§1031 Replacement Strategies

A Sec­tion 1031 exchange does not require every investor to use the same replace­ment-prop­er­ty strat­e­gy.

Depend­ing on the investor’s objec­tives, replace­ment prop­er­ty may include direct­ly owned real estate, one or more qual­i­fy­ing Delaware Statu­to­ry Trust inter­ests, or a com­bi­na­tion of approach­es.

Impor­tant con­sid­er­a­tions include prop­er­ty qual­i­ty, income objec­tives, diver­si­fi­ca­tion, lever­age, liq­uid­i­ty, man­age­ment respon­si­bil­i­ties, and the amount of cap­i­tal that needs to be rein­vest­ed.

The objec­tive should extend beyond sim­ply com­plet­ing the exchange. Replace­ment prop­er­ty should be eval­u­at­ed based on the investor’s broad­er finan­cial and real estate objec­tives.

Key Point: The replace­ment-prop­er­ty deci­sion should begin with the investor’s objec­tives — not the approach­ing 45-day dead­line.

Relat­ed DSTNews.org Arti­cles

• Using Mul­ti­ple DSTs to Diver­si­fy 1031 Exchange Pro­ceeds

• How 1031 Exchanges Work with DSTs: Smooth Exchange Exe­cu­tion

• The Mod­ern Cap­i­tal Allo­ca­tion Mod­el

Impor­tant Dis­clo­sure: This mate­r­i­al is for edu­ca­tion­al pur­pos­es only and is not tax, legal, account­ing, or invest­ment advice or an offer to sell or solic­i­ta­tion to pur­chase any secu­ri­ty. Pri­vate real estate, DSTs, Oppor­tu­ni­ty Zone invest­ments, pri­vate funds, and UPREIT struc­tures involve risk, includ­ing pos­si­ble loss of prin­ci­pal and lim­it­ed liq­uid­i­ty.