The choice between a Tenants-in-Common interest and a Delaware Statutory Trust is less about preference and more about what the investor is actually trying to accomplish: hands-on governance and cash-out optionality, or clean passivity at scale.
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What Each Structure Actually Is
A TIC is one of the oldest forms of joint property ownership: two or more investors hold direct, fractional title to a single asset. Each co-owner carries an undivided interest in the property, which can span commercial, multifamily, self-storage, or other asset types. Critically, every tenant in common holds equal rights to occupy and use the property regardless of how equity is divided among the group.
A Delaware Statutory Trust operates differently. Ownership is consolidated into a single trust managed by a professional sponsor. Investors hold a beneficial interest in the trust rather than direct title to the property. Both structures sit within the broader category of fractional ownership vehicles, alongside real estate funds and non-traded REITs, and both qualify as replacement property in a Section 1031 exchange.
The distinction matters because the legal form determines nearly everything else: governance rights, financing flexibility, scalability, and estate planning outcomes.
Where the Structures Diverge
| Factor | TIC | DST |
|---|---|---|
| Ownership form | Direct fractional title | Beneficial interest in trust |
| Investor governance | Votes on leases, refinancing, and sale | No governance role; sponsor manages |
| Mortgage structure | Each investor named on the loan | Trust holds debt; investors are not named |
| Co-investor cap | Capped under Rev Proc 2002-22 | No statutory cap; scales via trust |
| Cash-out refinance | Available; investor votes on timing | Not investor-controlled |
| Exit flexibility | Investor may divest shares without partner approval | Secondary market options; sponsor-determined |
| Estate transfer | Investor bequeaths share freely; no survivorship right | Beneficial interest passes per trust terms |
The TIC Cash-Out Mechanic
One feature that draws investors to TICs specifically is the cash-out refinance pathway. In this approach, the property is acquired free of debt. After a seasoning period of one to two years, the ownership group refinances at a 40 to 60 percent loan-to-value ratio. The proceeds flow back to investors as loan proceeds rather than income, which means they are not taxable in the year received.
This structure can return a meaningful portion of investor principal without triggering a taxable event. For investors who want both the deferral benefit of a Section 1031 exchange and eventual access to liquidity, the TIC cash-out path offers a mechanism that a DST's passive structure does not.
The cost is involvement. TIC investors vote on the refinancing decision, as well as on new leases and any eventual sale. That governance layer is not optional; it is baked into the legal architecture.
Governance, Scalability, and Estate Considerations
The operational friction in a TIC is structural, not incidental. IRS Revenue Procedure 2002-22 limits the number of co-investors and requires each investor to be named on the mortgage. Every major property decision, signing a new lease, refinancing, selling, requires investor participation. For investors who want an active role, this is a feature. For those transitioning out of active landlord responsibilities, it reintroduces the management burden they were trying to exit.
Scalability is the DST's structural advantage. Because ownership consolidates into a trust, a sponsor can aggregate capital from a much larger investor pool and build diversified portfolios across multiple asset types and geographies. A TIC cannot replicate this at meaningful scale.
Estate planning outcomes also differ. In a TIC, there is no right of survivorship. Each investor holds the right to bequeath their fractional interest to whomever they choose, and co-owners often negotiate first-right-of-purchase provisions to manage the risk of an unwanted third party entering the ownership group. In a joint tenancy, by contrast, a deceased owner's share passes directly to the surviving co-owner. TIC investors should weigh which outcome aligns with their estate plan before committing.
What This Means
The TIC versus DST decision is ultimately a question of control versus scale. Investors who want to vote on property decisions, access a cash-out refinance pathway, and retain direct title will find the TIC structure built for those priorities. Investors who want fully passive income, sponsor-managed operations, and a structure that accommodates a broader capital base will find the DST a closer fit.
Neither structure is the universal answer. The right fit depends on exchange timeline, liquidity needs, estate intentions, and tolerance for governance involvement. Accredited investors can map their specific situation against current offerings through a partnered broker-dealer's intake process. Confirm accreditation status to proceed.