DST Pros and Cons — the Unsponsored Version

Every DST brochure lists the pros; the cons arrive by experience. Both columns, from people who don’t sell them — with the mechanics explained here.

The genuine pros

Certainty of close — a DST executes in days, which makes it unbeatable insurance on a day-45 list. True passivity — no lease reading, no lender calls, no decisions; for an aging owner exiting operations entirely, that’s a feature with real value. Institutional access — $100K buys into property classes (distribution, Class-A multifamily) individual exchangers can’t touch whole. Pre-arranged debt — trusts carry fixed leverage that satisfies debt replacement without a loan application. Estate convenience — interests divide neatly among heirs, each free to exchange independently at the trust’s exit.

The honest cons

Fee drag — loads and sponsor economics commonly costing 8–12% of capital, paid whether the deal performs or not. Zero control — sale timing, operations, and outcomes belong to the sponsor; Revenue Ruling 2004-86’s restrictions prohibit the trust from raising capital or refinancing even when it should. Illiquidity — secondary markets are thin to nonexistent; plan on holding to the sponsor’s exit. Projection risk — distributions are forecasts, and 2022-24 reminded the industry that sponsor pro formas meet interest rates like everyone else’s. Adverse selection — the properties sponsors can profitably wrap are not always the properties you’d choose naked.

Who should actually use one

Exchangers with leftover dollars after a primary purchase; buyers needing bulletproof backup identification; owners under ~$300K where whole-property quality thins; and the deliberately decision-free. For a $1M+ primary allocation, compare against direct NNN ownership first — the comparison usually answers itself, in either direction, once the fee math is on paper.