1031 Exchange into a REIT

Picture of a relinquished rental property

1
Sell Your Investment Property.
 

 

Proceeds from the sale are held by your Qualified Intermediary.

Example of what a DST Property might look like with a  highlighted fraction of ownership

2
You purchase interests in a DST that owns a property. The DST is controlled by the REIT.

 

You complete your 1031 exchange, deferring your taxes.

Illustration of your DST property if purchased by a REIT

3
After a period of time, the REIT purchases the property owned by the DST.

 

Your DST interests are converted into ownership units in the REIT via IRS section 721 exchange "UPREIT" exchange and you pay tax when you convert your ownership units into shares of the REIT.

How it Works

  1. Invest your 1031 exchange proceeds into beneficial interests in a Delaware Statutory Trust (DST).
  2. The DST is acquired by a large national real estate investment trust (REIT).
  3. Your DST beneficial interests are converted into ownership shares of the REIT.

 

Benefits to Investors

  • Diversification - Possibility of investing in a multibillion dollar REIT while still complying with 1031 exchange rules.
  • Liquidity - Exchanging into a REIT provides the investor with the ability of selling REIT shares over time and thereby managing the capital gains they receive.
  • Safety - The investment is backed by a large corporation who potentially owns billions of dollars worth of assets.

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