Buying my own NNN property vs DSTs

I have seen clients initially drawn to purchasing their own NNN (Triple Net Lease) property, only to ultimately choose a Delaware Statutory Trust (DST) instead. These investors are often attracted to NNN properties because they offer passive ownership with minimal landlord responsibilities, but they become concerned about placing such a large portion of their net worth into a single property with one tenant.

That's why DST 1031 properties have become an increasingly popular alternative for investors who were previously considering direct NNN ownership. Here are some key reasons why investors may choose DSTs over purchasing their own NNN property:

Access to the Same Quality NNN Properties and Tenants

DSTs provide access to the same caliber of properties and tenants you'd find in direct NNN ownership. Tenants such as Walgreens, CVS, FedEx, Starbucks, Dollar General, and Home Depot have all been featured in DST programs. Many investors love the idea of receiving monthly distributions from these established, creditworthy national tenants.

It's important to note that actual tenants will vary depending on the DST properties available at the time of your investment. The companies listed may not be represented in all programs and may not always be available.

Diversification Across Multiple Properties

Many investors realize that placing $2-4 million into a single Walgreens or $1.5 million into one Starbucks location creates significant concentration risk. What happens if that one tenant doesn't renew their lease, or if that specific location underperforms?

DSTs provide a potential solution by allowing investors to build a diversified portfolio across multiple NNN properties in various geographic regions, with different tenants, through different sponsor firms. This diversification approach is similar to why investors don't put their entire retirement account into a single stock, but rather invest in mutual funds or ETFs.

It's important to note that diversification does not guarantee against losses or guarantee profits.

Lower Capital Requirements

Quality NNN properties often require $2-5 million investments, putting them out of reach for many investors. DSTs typically have minimum investments of $100,000, making institutional-grade NNN properties accessible to a broader range of investors.

Professional Management Without the Headaches

While NNN properties are considered "passive," direct ownership still involves lease negotiations, tenant relations, property inspections, and potential vacancy periods. As clients are looking to reduce their responsibilities, many times their children are occupied in their careers and not interested in taking on these responsibilities. DST properties are professionally managed by experienced sponsors who handle all operational aspects, providing truly passive ownership.

Faster, More Reliable Closings

For 1031 exchange investors working within tight timelines, DSTs offer "pre-packaged" solutions that eliminate the risks associated with financing, appraisals, environmental reports, and undisclosed lease issues that can derail traditional NNN property purchases during the 45-day identification period.

The Bottom Line

While direct NNN ownership offers more control, DSTs provide access to the same asset class with professional management, diversification, and lower capital requirements. For investors seeking passive real estate income without concentration risk, DSTs often represent the ideal solution.

Ready to explore DST opportunities? Contact Juniper Exchange to learn how DSTs can enhance your real estate portfolio.