Real estate investors who have transacted more than one property know the power of a 1031 exchange. Named for a section of the tax code, a 1031 exchange allows an investor to sell a property and buy another investment property without paying capital gains taxes. This can tremendously benefit the investor if the property has increased in value. It allows the investor to keep building their wealth, and a 1031 exchange can be made repeatedly with property after property. Instead of collecting the profit after the sale and paying taxes, the profit becomes part of the next property.
Trending Now:
- This billion-dollar fund has invested in the next big real estate boom, here's how you can join for $10.
This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing. - A billion-dollar investment strategy with minimums as low as $10 — you can become part of the next big real estate boom today.
This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Flagship Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
Of course, you are dealing with the Internal Revenue Service, so there are a lot of rules. Because it is an exchange, an investor has to purchase a ‘like-for-like' property within 180 days of the original sale. Like-for-like means that while you can invest in a more expensive property, it needs to be within the same category. You also can't just invest the profit; you have to invest both equity as well as any debt that was paid off.
One of the toughest requirements is the timeline. You have 45 days to designate a property and 180 days to complete the exchange. Investors also have to use a middleman to complete the deal. The downside of doing 1031 exchanges is that you are mostly still in the business of owning an actual direct investment with both the burdens and benefits of property ownership. However, another option is a Delaware Statutory Trust (DST). A DST is a trust formed by a real estate company that pools together investor funds into one vehicle that then invests in real estate. The DST manages the assets and members of the trust share in the income. DSTs are generally only available for accredited investors, and the minimum investment is much higher than other types of investments.
Because a DST is more hands-off than a traditional 1031 exchange, it is gaining traction with older investors who may have done multiple 1031 exchanges in the past. Earlier this year, Bisnow wrote about the growing use of DSTs by people eager to exit active landlord roles. Research from Mountain Dell Consulting found that in 2023, there were 62 sponsors with active DST offerings, up from 53 in 2022. The amount of money invested in DSTs is rising as well; equity grew to $21.6 billion from 2021 to 2023.
Don’t miss the real AI boom – here’s how to use just $10 to invest in high growth private tech companies.
This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
RealtyMogul, an online real estate investing platform, recently announced it has created a 1031 concierge program that offers 1031 exchange-eligible Delaware Statutory Trust (DST) investment options. RealtyMogul’s program includes multifamily offerings from RealtyMogul's sister company, RM Communities. The company has hired Steve Haskell, who previously headed Kay Property and Investment's San Diego office and is an expert in Delaware Statutory Trust (DST) and passive real estate investments. "We are excited to be able to provide our investors access to this range of 1031 exchange-eligible opportunities. At RealtyMogul, we are committed to helping our members build their personalized real estate portfolio and I know Steve will play a key role in empowering our investors to achieve their 1031 exchange goals," said Jilliene Helman, CEO of RealtyMogul.
Other companies have jumped on the DST bandwagon as interest has grown, which is good news for investors ready to leave active investing behind. In the past, there have been efforts to cap or eliminate the 1031 exchange precisely because it is such a wealth builder for real estate investors. The popularity of 1031 exchange usage and the potential fallout for the real estate market has meant that any proposals to restrict it have failed. DSTs and 1031 exchanges should be around for real estate investors for years to come.
Read More:
- Don’t miss out on the next NVIDIA – you can invest in the future of AI for only $10.
**This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing. - When today’s AI startups go public, most of the rapid growth will be behind them — here’s how not to get left out.
This is a paid advertisement. Carefully consider the investment objectives, risks, charges and expenses of the Fundrise Innovation Fund before investing. This and other information can be found in the Fund's prospectus. Read them carefully before investing.
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
