DST Educational Series A- Part 5: DST Fees

Welcome DST News! Our goal is to provide non-biased education and market information for Accredited Investors on DSTs. We hope to provide a Depth & Breath of knowledge for Investors About Delaware Statutory Trusts (DSTs)

By Al DiNicola, AIF® Feb 9, 2022

The expenses associated with a Delaware Statutory Trust investment or purchase may be viewed as expensive.  This may be due to how the fees are charged and when. Most real estate investments will have three aspects of cost: cost to purchase (acquisition); cost to operate (operations); cost exit or sell the property at the end of ownership (disposition). DST have the same fees.  There are attorney and legal fees, loan cost (if debt is present), and expenses paid to lender are found in both regular real estate investment and DST.  There are other fees in DST that may at first glance is not typical. Here are examples:

Selling Commissions. Most owners of commercial real estate use real estate brokers. DST investment acquisitions, by individual investors, are handled through a licensed third-party group. These are representatives of Broker/Dealers as well as registered representatives operating under a registered investment advisor (RIA). You must have Securities licenses and registered with either the SEC or FINRA.

In some cases, RIAs may be compensated from their clients based on assets under management, if this occurs then commissions may be re-allowed to registered representatives that execute sales of DST interests. Real estate brokers are not permitted to participate in the sale of a DST (unless the individual agents carry the necessary securities license). There is a difference when you compare the commission paid on a DST acquisition to the commission paid on a typical real estate transaction.  On a DST transaction the commission is only paid on the cash invested in the transaction and not on the borrowed funds to acquire the property.  In a normal real estate transaction where an investor brings $500,000 in cash, obtains a $500,000 loan to purchases a $1,000,000 building the real estate commission is paid on the entire amount. That would amount to a $60,000 commission (using a hypothetical total listing commission of 6%) compared to a $30,000 commission on a DST purchase with the commission only being paid on the $500,000 of cash in the transaction. Typically, in real estate offered through real estate brokers the listing agreement specify the seller pay all the commissions (simply by adding to the selling price). The commission conversation with any seller of real estate may also include the notion that no matter how the deal is structured the buyer is always paying the commission (since it will be added to the acceptable price paid to the seller).

Look for Part 6: Allowances for Broker Dealer

DST’s (Delaware Statutory Trusts) are for accredited investors only.  Contact your investment adviser for additional details on how a DST may be a solution to your 1031 Exchange and compliment your financial objectives. For more information on how to properly set up an IRC 1031Tax Deferred Exchange or if you are an accredited investor and would like additional information on a DST contact Al DiNicola at 239-691-8098 or email adinicola@namcoa.com.

This is not an offer to purchase or solicitation to purchase any security, as such be made only through an offering memorandum or prospectus.  Investing in securities, real estate, or any investment, in any form, involves risk, including but not limited to the potential of losing some or all of your investment dollars when you invest in securities. You should review any planned financial transactions that may have tax or legal implications with your personal tax or legal advisor.   NAMCOA, LLC is a Registered Investment Advisor, regulated by SEC (Securities and Exchange Commission). Our corporate office is located at 999 Vanderbilt Beach Road, Suite 200, Naples Florida 34108. Securities Offered through MSC-BD, LLC, Member of FINRA/SIPC. 410 Peachtree Parkway Suite 4245, Cumming, GA 30041. MSC-BD, LLC and NAMCOA are independently owned and are not affiliated. 

About the author

Al DiNicola, AIF, CEPA, specializes in 1031 Exchanges utilizing DST as a viable alternative for accredited investors. He also is well versed in Opportunity Zones and Alternative Real Estate Investments. Mr. DiNicola has more than 40 years of experience in commercial & residential sales and development. Al has extensive experience in real estate land acquisitions, development, investment and real estate securities.

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