Tax-Deferred Wealth Building Through DSTs and TICs..

[Mohamed Youssef]

Delaware Statutory Trusts (DSTs) and Tenancy-In-Common (TIC) structures have evolved significantly as wealth-building tools. Beyond just 1031 exchange destinations, they offer compelling advantages for specific situations.

For investors seeking scale, DSTs provide access to institutional-quality assets otherwise unattainable. One client recently exchanged from a management-intensive 5-story office building in downtown LA into fractional ownership of a 300-unit luxury apartment community previously only accessible to institutional investors.

The debt structures prove particularly valuable in today's environment. Many DSTs secured long-term, fixed-rate financing before recent rate increases—I've seen offerings with embedded debt at 3.5-4% while current rates exceed 7% for similar assets.

For those concerned about retirement transitions, these structures can convert active management responsibilities into passive ownership while maintaining real estate's tax advantages. Another client approaching health challenges exchanged two management-intensive properties for DST interests requiring no ongoing involvement.

The risk factors require careful evaluation: limited control, typically fixed holding periods, and dependence on sponsor expertise. However, they offer unique advantages for specific portfolio needs and life situations.

Has anyone utilized DSTs or TICs beyond just 1031 accommodation? What criteria did you use to evaluate sponsors and offerings?