lease structure can make distributions look like property performance when they are a contractual payment. You cannot find these by scanning for the word “fee.”
This guide walks the full fee stack in the order you will encounter it: going in, holding, and going out. For each one: the plain answer, what the fine print says, and the question we would ask the person selling it to you.
The “load” is everything that comes out between your wire and the real estate. Five line items, in roughly descending order of size.
The commission compensates the broker-dealer and the representative who sold you the interest — typically the single largest piece of the load.
Commissions are disclosed as a percentage of the offering and are often tiered by investment size. Fee-based advisory accounts may access lower-load share classes of the same offering — same building, same trust, materially different cost — which is itself worth asking about.
“What is the selling commission on my investment, and is there a share class or account type with a lower one?”
A separate fee to the managing broker-dealer that organizes the selling group — distinct from the commission, and easy to miss because the two are often read as one number.
The dealer-manager fee is usually disclosed adjacent to the selling commission in the use-of-proceeds table. Together they make up what the industry calls distribution costs.
“What do the selling commission and dealer-manager fee total, combined, as a percentage of my equity?”
The legal, accounting, marketing, and administrative cost of creating the offering itself — the trust does not spring into existence for free.
These are commonly capped at a disclosed percentage, with the sponsor absorbing costs above the cap. The cap — and whether it has historically been hit — tells you something about the sponsor’s discipline.
“What are organization and offering expenses capped at, and who pays if actual costs exceed the cap?”
A fee the sponsor earns for finding, underwriting, and closing the property — compensation for real work, charged on top of the markup described next.
Acquisition fees are typically calculated on the purchase price of the property rather than on equity, which makes them look smaller than they are relative to your investment on a leveraged deal.
“Is the acquisition fee calculated on equity or on the property’s purchase price — and what does it equal as a percentage of my equity?”
The piece that hides best: the difference between what the sponsor paid for the property and the price at which it is contributed to the trust you are buying into.
The markup never appears in the fee table. Finding it means comparing the sponsor’s acquisition cost — disclosed elsewhere in the PPM — against the trust’s purchase price. On some offerings the spread is modest; on others it is the largest single cost in the deal.
“What did the sponsor pay for this property, when, and what is the trust paying for it now?”
Numbers make this concrete. Take a hypothetical offering with an all-in front-end load of ten percent of equity — squarely inside the commonly disclosed range — and follow a $100,000 investment in.
| Where it goes | Illustrative amount |
|---|---|
| Selling commission & dealer-manager fee | $6,000 |
| Organization & offering expenses | $1,500 |
| Acquisition fee & sponsor markup | $2,500 |
| Working in the real estate on day one | $90,000 |
Two things follow from that table. First, the property must appreciate meaningfully before your position is worth what you paid for it — before any distribution, and before the exit fees described below. Second, a “5.0% distribution” on your $100,000 is doing something quietly flattering: measured against the $90,000 actually at work, the property is being asked to generate materially more than 5% — and where it cannot, the difference tends to come from somewhere else. That somewhere else is the reserves section, below.
Hypothetical illustration only. It assumes a 10% all-in load for arithmetic clarity; actual loads vary by offering and are disclosed in each PPM.
The front-end load happens once. The ongoing stack repeats every year, and because each piece is small, the stack is easy to underweight.
The sponsor’s annual fees for overseeing the investment and administering the trust, paid out of property cash flow before distributions.
Often quoted as a percentage of invested equity or of gross revenue — two very different bases. A fee on gross revenue persists even in years when there is little or nothing left for investors.
“What are the annual sponsor-level fees, on what base are they calculated, and are they subordinated to my distribution?”
Someone runs the building — often a sponsor affiliate, at a market-rate fee. In many DSTs the sponsor affiliate also master-leases the entire property.
Where a master lease exists, the trust’s income is a contractual rent payment from the affiliate, not the building’s own performance. That can make distributions look stable while the underlying property is not — and it means the number you were quoted depends on the affiliate’s willingness and ability to keep paying.
“If there is a master lease, what is the trust’s rent as a percentage of the property’s actual projected net operating income?”
A portion of the offering proceeds — the money you and other investors contributed — is set aside as a reserve. Reserves are prudent; a passive trust with no ability to raise new capital needs a cushion. But reserves are also routinely used to fund distributions in years when the property’s actual cash flow falls short of projection. When that happens, the trust is sending you back your own capital and describing it as income. The offering documents will say this — in a paragraph you are unlikely to be walked through.
Reserves can fund a distribution for years. They cannot fund a return. This is why the distribution rate, standing alone, tells you almost nothing: it is one number doing the work of three — property performance, fee drag, and reserve support — without telling you the mix.
Ask what share of projected distributions in the first three years is expected to come from operations versus reserves.
The projection’s sources-and-uses detail shows whether year-one distributions are covered by net operating income after fees — or topped up from the reserve account funded by your own capital.
“In each of the first three years, what percentage of my projected distribution comes from property operations rather than reserves?”
Most sponsors take a fee on the sale of the property, frequently in the low single digits of the gross sale price, before proceeds are split.
On a leveraged property, a fee on gross price is a much larger bite out of your equity than it looks: with 50% leverage, a 2% fee on gross is roughly 4% of investor equity.
“What is the disposition fee, and is it calculated on gross sale price or on equity?”
In a growing share of programs, the exit is not a sale at all: the sponsor’s affiliated REIT absorbs the property, and you receive operating-partnership units instead of cash.
The conversion happens at a value the sponsor’s own process determines, your ability to 1031 exchange ends there, and your future liquidity depends on the REIT’s repurchase program — which is capped and can be limited or suspended, as several of the largest non-traded REITs did between 2022 and 2024. We wrote about that record at length in Redemption Denied.
“Is the 721 conversion optional for me, or at the sponsor’s discretion — and what has the target REIT’s distribution coverage been for the past three years?”
Pull the threads together and the arithmetic is mechanical. If the all-in load on an offering is ten percent, then on the day you close, your beneficial interest is backed by roughly ninety cents of property value for every dollar you invested. The property must appreciate meaningfully just to return you to even — before any distribution, and before the disposition fee on the way out.
A distribution rate quoted on your gross investment quietly ignores all of this. It is a yield on the dollar you sent, not on the ninety cents that went to work. That is why the question that actually settles things is never “what is the distribution?” It is: for every program this sponsor has taken full cycle, what was the net, investor-level return — from first dollar in to last dollar out, including the programs that underperformed? A sponsor that cannot or will not produce that figure has told you something. A representative who steers you back to the distribution rate has told you something too.
You do not need to read two hundred pages to understand the fee stack. You need one table and a calculator.
Or skip the ten minutes and ask us — walking investors through this page, line by line, before they invest is a standing part of how we work.
Before you compare any two DSTs, get answers to these six questions, in writing, from the offering documents:
None of this makes the load illegitimate. Sponsors do real work sourcing and structuring assets; broker-dealers carry real regulatory cost; a fully passive, professionally managed fractional interest in institutional real estate is a genuine product that costs genuine money to build. Many DSTs deliver exactly what they projected, fees and all.
Our objection is not to the fees. It is to the fees standing in shadow while the distribution stands in the spotlight — quoted on gross equity when the load has already reduced what is working for you, and offered as a substitute for the only figure that finally settles the question, which is what investors actually got back.
Fee ranges described are illustrative of ranges commonly disclosed across the securitized 1031 marketplace and vary materially by offering; the governing figures for any program are those in its private placement memorandum. The worked example is a hypothetical illustration, not a representation of any actual offering. This article reflects the opinions of Carmona Wealth and is provided for educational purposes only. No return, yield, or distribution is projected or guaranteed. Delaware Statutory Trusts and 721 UPREIT programs are speculative, illiquid, and available to accredited investors only. [Full site compliance block and superscript source list carry at publication per standard process.]
Send us any PPM and we’ll walk you through the use-of-proceeds page — line by line, before you invest.
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