DST vs. TIC (Tenants-in-Common)

How ownership is held

In a TIC, each investor holds a direct, deeded fractional interest in the property and is, in effect, a co-owner on title alongside the others. In a DST, the trust owns the property and you hold a beneficial interest in the trust rather than a deed to the real estate. Both are recognized for 1031 purposes, but the structure changes who signs, who votes, and who deals with lenders. The deeded-versus-beneficial distinction is the root of nearly every other difference between the two, so it is worth pausing on. With a TIC you are an owner of record; with a DST you are a beneficiary of a trust that is the owner of record. That single fact ripples through governance, financing, and the day-to-day experience of holding the investment.

A brief history of why this matters

Before Revenue Ruling 2004-86 blessed the DST structure for 1031 exchanges, TICs were the dominant way for multiple investors to co-own institutional real estate as replacement property. TICs worked, but their governance proved cumbersome at scale, and the DST emerged as the cleaner alternative. Today DSTs dominate the passive 1031 market, while TICs persist in niches — often where a small group of investors specifically wants direct ownership and a genuine voice in decisions. Understanding the trade-offs helps you see why one structure won the volume game without making the other obsolete.

Side-by-side snapshot

TIC (Tenants-in-Common) - Direct deeded co-ownership on title — you are an owner of record - Limited to up to 35 co-owners - Major decisions often require unanimous (or supermajority) owner votes - Each owner typically qualifies for and signs financing individually - Each owner can usually sell or transfer their interest independently - More owner control, but more coordination friction

DST (Delaware Statutory Trust) - Beneficial interest; the trust holds title - Can accommodate far more investors than 35 - A single trustee makes all decisions — no owner votes - Financing is arranged at the trust level, not by each investor - Investors generally cannot force a sale or override the trustee - Fully passive, but essentially no governance voice

Both can serve as 1031 replacement property; confirm suitability with your advisors.

Decision-making and friction

This is where DSTs took over. Because a TIC may require unanimous (or supermajority) consent from up to 35 co-owners for major actions — refinancing, signing a new lease, or selling — a single holdout can stall the whole property. Imagine 34 owners ready to sell into a strong market and one who refuses; the transaction can grind to a halt. A DST removes that friction entirely: one trustee makes operating and disposition decisions, so investors are fully passive and there is never a vote to coordinate. That simplicity is a major reason DSTs dominate today's passive 1031 market. The flip side is that DST investors have essentially no say in those decisions and must trust the sponsor's judgment about when to sell and how to operate.

Financing and lender treatment

Financing also differs sharply. In a TIC, each co-owner may need to qualify for and sign on the loan individually, which complicates closings and any future refinancing — a lender effectively underwrites up to 35 separate borrowers. In a DST, the loan is arranged once at the trust level and the individual investors are generally not personally liable, which simplifies the process considerably and removes any personal loan exposure from your balance sheet. For investors who want to avoid lender qualification and the entanglement of co-signing with strangers, the DST structure is typically far easier. As always, the specific loan terms and recourse provisions vary by offering and warrant professional review.

Liquidity, control, and risk

Both structures are illiquid and intended for accredited investors, with no reliable secondary market. There are nuances, though. Because a TIC interest is a deeded property interest, an owner can sometimes sell or transfer their slice independently, subject to the co-ownership agreement — but finding a buyer for a fractional TIC interest is rarely easy. A DST interest is held until the sponsor sells the asset. On control, the TIC gives you a real vote and a real voice; the DST gives you neither but spares you the coordination. On risk, the TIC concentrates governance risk in the group's ability to agree, while the DST concentrates it in the trustee's judgment. There is no free lunch — you are choosing which kind of dependence you prefer.

Owner limits and capacity

The 35-owner cap on a TIC is a hard ceiling that shapes minimum investment sizes: to assemble enough capital for an institutional property with only 35 slots, each slice tends to be larger. A DST has no such cap and can spread an offering across many more investors, which is part of why DST minimums can be relatively modest and why diversifying across several DSTs is practical. If you want to commit a smaller amount or spread proceeds across multiple properties, the DST's capacity is an advantage.

A worked illustration

Suppose four sophisticated investors who already know and trust each other want to co-own a single property and have a genuine say in when it sells. A TIC may fit: four deeded owners, a clear co-ownership agreement, and real voting power, accepting that they must each qualify for the loan and must agree on major moves. Now suppose an investor wants to place an illustrative $250,000 of 1031 proceeds passively across two or three properties with no voting, no loan signing, and no coordination. The DST fits that profile far better. Figures and scenarios here are purely illustrative.

Choosing between the structures

A DST is usually the simpler, more hands-off choice: no owner votes, no individual loan qualification, capacity for many investors, and modest minimums. A TIC may appeal to a small group of investors who want direct deeded ownership and a real voice in major decisions and are willing to coordinate among themselves. Both are illiquid and intended for accredited investors, and both qualify as 1031 replacement property. Because governance, financing, owner limits, and exit terms differ meaningfully, compare specific offerings and review the documents with your CPA and attorney before deciding.