After a successful real estate sale, the celebration often stops when you calculate how much of your gain will be lost to taxes. Selling an appreciated property should feel like a win. Yet without planning, a large share of that gain may be lost to federal, state, and depreciation recapture taxes.
How the Strategy Works
A 1031 exchange allows you to sell an investment property and reinvest the proceeds into another “like-kind” property, deferring the recognition of capital gains. The IRS sets strict deadlines: 45 days to identify replacement properties, and 180 days to complete the transaction.
For many investors, this timeline feels restrictive. That’s where a DST* come in. A Delaware Statutory Trust is a legal structure that allows you to own a fractional share of large, institutional-grade properties, think medical campuses, multifamily complexes, or industrial real estate. These assets are managed by professional sponsors, freeing you from landlord duties while maintaining exposure to high-quality real estate.
Key Pros
The 1031 DST* exchange offers several compelling advantages that align with the priorities of successful individuals:
Tax Deferral
Without a strategy, taxes can take a large bite out of your proceeds before reinvestment even begins. A 1031 DST* exchange helps defer those liabilities, keeping your money in motion instead of sidelined by the IRS.
Access to Scale and Diversification
DSTs* open the door to large-scale assets that are often out of reach for individual investors. This also allows for diversification across geographies and property types, strengthening portfolio resilience.
Operational Simplicity
Leaky roofs, midnight tenant calls, rising repair costs, may be a source of stress for some. By shifting to a passive structure, you reclaim time and focus for your business, your family, and your future plans.
Legacy and Continuity
This strategy can integrate real estate holdings into broader long-term family and estate planning goals, offering a streamlined method for wealth transfer to future generations.
Risks and Considerations
While 1031 exchanges and DSTs can offer tax deferral and diversification benefits, they are not without risks:
- The IRS requires identification of replacement property within 45 days and closing within 180 days. Missing these deadlines may disqualify the exchange.
- DSTs* are illiquid typically long-term investments with limited secondary markets. Investors should be prepared to hold until the trust terminates.
- DST* investors do not have decision-making authority over property operations, financing, or sale timing. These responsibilities rest with the sponsor.
- Performance depends on the sponsor’s ability to manage the property and execute the business plan. Poor management can negatively impact results.
- As with all investments, there is no guarantee of profit. Investors may lose part or all of their principal.
The Leadership Advantage
The 1031 DST* isn’t a loophole, it’s a well-defined, IRS-approved strategy. Imagine selling a $2 million property and potentially watching hundreds of thousands disappear in taxes. Now imagine redirecting that full amount into diversified and professionally managed assets.***
Want to see how this strategy could work in practice? Download our free eBook: The 1031 DST Advantage: A Tax Strategy Made Simple → https://www.1031dstgroup.com/register
If you or someone you know is preparing for a sale and needs guidance on tax-efficient strategies, 1031 DST Group is here to help. Get a free consultation or learn more at www.1031dstgroup.com/free-consultation
Disclosure: The strategies described are complex and may not be appropriate for all investors. This material is for informational purposes only and should not be construed as individualized tax, legal or investment advice. Investors should consult with their own tax advisors, legal counsel, and financial professionals. *Certain investments, including DSTs and other private placements, are generally available only to Accredited Investors** as defined under Rule 501 of Regulation D of the Securities Act of 1933. **Accredited investors are defined under SEC Rule 506 of Regulation D. Generally, an investor is deemed accredited if their net worth is greater than $1,000,000 exclusive of their primary residence and/or their annual income exceeds $200,000 for the current and past two years. ***Illustrative examples only. Actual results may vary. DSTs are illiquid and may not suit all investors. Offers, when available, are made solely through the official Private Placement Memorandum (PPM).
Investment advisory services are offered through Realta Investment Advisors, Inc., a US SEC Registered Investment Advisor. Securities are offered through Realta Equities, Inc., Member FINRA/SIPC, 1201 N. Orange St., Suite 729, Wilmington, DE 19801. Realta Wealth is a trade name used by Realta Equities, Inc. and its affiliate Realta Investment Advisors, Inc.
