At our December DIG Philly meeting, Fred Hubler broke down Delaware Statutory Trusts (DSTs) in a way that finally makes sense. Forget the technical jargon—this is about Thanksgiving dessert and why 40 business partners is a terrible idea.
Here's something that might surprise you: DSTs have been around for 19 years. They're not some cutting-edge, untested financial product. Yet most people have never heard of them.
As Hubler points out, DSTs are essentially a modernized, improved version of something real estate investors have used for decades: tenant-in-common (TIC) arrangements. But understanding why DSTs are better requires understanding why TICs were problematic in the first place.
Imagine you own a property with your brother-in-law in a place like West Chester, Exton, or even Phoenixville. You're both on the deed as tenants in common. When decisions need to be made—whether to renovate, when to sell, how to handle a problem tenant—you have two voices at the table. Manageable, right?
Now imagine owning that same property with 40 other people.
Hubler's Thanksgiving test perfectly illustrates the problem: "At my Thanksgiving we couldn't agree on what to have for dessert. So imagine having investors in a real estate."
Traditional tenant-in-common structures gave every investor equal say in property decisions. On paper, that sounds democratic and fair. In practice, it's a nightmare:
If your family can't agree on pumpkin pie versus apple pie, how are 40 strangers supposed to agree on six-figure renovation decisions?
The result was often paralysis. Properties that should have been improved weren't. Sales that should have happened were delayed. Opportunities were missed because consensus was impossible.
A Delaware Statutory Trust solves this problem with elegant simplicity. As Hubler explains it:
"All a DST is, is a better structure of a tenant in common where the sponsor—Cantor, Inland, whoever is the person putting it out there—they act like a managing partner but it's not a partnership."
Let's unpack that:
The Structure:
The Key Difference:
When you invest in a DST, you're essentially saying: "I want the income from real estate without the headaches of real estate."
You Get:
You Give Up:
For many investors—especially those tired of being landlords or facing massive capital gains taxes—this trade-off is exactly what they're looking for.
Hubler uses another helpful analogy for understanding DSTs: Think of it like booking a flight.
When you invest in a DST, you're getting on a plane with a 5-7 year typical hold period. You know roughly when you're departing (when you invest) and when you're landing (when the property is expected to sell).
At the airport (when the DST property sells), you have three doors:
Door 1: Exit the airport and pay your taxes—including all the taxes you've deferred over the years
Door 2: Get on another flight (another DST) and continue deferring taxes while collecting passive income
Door 3: Go private—take your appreciated capital and invest in your own property
The beauty is that you make this decision when the property sells, not when you first invest. You maintain flexibility while collecting passive income for 5-7 years.
DSTs aren't for everyone, but they make sense for:
To invest in DSTs, you need:
A DST is what happens when someone looks at traditional real estate investing and asks: "What if we could keep all the benefits—the income, the tax deferral, the appreciation potential—and eliminate all the problems—the management, the disagreements, the active involvement?"
The answer is a structure that's been refined over 19 years but remains unknown to most investors simply because... well, nobody talks about it.
Until now.
If you can't get your family to agree on Thanksgiving dessert, maybe you shouldn't be trying to manage real estate with 40 other investors. There's a better way.
Delaware Statutory Trusts require accredited investor status and have minimum investment thresholds typically starting at $100,000. DSTs are illiquid investments with typical hold periods of 5-7 years. This article is for educational purposes only. Always consult with qualified tax, legal, and financial professionals before making investment decisions.