Direct NNN
vs
DST

With $500K-$2M of 1031 equity, direct NNN buys you 100% of one credit-tenant single-tenant building with full control and 1-2% in deal fees, while a DST buys you a passive minority interest in a sponsor-controlled portfolio at a 10-17% all-in fee load.

GM By Glen Gomez-Meade~9 min read Published

TL;DR

If you have $750K+ and want to keep doing real estate, go direct NNN. If you have $500K or less, want zero work, or are using DSTs as backup IDs, the DST math works. The middle case ($500K-$1M with appetite for one direct deal) is where most investors get sold the wrong product.

What is Direct NNN?

Direct NNN at this equity range gets you into a $1.5M-$5M single-tenant property — Dollar General, O'Reilly Auto Parts, regional QSR, smaller medical, neighborhood industrial. You source through a broker, underwrite the tenant credit and lease, finance at 50-65% LTV non-recourse, and own the building in your LLC. All-in deal fees (broker, legal, PCA, lender, title) typically 1-2% of purchase price.

What is DST?

A DST at this equity range deploys into one or more sponsor offerings — typically institutional multifamily, NNN industrial, medical office, or storage portfolios. Sponsor minimums run $50K-$100K. You write a check, sign sub docs, and become a fully passive beneficial-interest holder in a Delaware trust. Sponsor controls financing, leasing, capex, and exit timing.

Side by side

Direct NNN vs DST — the differences.

Dimension Direct NNN DST
Equity range we're talking about $500K-$2M down on a $1.5M-$5M property $500K-$2M spread across 1-10 DST offerings
Number of properties One (or two if you split equity) 1-10 depending on diversification strategy
All-in cost of getting in 1-2% of purchase price ($15K-$60K typical) 10-17% of equity ($50K-$340K of your check)
Cash-on-cash year 1 7-9% with 60% leverage on a 6.0% cap deal 5.0-6.0% projected, net of fees
Tenant exposure 100% to one credit story Diversified across portfolio (or stack)
Decision rights All of them — you sign every doc None — sponsor controls everything
Time required 20-60 hours of underwriting + closing involvement 2-5 hours per offering — read PPM, sign sub docs
Property management Minimal in true NNN — handle annual recon, watch for default None — sponsor or third-party PM handles everything
Liquidity / exit control Yours — sell when the market or your life says to Sponsor's — exit when their fund needs liquidity
Estate planning fit Excellent — single property, easy to title and step up Workable — beneficial interests step up too, but allocation across many DSTs adds estate complexity
Best at this equity level for Investors who want control, upside, and one quality building Investors who want zero work, max diversification, or backup IDs

When to use Direct NNN

  • You have $750K+ of equity and want to deploy it into one credit deal
  • You're willing to put 20-60 hours into sourcing, underwriting, and closing
  • You want 100% of the upside, not 83-90% after sponsor load
  • You want to control the eventual sale and the timing
  • You'd rather own a real building than a beneficial interest in someone else's deal

When to use DST

  • Your equity is under $500K and direct NNN options shrink to lower-credit tenants
  • You're 70+ and explicitly trading out of the operational role
  • You want one exchange to spread across 4-8 sponsor portfolios
  • You need backup IDs on day 43 to keep your exchange alive
  • Your CPA or estate plan favors fractional interests over single-property concentration

Verdict

At $500K-$2M of equity, direct NNN almost always wins on math — the 10-17% DST load is permanent equity drag that no sponsor outperforms over a 5-7 year hold. The exception is when you genuinely want to be done with real estate as a job and the diversification across sponsors actually matters to your portfolio. Most DST sales at this equity level are sold to investors who could and should have gone direct.

Frequently asked questions

How much equity do I really need to buy quality NNN direct?

Practical floor is $500K equity to compete for institutional-quality NNN. At $300K-$500K you're shopping Dollar General, smaller franchise QSRs, and lower-credit regional tenants — workable but a different risk profile. Below $300K, DSTs become structurally more attractive.

Can I split my exchange between direct NNN and a DST?

Yes, and we recommend it for many buyers. Common structure: 75-85% into the direct NNN and 15-25% into a DST to soak up leftover proceeds and avoid boot. The DST also serves as your backup ID if the direct deal falls out.

What does a 10-17% DST load actually buy you?

Sponsor's acquisition fees, broker-dealer selling commissions, organizational and offering expenses, ongoing asset management fees. Some of this is real value (institutional underwriting, professional management). A lot of it is friction. Read every PPM's fee table line by line.

If I go direct NNN at this equity level, what tenants should I look at?

Investment-grade single-tenant retail (Walgreens, CVS, AutoZone, O'Reilly), high-credit QSR (Chick-fil-A, Starbucks ground leases when you can find them), smaller industrial flex, and medical office. Avoid newer franchise concepts and short-term residual leases unless you're underwriting real estate first, lease second.

GM

Author

Glen Gomez-Meade

Glen writes The Upleg. More about Glen →

The Upleg Weekly

Get the 1031 Playbook. Free, weekly briefing.

One weekly email. Snarky CRE takes, the occasional cap rate, unsubscribe anytime.