1031 Exchange & DST Investing in Austin, TX
Austin is a fast-growing technology and manufacturing hub whose apartment and industrial markets have absorbed a large new-supply wave. Because Texas levies no state income tax, a 1031 exchange faces no state-level capital-gains tax, and DSTs are available to accredited investors nationwide.
State tax treatment of a 1031 exchange
Capital-gains treatment is set at the state level, and Texas imposes no personal income tax. As a result there is no state capital-gains tax on a real estate sale and no state nonresident withholding, so a 1031 exchange in Austin defers only federal tax on the gain. See our Texas state page for details.
Market snapshot
Austin's rise has been driven by technology and advanced manufacturing, with Tesla, Samsung's semiconductor investment in nearby Taylor, Oracle, Apple, and a dense startup ecosystem anchoring demand. Key submarkets include the Domain in North Austin, downtown and East Austin, and the fast-growing suburban rings around Round Rock, Cedar Park, and Kyle-Buda. Multifamily and industrial have been the dominant investment asset classes, alongside a large but recently softer office sector.
Austin drew heavy apartment development during the pandemic-era boom, and the resulting supply wave has pushed vacancy higher and pressured rents downward in 2024 and 2025 even as the metro keeps adding jobs and residents. Cap rates have widened from cycle lows across property types as the market digests new deliveries. For 1031 investors, Austin's long-run appeal rests on its highly educated workforce, corporate relocations, and above-average population growth, tempered by near-term oversupply that has made pricing and rent underwriting more cautious.
Why 1031 & DST investors look here
- Technology and semiconductor manufacturing base with major corporate relocations and expansions
- Highly educated workforce and sustained in-migration despite near-term apartment oversupply
- No state income tax, adding to the metro's appeal for capital and residents
Replacement-property options
An investor selling in Austin can defer gain by exchanging into DST interests, and the replacement property need not be in Texas; like-kind treatment applies to real estate anywhere in the United States. Delaware Statutory Trusts allow accredited investors to reinvest proceeds into professionally managed, institutionally sized assets, and a 721 UPREIT contribution or Qualified Opportunity Zone investment may suit some objectives. Suitability depends on individual circumstances and should be reviewed with qualified tax and financial professionals.
Frequently asked questions
Is Austin a good market for a 1031 replacement?
Austin has strong long-run drivers in technology and manufacturing but is working through a large apartment-supply wave that has softened rents in 2024 and 2025. Whether it fits an exchange depends on your objectives and risk tolerance.
Does Texas tax a 1031 exchange?
Texas has no state income tax, so there is no state-level capital-gains tax on a property sale and no state withholding. A 1031 exchange in Austin defers only federal tax on the gain.
Can I exchange Austin property for out-of-state DSTs?
Yes. Like-kind real estate can be located anywhere in the United States, so Austin sale proceeds can be exchanged into DSTs holding property in other states.
Gerald F. “Jerry” Baker, III — Founder & Managing Principal, Baker 1031 Investments · FINRA Series 22 / 63 · SIE. Read full bio →
State tax treatment is general and changes frequently; this page is educational and is not tax, legal, or investment advice. Confirm current state and local rules with your own CPA and attorney. Securities offered through Aurora Securities, member FINRA/SIPC. Real estate investments involve risk, including possible loss of principal.