1031 Exchange Freedom: Why Smart Investors Are Ditching DSTs for TICs
- Irwin Boris
- Apr 9
- 4 min read
The 1031 Exchange Trap Most Investors Fall Into
45 days.
That's how long you have to identify replacement properties for your 1031 exchange.
And that's exactly when many investors make a decision they regret for years:
Rushing into a Delaware Statutory Trust (DST) without understanding the permanent handcuffs they're putting on.
"These aren't the droids you're looking for..."
Remember that Jedi mind trick from Star Wars? That's essentially what's happening when DST sponsors dangle "passive income" in front of stressed 1031 investors racing against the clock.
What they don't emphasize:
• You surrender ALL control over your investment • You can't refinance to access equity • You can't adapt to changing market conditions • You're locked in until THEY decide to sell
Meanwhile, savvy investors are using Tenant-In-Common (TIC) structures for multi-tenant industrial and flex properties, retaining their decision-making rights while still satisfying 1031 requirements.
Don't let the 45-day pressure cooker force you into a LLC - Locked-in Low-yield Choice.
"Why I'll Never Put Another Dollar in a DST"
Direct quote from a client who called me last week.
After selling his retail property in a 1031 exchange, he followed his broker's recommendation into a DST holding Class A multifamily.
Three years later: • His promised 5.7% cash flow never materialized (actual: 4.2%) • Market rents in the area surged, but the DST couldn't capitalize • The property needed capital improvements, but the DST couldn't raise funds • He wanted out, but there was zero secondary market for his interest
The IRS treats DSTs as "Legally Active, But Functionally Passive."
Translation: You get all the tax benefits of direct ownership, but NONE of the advantages that make real estate such a powerful wealth-building tool.
Multi-tenant industrial TIC structures offer a superior alternative: • Maintain decision-making authority • Ability to refinance when advantageous • Freedom to implement value-add strategies • Control over hold periods and exit timing
When you're exchanging into your next property, remember: true wealth isn't just built on tax deferral. It's built on control.
The Seven Deadly Sins Destroying Your 1031 Returns
The IRS prohibits DSTs from doing seven critical things. They're officially called the "Seven Deadly Sins," and they're killing your investment returns:
✋ DSTs CANNOT renegotiate leases
✋ DSTs CANNOT refinance properties
✋ DSTs CANNOT raise new capital
✋ DSTs CANNOT reinvest proceeds
✋ DSTs CANNOT make substantial improvements
✋ DSTs CANNOT renegotiate debt
✋ DSTs CANNOT sell or exchange property
Now imagine owning multi-tenant industrial through a TIC structure where NONE of these restrictions apply.
When that big tenant asks for a 5-year extension with slight modifications? You can say yes. When interest rates drop dramatically? You can refinance. When the roof needs replacement? You can raise capital efficiently.
The difference in long-term returns isn't marginal - it's MASSIVE.
One client's TIC industrial investment outperformed his previous DST by over 380% in just 5 years, primarily because we could actively manage the asset.
The 1031 clock is ticking, but don't let it push you into a lifetime of regret.
How DST Sponsors Exploit Your 1031 Deadline Pressure
Let's talk about the uncomfortable truth of the DST industry.
When you're up against that 45-day identification deadline, DST sponsors know you're vulnerable. Here's how they exploit that pressure:
🕸 Overpriced Properties – They acquire at market value, mark up 5-7%, then sell to exchange-pressured investors who rarely scrutinize the numbers properly.
🕸 Fee Layering – Acquisition fees, asset management fees, property management fees, disposition fees... I recently reviewed a DST offering with 14% of investor capital going to fees before a single dollar was invested.
🕸 Misaligned Incentives – Many sponsors make their real money on the front-end fees, not the long-term performance.
Compare this to a well-structured TIC for multi-tenant industrial: • Direct acquisition at true market value • Transparent, aligned fee structures • Incentives tied to actual property performance • Professional management with investor oversight
One of my clients was literally days away from putting $2.7M into a DST before we showed him our TIC alternative for flex industrial. Four years later, he's received 2.3x the cash flow he would have in the DST.
The best 1031 decisions aren't made under pressure. If you're approaching your deadline, let's talk about TIC alternatives that won't leave you trapped.
Multi-Tenant Industrial: The Perfect TIC Asset Class
Not all property types are created equal for TIC structures.
After helping investors place over $83M in TIC investments, I've found multi-tenant industrial and flex properties to be uniquely advantageous:
Management Efficiency – Smaller tenant improvements and standardized spaces mean simpler decision-making among co-owners
Risk Distribution – Multiple tenants across various industries provide natural diversification that single-tenant properties can't match
Staggered Lease Expirations – Creates ongoing optimization opportunities without overwhelming co-owner governance
Lower Capital Requirements – Smaller periodic improvements versus major repositioning needs
Recession Resilience – Essential business tenants provide stability during economic fluctuations
One recent example: A 7-investor TIC structure we facilitated for a 12-unit industrial flex property has outperformed its projections for 3 consecutive years, with minimal co-owner friction.
The governance structure of a TIC requires thoughtful consideration, but when paired with the right asset class, it delivers what DSTs fundamentally cannot: actual ownership with control.
Don't settle for the DST illusion of ownership when you can have the real thing.
Breaking Free: From DST Handcuffs to TIC Freedom
"I feel like I've been liberated from financial prison."
That's what a client told me after we helped him transition from a DST investment into a TIC structure for multi-tenant industrial.
After years of: • Receiving distribution checks with no transparency • Watching neighboring properties implement value-add strategies he couldn't • Having zero voice in property operations • Being unable to access his equity
He finally experienced what real estate ownership should actually feel like: • Quarterly meetings where his voice mattered • The ability to implement energy efficiency upgrades that boosted NOI by 17% • Refinancing that returned 31% of his initial capital while maintaining the 1031 integrity • Control over his financial destiny
DSTs are at best a LLC - Locked-in Low-yield Choice.
TICs for multi-tenant industrial are FRE - Flexible, Responsive, and Empowering.
If you're facing a 1031 exchange and contemplating a DST, let's have a conversation about maintaining your rights as a real estate investor while still satisfying the IRS requirements.
Your wealth deserves better than a Jedi mind trick.
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