Tool & guide

1031 Exchange DST Brokers: Recommendation Assumption Comparator

By Sequoia ResearchPublished Read as Markdown

Recommendation Assumption Comparator

Users enter the assumptions supporting a recommendation and alternative values they want to test. The tool displays how modeled cash flows and exit proceeds change and generates questions for the recommending professional.

For an export, select Download in the tool, then Save file when it appears below. Your entries stay in your browser.

What Is This Article About?

This guide explains a calculator for testing the assumptions behind a DST recommendation. It compares two sets of income, cost, reserve, and sale inputs for one property or program. The results show changes in modeled cash and suggest questions for the recommending professional. The calculator does not rate the recommendation, forecast returns, or determine the tax result of an exchange.

Table of Contents

What the Recommendation Assumption Comparator Does

The calculator lets you compare a reference case with an alternative case. You enter every number in both cases. It then computes annual cash after the entered costs, cash across the hold period, a modeled sale value, and cash left at exit. A final row adds the signed annual and exit amounts.

The tool does not choose a better case. A larger number may come from a less cautious assumption, an omitted cost, or a reserve release. The value of the exercise lies in seeing which input changed and what evidence would support it.

This is useful when a recommendation depends on a rent forecast, a debt schedule, or a sale assumption that you want to test. Ask the professional to explain the reference case. Then enter a clearly labeled alternative. You can change one input to isolate its effect or several to examine a combined case. The output lists all numeric inputs that differ.

The SEC's performance bulletin explains that projections are hypothetical and that methods, costs, and market conditions affect how results should be read. This tool follows that distinction. Its computed figures are consequences of your inputs, not evidence that the property will produce them. SEC performance claims bulletin

Choose One Model and a Common Holding Period

Begin with the exact offering name or a name that clearly identifies a fictional model. All dollar amounts must cover the same property or program. Do not combine the whole property's income with one investor's debt share. A result built from different ownership scales would have no sound meaning.

Enter an analysis date and a holding period of one through 30 whole years. Both cases use that period. Annual amounts stay flat, and the exit takes place at the end of the last modeled year. These are design choices that keep the comparison easy to inspect. They are not statements about a typical DST holding period.

The model name becomes fixed after the first successful calculation. This prevents a new name from inheriting another offering's inputs and results. To correct the name or change offerings, use Start new analysis and confirm that you want to clear the record. Save an export first if you need the earlier work.

The analysis date labels your work. It does not update the dates in your sources or prove that an offering is still open. This calculator has no connection to sponsor inventory, broker records, property accounts, or market prices.

Enter Sources and Separate Facts From Assumptions

Each case has a required explanation field. Record the source, version, period, and assumptions there. If some inputs are known and others are estimates, identify which is which. A wholly invented case is allowed when you label it as fictional.

For a real research exercise, an explanation might identify a dated operating statement for income, a loan schedule for debt payments, and a separate estimate for sale costs. The tool checks that you supplied text. It does not open documents or decide whether that text supports the numbers.

Use a blank field when an amount is unknown. The calculator will stop rather than silently treat it as zero. Enter zero only when you intend to leave that item out or have a basis for a zero amount. Explain meaningful exclusions in the source or notes field.

Dollar inputs allow up to two decimal places and no commas. Each amount is limited to $1 billion. Only annual net operating income can be negative. Rate inputs allow up to two decimal places: the exit cap rate must be above zero and no more than 100%, while sale costs may range from zero through 100%. These are input limits, not estimates of reasonable market terms.

Build the Annual Cash-Flow Cases

For each case, enter annual net operating income, annual debt payments, annual reserve funding, and other annual cash costs. Net operating income, or NOI, means income after property operating expenses in this model. Do not subtract the same operating expenses again in the other-cost field.

The annual calculation is:

Annual cash = annual NOI − debt payments − reserve funding − other annual cash costs.

Debt payments should include the scheduled amounts you intend to model, such as principal and interest. The calculator does not create an amortization schedule. You must enter the eventual debt payoff separately. Ask the professional to explain how those two inputs fit the loan terms.

Reserve funding is cash set aside during each modeled year. Other annual costs can capture additional recurring cash needs that are not already in NOI or another field. Use the explanation to state what each amount contains. This matters when one report lists a fee within expenses and another shows it below NOI.

The tool multiplies annual cash by the whole holding period. It also provides a year-by-year table. Every row repeats the same annual amount. The last row shows the separately calculated exit cash. No rent growth, expense growth, payment delay, partial year, or midyear sale is added behind the scenes.

Enter the Exit Value and Cost Assumptions

Enter annual NOI used for the exit and an exit capitalization rate. A cap rate expresses income as a percentage of value. In this simplified model, the estimated gross sale value equals exit NOI divided by the cap rate expressed as a decimal.

For example, $1.2 million of exit NOI divided by 6%, or 0.06, produces a $20 million modeled value. This is arithmetic under chosen assumptions. It is not an appraisal or evidence of what a buyer would pay.

Next enter sale costs as a percentage of modeled value, the debt payoff, other exit cash costs, and any reserve cash released. The exit calculation is:

Exit cash = modeled value − sale costs − debt payoff − other exit costs + reserve release.

Keep sale costs and other exit costs distinct to avoid counting an item twice. The percentage field applies to the modeled gross price. The other-cost field is a dollar amount. The tool has no way to detect that you entered the same brokerage cost or closing charge in both places.

Gross value rounds to the nearest cent first. Sale costs then round to the nearest cent using that rounded value. A half cent rounds up. The remaining dollar calculations use whole cents. This sequence is included in exports so another reader can reproduce the result.

Read the Fictional Five-Year Example

The Load fictional example button asks before replacing your work. It fills the inputs but does not calculate until you select Compare assumptions. The example covers an invented whole-property model over five years.

The reference case uses $1.2 million in annual NOI. It deducts $650,000 of debt payments, $100,000 of reserve funding, and $50,000 of other annual costs. Annual cash is $400,000. Across five flat years, that totals $2 million.

At exit, the reference case uses $1.3 million of NOI and a 5% cap rate. Modeled value is $26 million. Sale costs of 2% are $520,000. After a $10 million debt payoff and $100,000 of other exit costs, adding a $400,000 reserve release leaves $15.78 million in modeled exit cash.

The alternative reduces annual NOI to $1.1 million. It also reduces exit NOI to $1.2 million and raises the exit cap rate to 6%. The other inputs stay the same.

Modeled output Reference case Alternative case Alternative minus reference
Annual cash $400,000 $300,000 ($100,000)
Cash across five years $2,000,000 $1,500,000 ($500,000)
Gross exit value $26,000,000 $20,000,000 ($6,000,000)
Sale costs $520,000 $400,000 ($120,000)
Exit cash after entered items $15,780,000 $9,900,000 ($5,880,000)
Combined modeled cash balance $17,780,000 $11,400,000 ($6,380,000)

The sale-cost change is negative because the alternative's lower modeled price produces a smaller cost at the same 2% rate. That lower cost offsets part of the value decline. It does not make the alternative a recommended choice.

The combined balance is not profit. The tool has no initial equity contribution or investor ownership share. These totals can include returned capital and released reserve cash. They cannot establish a percentage return or the amount one investor receives.

Understand Negative Cash and Reserve Releases

A negative annual result means the entered annual costs exceed the entered NOI. It is a funding need within this model. The calculator does not assume that investors will pay the gap, that a sponsor will cover it, or that the trust may take a particular action.

A negative exit result has the same limited meaning. Modeled sale value and reserve cash do not cover all entered exit obligations. The result should lead to a review of the terms and possible sources of cash. It is not a finding about a lender's rights or a specific investor's liability.

The combined balance adds positive and negative amounts. If five years each show a $10 cash need and exit shows an $11 cash need, the combined balance is negative $61. That number does not show when funding would be needed within each year. The annual schedule helps keep the two parts visible.

Reserve releases need special care. The tool compares the release with reserve funding during the modeled hold. If the release is larger, it generates a question about beginning reserves or another source. It still calculates because the model has no opening reserve balance. The flag is a prompt to obtain records, not proof of an error.

Even a smaller release is not verified. Repairs, lender controls, other uses, or changed needs could affect what cash remains. The calculator does not track a reserve account. Cash moved out of reserves is also not new property income.

Use the Questions With Your DST Broker

The output creates questions based on the fields you changed. Income changes lead to questions about rent, vacancy, expenses, and the income basis. Debt changes prompt review of the loan schedule and payoff terms. Reserve changes prompt a request for the balances and uses behind the amounts.

The questions also address fee treatment, exit cap rates, and negative cash where relevant. You can add your own unresolved issues in the notes. No question is sent to anyone. You decide what to share and through which channel.

FINRA's guidance says a recommending member should reasonably investigate the issuer, management, assets, claims, and intended use of proceeds. It also addresses new material developments and review of outside research. A sensitivity worksheet does not replace those duties or determine whether a recommendation meets a legal standard. FINRA Regulatory Notice 23-08

Use the export to ask a focused question: “Which evidence supports this assumption, and what changes if it is wrong?” Keep the response with the source date. If new facts change the case, revise the model and keep a new snapshot. Do not treat a prior calculation as a review of terms that have since changed.

Revise, Cancel, and Export a Comparison

Changing any field removes the current result and disables exports. Select Compare assumptions to calculate again. A failed calculation leaves the last successful inputs available through Cancel unsaved changes, but does not display them as a current result.

Cancel restores the last successful comparison. If none exists, it restores a blank form. Starting a new analysis or loading an example requires an in-page confirmation. Canceling that confirmation leaves the current work intact.

JSON export contains the inputs, source explanations, outputs, questions, annual schedule, and export time. Dollar and rate values are stored as decimal strings to preserve the entered precision. The text export is a readable summary of inputs, results, sources, and questions. The annual schedule is included in JSON rather than the text summary.

When the calculator is embedded on the site, an export may prepare a separate Save file button below the tool. Use that button to save the prepared file. There is no automatic storage, version history, or file import. Closing or refreshing the page clears the working state.

Know the Model Limits

The calculator does not forecast a range of likely outcomes. It evaluates two chosen cases without assigning either a probability. Changing several inputs at once shows their combined effect; it does not isolate the cause of each change.

It also omits taxes, initial contributions, ownership allocations, time value of money, and any cost you do not enter. It cannot compute IRR, an equity multiple, or an investor distribution entitlement. A detailed investment model may need varying annual inputs, exact cash dates, and rules that this worksheet does not represent.

The SEC's updated private-placement bulletin discusses limited disclosure, resale difficulty, and the risk of a total loss. A clear calculator output does not remove those risks. It also cannot confirm that the underlying evidence is complete or that an exchange qualifies for tax deferral. SEC private placement bulletin

FAQ

Can This Tool Tell Me Whether a DST Broker's Recommendation Is Good?

No. It shows what follows from two sets of entered assumptions. Use the differences and questions to discuss the evidence with the professional. The tool does not check sources, rank brokers, judge legal duties, or decide whether the investment fits your needs.

Should I Enter My Investment Amount or the Whole Property's Figures?

Use one consistent whole-property or whole-program basis. The calculator does not allocate results to an investor share. Do not mix your own dollar commitment with whole-property income or debt. An investor-level analysis needs the relevant ownership, fees, contributions, and payment rights.

Why Is Combined Modeled Cash Not an Investment Return?

The model adds annual cash and exit cash without subtracting an initial contribution. It also lacks exact cash dates, investor shares, and tax treatment. Exit cash can include returned capital and reserves. The result is a signed cash balance for the stated model, not a profit percentage.

Can I Leave an Unknown Cost Blank?

Yes, but the calculator will not produce a result until every required numeric input is supplied. It never silently turns a blank into zero. If you intentionally exclude a cost, enter zero and explain that choice. The result will reflect the exclusion.

Why Can the Tool Allow a Reserve Release Larger Than Reserve Funding?

There could be an opening reserve balance that this simple model does not track. The tool flags the difference and asks for supporting records. Allowing the calculation is not a finding that the money exists or can be released. Review reserve uses and governing restrictions separately.

Does the Calculator Save My Work or Send It to a Broker?

No. Inputs remain in the current page until you export them. The tool has no automatic saving, file restore, accounts, or messaging. Export a snapshot before replacing the model or closing the page. You control any later sharing of the downloaded file.

About Sequoia Research

Sequoia Research, LLC provides independent research on DSTs and other real estate investment offerings. This educational tool helps readers inspect assumptions and prepare questions about a proposed investment.

Sources

All sources were accessed October 16, 2026. The calculator's figures and example are original teaching models, not sponsor forecasts.