Many investors have had bad experiences with TIC investments and are interested in understanding why DSTs may be better. In this blog, we will provide some basic education on the key differences and relative benefits of TIC investments and 1031 DST exchanges.
Loan Responsibilities – In a DST the sponsor or an affiliate trustee is the sole borrower and is fully responsible for any loan guarantees. In a TIC, each investor is a borrower and is responsible for specified loan liabilities.
Management – In a DST the trustee is responsible for all property decisions. In a TIC, the investors are responsible for making important property decisions and unanimous approval is required for a sale, leases, and any new financing.
Track Record – In general, TICs have performed very poorly and most owners that we have worked with have not realized the expectations that they received when first making their investments. DSTs have performed far better largely due to 1) greater manager responsibilities and liabilities for failing to perform 2) greater scrutiny from lenders and the securities industry over who may be allowed to become a DST sponsor 3) more realistic performance projections due to oversight by third party due diligence groups and broker dealers in approving offerings.
These factors have resulted in strong growth in 1031 DST exchanges in recent years while new TIC investments have dropped to relatively low levels.
FGG1031 is an affiliate of First Guardian Group and is headquartered in San Jose, California. Our team consists of highly experienced real estate and investment professionals who have provided services to thousands of clients across the US for more than 12 years.
At FGG1031 we specialize in providing a custom 1031 exchange experience by working with the investor one on one throughout the entire 1031 exchange process. We provide advice on selecting suitable 1031 Exchange options including properties structured as a Delaware Statutory Trust (DST) as well as access to the wholly owned real estate.