THE 1031 INVESTOR TRAP: HOW 1% ANNUAL RIA FEES CAN UNDERCUT YOUR RETURNS In today’s 1031 exchange marketplace, investors are increasingly hearing a clever sales pitch from Registered Investment Advisors (RIAs): avoid upfront commissions on Delaware Statutory Trusts (DSTs) and instead pay a 1% annual assets-under-management (AUM) fee. At first glance, this sounds appealing—lower upfront costs, alignment of interests, and the comfort of a “fiduciary” relationship. But when you apply basic real estate logic, the math tells a very different story.
DSTS ARE REAL ESTATE INVESTMENTS—SO TREAT THEM THAT WAY
A DST is not a stock portfolio. It is a form of real estate ownership blessed by the IRS as like-kind for the purposes of a 1031 exchange. Investors in DSTs are effectively buying into institutional-grade properties such as, apartment communities, industrial facilities, and medical office buildings. Key Question Investors Should Ask: What is my expected hold period? Most DSTs are structured with a projected hold period of 5 to 10 years, though they may go longer depending on market conditions.
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