How I Build Your 1031 Exchange Solution, Step by Step

A 1031 exchange solution is a written plan that matches the money and debt from the property you sell with replacement property that fits your income needs, risk comfort, and family goals. The plan has to work on a tight clock: you get 45 days after your sale to name replacement property and 180 days to close on it.

Key takeaways

• A 1031 exchange solution is more than one property. It is a plan that covers the math, the deadlines, the backups, and what happens after you close.
• To defer all of your gain, a common rule of thumb is to reinvest all of your net equity and buy replacement property worth at least as much as you sold. Cash you keep and debt you don't replace can be taxable. This is called "boot."
• The 45-day and 180-day deadlines come from the tax code and Treasury rules. They do not stop for weekends or holidays, and the 180 days can be cut short by your tax return due date.
• I often split an exchange across more than one Delaware statutory trust (DST) to mix property types, sponsors, and debt levels. In my offering records as of October 2026, 28% of offerings start at $25,000, which makes splitting easier.
• We review every opportunity together. I tell you why I'm considering it, what I like, and where I have doubts.
• DST interests can qualify as replacement property, but they carry real risk. Distributions are not guaranteed, they are illiquid, and you can lose your entire investment. Confirm every tax question with your CPA, attorney, and qualified intermediary.

What is a 1031 exchange solution?

Let me start with the basic terms. I'll define each one the first time I use it.

A 1031 exchange is a way to sell investment real estate and buy other investment real estate while putting off the tax on your gain. The name comes from Section 1031 of the Internal Revenue Code. The law says no gain is recognized when real property held for productive use in a trade or business or for investment is exchanged for real property of "like kind." Since 2018, this treatment is generally limited to real property. The tax is deferred, not erased. It can come due later if you sell without doing another exchange.

A relinquished property is the property you sell. A replacement property is the property you buy.

A qualified intermediary, or QI, is a company that holds your sale money during the exchange. You can't touch the money yourself. The IRS warns that "taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction," according to its fact sheet on like-kind exchanges. The QI signs a written exchange agreement with you, as described in the Treasury regulation on deferred exchanges.

A Delaware statutory trust, or DST, is a legal trust that owns real estate. Investors buy beneficial interests in the trust. In Revenue Ruling 2004-86, the IRS said a DST interest can be treated as an interest in real estate for a 1031 exchange, as long as the trust follows strict limits and the other 1031 rules are met.

A sponsor is the real estate company that buys the property, sets up the DST, and manages it.

So what is a 1031 exchange solution? It's the full plan that ties all of this together. It answers four questions:

1. How much equity and debt must you replace?
2. What replacement property fits your goals?
3. How will you meet the 45-day and 180-day deadlines?
4. What is your backup if something falls through?

When I say "I build your solution," I mean I help you answer all four. I don't just hand you a list of properties.

Why do I build a plan instead of just picking a property?

Most people come to me with one question: "What should I buy?" That's a fair question. But it's usually the third or fourth question we should ask.

Here's why. Two investors can sell the same building for the same price and need very different plans. One may need monthly income to replace rent checks. The other may care most about leaving something simple to their kids. One may still owe a large mortgage. The other may own the property free and clear.

If I picked a property before I knew those facts, I'd be guessing. And in a 1031 exchange, a guess can cost you. If the property is too small, you may owe tax. If it doesn't fit your goals, you may be stuck with it for years. DSTs are illiquid, which means you usually can't sell your interest early.

My background shapes how I think about this. I studied applied mathematics and applied statistics at Babson College. I then spent my career in real estate acquisitions, management, and development at firms like ValueRock Realty Partners, Faris Lee Investments, Westport Capital Partners, and Arbor Bay Capital Partners. Over that time I was involved in more than $10 billion of real estate investment activity. That work taught me to start with the numbers and the goals, then find property that fits. Not the other way around.

How does my process work, step by step?

Here is the short version. I'll walk through each step in detail below.

1. Introductory call. I learn about your sale, your money, your goals, and your timeline.
2. The math. We figure out how much equity and debt you need to replace to defer your gain.
3. The timeline. We map your 45-day and 180-day dates, and check your tax return due date.
4. The structure. We decide between one DST or several, and how to mix property types, sponsors, and debt.
5. Backups. We plan backup identifications in case something closes early or sells out.
6. Review together. We look at each opportunity side by side. I share what I like and where I have reservations.
7. Close. I coordinate paperwork with the sponsor and your qualified intermediary.
8. After closing. We cover reporting, Form 8824, and what to expect for the years you hold the investment.

You don't have to start at step one before you list your property. But the earlier we start, the more choices you have. I'll show you why in the timing table below.

What happens on the introductory call?

The introductory call is where I listen. I ask a lot of questions. Some are about numbers. Some are about your life. Both matter.

Here's what I ask and why.

When are you selling, and where are you in the sale?

Your timing drives almost everything. If you haven't listed yet, we have room to plan. If you're already in escrow, we need to move faster. If you've already closed, your 45-day clock is already running.

I ask for the expected closing date. I also ask whether the buyer has contingencies left, like inspections or financing. A sale that falls apart changes the plan.

What are your expected net proceeds?

Net proceeds are the cash left after you pay off your loan and pay closing costs. This is the equity your QI will hold. It's the number you need to reinvest to defer all of your gain.

I'll usually ask for a draft settlement statement from escrow. If you don't have one yet, we'll estimate.

How much debt will be paid off at closing?

This is the question people often forget. If your loan gets paid off when you sell, that debt relief counts in the 1031 math. In general, you need to replace that debt with new debt or with extra cash. I'll explain this in the math section.

What income do you need from the investment?

Some investors live on their rental income. Others have income from work or other sources and don't need monthly cash. If you need income, we'll focus on that. If you don't, we may weigh growth or simplicity more.

I'm always clear here. DST distributions are not guaranteed. They can be cut or stopped. A projected rate is a sponsor's estimate, not a promise.

How do you feel about risk?

I ask about risk in plain terms. How would you feel if your monthly check dropped by a third for a year? How would you feel if the property sold for less than you paid? Have you ever owned a property that lost money?

I also ask how you feel about debt. Some clients want no loans at all. Others are comfortable with some leverage if it helps them replace the debt they paid off.

What are your estate goals?

Many investors are thinking about their kids or grandkids. They may want something that is easy to pass on and doesn't require the next generation to manage tenants. I ask who is involved in your decisions and who would inherit.

Estate rules are complex. I'll tell you how structures work, but your estate attorney and CPA need to advise you on your situation.

Do you own other properties?

Other properties affect the plan. If you already own a lot of apartments in one city, you may want something different this time. If you plan to sell another property next year, we might plan both exchanges together.

Are you an accredited investor?

Most DSTs are sold as private offerings, so most are open only to accredited investors. The SEC sets the test. For an individual, it generally means net worth over $1 million, not counting your primary residence, or income over $200,000 ($300,000 with a spouse or partner) in each of the last two years, with the same expected this year. Certain licensed professionals also qualify. If you aren't accredited, DSTs may not be an option, and we'll talk about other paths.

Who else is on your team?

I ask for your CPA, attorney, and QI. If you don't have a QI yet, you'll need one before your sale closes. The QI must be in place before you receive any sale money. I work alongside your team. I don't replace them.

How does the 1031 exchange math work?

This is where my math background comes in handy. The goal is simple to say. To defer all of your gain, you generally need to do two things:

1. Reinvest all of your net equity. Every dollar the QI holds should go into replacement property.
2. Buy at least as much property as you sold. In practice, that means replacing the debt that was paid off, either with new debt or with extra cash from your pocket.

If you fall short on either one, the shortfall is called boot. Boot is any cash or non-like-kind value you receive in the exchange. The tax code says that when you receive "other property or money" in an exchange, gain is recognized up to that amount. The IRS fact sheet puts it this way: "If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain."

There are two common kinds of boot:

• Cash boot. You keep some of the sale money. Maybe you need it for a down payment on a house. That cash can be taxable.
• Mortgage boot. Your old loan was paid off, but you bought less property or took on less debt, and you didn't add cash to make up the gap. That debt relief can be taxable.

Boot doesn't kill the whole exchange. It usually means part of your gain is taxed now, and the rest is still deferred. Sometimes clients choose to take a little boot on purpose because they need the cash. That's a valid choice. We just want to make it on purpose, with your CPA's input, not by accident.

A worked example with simple numbers

Let's use a hypothetical. Say you sell a rental building for $1,000,000.

• Your loan payoff at closing is $300,000.
• Your closing costs are $50,000.
• That leaves $650,000 in net proceeds. Your QI holds it.

Here's the target. To defer all of your gain, you'd want to reinvest the full $650,000. You'd also want your replacement property to be worth at least about $950,000. That's the $1,000,000 sale price minus the $50,000 in closing costs. And you'd want at least $300,000 of new debt, or extra cash to make up for any debt you don't replace.

How closing costs count can vary. Your CPA should confirm the exact numbers for your exchange. I use this as a starting point.

Now let's look at three ways this could go.

Option A: All cash, one DST. You put all $650,000 into one DST with no debt. You've reinvested all of your equity. But your replacement property is only worth $650,000. You've replaced none of the $300,000 of debt. That's about $300,000 of potential mortgage boot. Unless you add $300,000 of your own cash, part of your gain could be taxable.

Option B: Keep some cash. You put $600,000 into replacement property and keep $50,000. Even if you replace all of the debt, the $50,000 you kept is cash boot. It can be taxable.

Option C: A mix of debt-free and leveraged DSTs. This is where a plan helps. Let's use two hypothetical DSTs:

• DST 1 has no debt. You put in $400,000. Your share of the property is worth $400,000. Your share of the debt is $0.
• DST 2 has a loan-to-value of 55%. Loan-to-value, or LTV, is the loan amount divided by the property value. You put in $250,000 of equity. Since equity is 45% of the value, your share of the property is about $555,556. Your share of the debt is about $305,556.

Now add it up:

In this example, you reinvest all of your equity. You replace slightly more debt than you paid off. And the value of what you buy is above the target. On paper, that meets the rule of thumb for deferring all of your gain.

But notice the trade-off. DST 2 carries more debt. Debt can raise returns in good times and make losses worse in bad times. A lender can also take a property if the loan isn't paid. So the math tells us what is possible. Your risk comfort tells us what is right for you.

That's why I don't do the math first and then sell you on it. We do the math, then we talk about whether the mix fits how you sleep at night.

What about your basis?

Your basis is roughly what you paid for a property, plus improvements, minus depreciation you've taken. In an exchange, your old basis generally carries over into the new property, with adjustments. That's how the deferred gain is tracked. Form 8824 helps figure the gain deferred and the basis of what you receive. Your CPA handles this. I make sure your CPA has the numbers from each DST.

What are the 1031 exchange deadlines?

The deadlines are the part of a 1031 exchange that worries people most. For good reason. They are strict, and there is very little room for error. They come from Section 1031(a)(3) and the Treasury regulation at 26 CFR 1.1031(k)-1.

The 45-day identification period

You have 45 days from the day you transfer your relinquished property to identify replacement property. The regulation says this period "ends at midnight on the 45th day."

To identify property, you must put it in a written document that you sign. The document must clearly describe the property. It must be delivered to a proper person, such as your QI, before the 45 days end. Your QI will usually give you a form for this.

You can change your mind. The regulation says an identification "may be revoked at any time before the end of the identification period." After day 45, your list is locked.

The three identification rules

You can't just list every property in the country. The regulation limits how many properties you can identify. You must meet one of these rules:

The three-property rule. You can identify up to three properties of any value. It's the simplest rule to follow.

The 200% rule. You can identify more than three properties, as long as their total value is no more than 200% of the value of what you sold. If you sold a $1,000,000 property, you could identify, say, six DSTs, as long as their combined value is $2,000,000 or less.

The 95% rule. You can identify any number of properties of any value, but you must actually buy at least 95% of the total value of everything you identified. This rule is risky. If one deal falls through, you may miss the 95% mark. I rarely suggest it.

If you break all three rules, the regulation generally treats you as if you identified nothing, with limited exceptions. That's why I check the identification form line by line.

One note on DSTs. Each DST counts as a property. So if you want to split into four DSTs, the three-property rule won't cover it. You'd need the 200% rule. With DSTs that have debt, the value that counts is generally your share of the property's value, not just the equity you put in. Your QI and CPA should confirm how to value each item on your list.

The 180-day exchange period

You must receive your replacement property by the earlier of two dates:

1. 180 days after you transfer your relinquished property, or
2. The due date of your tax return, including extensions, for the year you sold.

The 180 days include the first 45. They are not added after. So once you've identified on day 45, you have 135 days left to close.

The tax return due date trap

This catches people who sell late in the year. Here's a hypothetical.

Say you sell on December 1, 2026. Day 45 is January 15, 2027. Day 180 is May 30, 2027. But for most individuals, the 2026 tax return is due April 15, 2027. That's earlier than day 180.

If you file your return on April 15 without an extension, your exchange period may end that day. You'd lose about six weeks. The fix is often simple: file an extension. The Form 8824 instructions say the property must be received by the earlier of 180 days or "the due date (including extensions) of your tax return." Ask your CPA about an extension early.

Please count your own dates with your QI. Holidays and weekends don't extend these deadlines.

When should you call me: before listing, in escrow, or after closing?

You can call me at any point. But each stage gives us different options. Here's how I think about it.

Before you list

This is the ideal time. We can estimate your net proceeds and debt payoff. We can line up your QI. We can study the types of property that fit your goals. You'll know your target numbers before you sign a listing agreement.

The one catch is that DST offerings open and close all the time. A DST I like today may be fully sold by the time your sale closes. So at this stage, we focus on the plan and the types of offerings, not just one name.

While you're in escrow

This is a common time to start, and it works well. We have a known closing date and close-to-final numbers. We can start reviewing the offerings I currently have available right away. Your QI should be engaged now, before closing, so the sale money goes straight to them.

After you've closed

If you've already closed, your clock is running. Don't panic, but don't wait. We'll focus on getting a sound list identified by day 45. Then we use the rest of the 180 days to complete paperwork and funding.

If the sale money went to you instead of a QI, that's a serious problem. You may not be able to do an exchange at all. Talk to your CPA and attorney right away.

Should you use one DST or several?

Once we know your numbers and timeline, we decide how to structure the replacement. One of the first choices is whether to use one DST or split across several.

There's no single right answer. Here's how they compare.

When one DST can make sense

One DST can fit when your exchange is small. If you're reinvesting $150,000, splitting into four pieces may not make sense. It can also fit when one offering matches your debt target and goals on its own. Some DSTs hold a portfolio of several properties, which spreads risk inside one investment.

When several DSTs can make sense

Several DSTs can fit when you have more money to place. They can also help you hit a debt target, like Option C in my example. And they spread risk. If one property struggles, it affects part of your money, not all of it.

Spreading money out does not prevent losses. It can reduce the damage from one bad outcome, but all of your DSTs could still lose value in a weak market.

How do I mix property types, sponsors, and leverage?

If we decide to use more than one DST, I look at three things to mix: property type, sponsor, and leverage.

Property type

DSTs can hold many kinds of real estate. In my offering records as of October 2026, the most common types are multifamily (apartments), industrial (warehouses and distribution), and net lease. A net lease property is one where the tenant pays most of the property costs, like taxes, insurance, and upkeep. Other types include self-storage, retail, and medical office.

Each type reacts differently to the economy. Apartments depend on rents and local job markets. Industrial depends on shipping and storage demand. Net lease depends heavily on the tenant's ability to keep paying. Mixing types can help balance those risks.

Some offerings on my platform also hold oil and gas royalty interests. These programs own mineral and royalty rights. Third-party operators run the wells. The owner receives a share of production revenue and doesn't pay drilling or operating costs. For example, one royalty portfolio I reviewed holds 14 royalty properties with 27 producing wells in Oklahoma's Anadarko Basin and Texas's Permian Basin. Royalty income moves with oil and gas prices and production levels, so it can swing a lot. It isn't right for everyone.

Sponsor

The sponsor runs the property for years. That makes the sponsor one of the most important choices you make. I work with DSTs from more than 20 institutional sponsors. When I build a mix, I often spread money across more than one sponsor. That way, your whole exchange doesn't depend on one company's decisions.

Leverage

Leverage means using debt to buy property. I covered the math above. Here's the risk side.

Debt-free DSTs have no lender. That removes the risk of a loan default. But they don't help you replace debt from your sale.

Leveraged DSTs help you replace debt. But debt adds risk. If income falls, the loan still has to be paid. Under the DST rules in Revenue Ruling 2004-86, the trustee generally can't renegotiate the loan or take in new cash from investors. That limits what the sponsor can do if things go wrong.

So I look at the LTV, the loan's interest rate and term, and when the loan comes due. I compare the loan maturity to the planned hold. A loan that comes due before the planned sale can be a problem.

Other things I weigh

I also look at where the property is, how long the sponsor plans to hold it, and whether the DST has a plan to convert into a real estate investment trust later. I'll explain that last one in the "after closing" section.

Why do backup identifications matter?

Backups are one of the most useful parts of a plan. They're also one of the most overlooked.

Here's the problem. DST offerings fill up. A sponsor raises a fixed amount of money. When the raise is full, the offering closes. If you identified a DST on day 30 and it fills on day 40, you may not be able to buy it. If it was your only choice, your exchange could fail.

A backup is an extra property on your identification list. You may not plan to buy it. It's there in case your first choice falls through.

Here's how I usually set up backups:

• Under the three-property rule, if you plan to buy one or two DSTs, we can list one or two backups.
• Under the 200% rule, we can list more backups, as long as the total value stays at or below 200% of what you sold.
• We pick backups that also fit your goals. A backup you'd never actually want isn't much help.
• We reserve when we can. Some sponsors let you reserve an interest before you fund. That can help, but it isn't a promise the deal will close.

I also watch for other reasons a deal might fall through. A sponsor could pause an offering. New facts could come up in due diligence. Your own situation could change. A good backup gives us room to adjust without missing a deadline.

How do we review opportunities together?

This is the heart of how I work. I don't send you a list and wait for a yes. We go through each opportunity together, using the steps in my guide to choosing a DST.

For each one, I tell you three things:

1. Why I'm considering it. How it fits your numbers, timeline, and goals.
2. What I like. For example, the tenant base, the location, the loan terms, or the sponsor's track record.
3. Where I have reservations. Every offering has weak spots. I'll tell you what mine are. Maybe the debt is higher than I'd like. Maybe the market has a lot of new supply. Maybe the projected income depends on rent growth that may not happen.

You'll also get the offering documents. The main one is the private placement memorandum, or PPM. It explains the property, the fees, the risks, and the terms. I encourage you to read the risk section closely. I'm happy to walk through it with you.

What due diligence sits behind the review?

Before an offering reaches you, it goes through my due diligence process. I look at five areas:

1. Broker-dealer review. The broker-dealer through which securities are offered reviews the offering.
2. Investment manager audit. We look at the sponsor's people, history, and how they manage money.
3. Investment offering review. We study the structure, fees, and terms of the offering itself.
4. Real estate assessment. We study the property, the market, and the tenants.
5. Institutional underwriting. We check the numbers behind the sponsor's projections.

I partner with outside auditors in each area. And this isn't a one-time check. I keep watching offerings over time, not just when they launch.

Due diligence helps. It doesn't remove risk. A carefully reviewed offering can still lose money.

Why I sometimes pass

Not every offering I look at makes it to clients. In my offering records as of October 2026, there are 5 offerings I reviewed and passed on. Passing is part of the job. If I have doubts I can't resolve, I'd rather tell you no than fill a slot.

There's an industry reason for this care, too. FINRA, which oversees broker-dealers, said in Regulatory Notice 05-18 that tenant-in-common interests sold for 1031 exchanges are generally securities. That means firms selling them must meet rules on suitability and due diligence. DST interests are also sold as securities. I take those duties seriously.

What happens when we close?

Once you choose your offerings, we move to closing. Here's what that looks like.

Paperwork

Each DST has a subscription agreement. That's the form where you agree to buy an interest. You'll confirm that you're accredited, give your exchange details, and sign. I help you fill these out and check them for errors. Small mistakes, like a wrong name or missing signature, can slow things down.

Working with your qualified intermediary

Your QI holds your money, so they send the funds. I coordinate with your QI and the sponsor so everyone has what they need. That includes your exchange agreement, your identification form, and the sponsor's wiring instructions.

Wire fraud is a real risk in real estate. Always confirm wiring instructions by phone using a number you know is correct. Never trust wiring changes sent only by email.

How fast can it close?

With DSTs, the sponsor has usually already bought the property. There's no new appraisal, inspection, or loan approval for you to wait on. So closing can often take two to three business days once paperwork, funding, and approvals are complete. That speed can be a big help if your 180-day deadline is close.

Fast doesn't mean rushed. I'd still rather start early and close calmly.

Confirming the close

After funding, the sponsor confirms your purchase. You'll get documents showing your interest. Your QI will close out your exchange account. I make sure the dates, amounts, and names all line up. Your CPA will need them.

What happens after you close?

The exchange is done, but your investment has just started. Here's what to expect.

Reporting on Form 8824

You must report your exchange to the IRS on Form 8824, Like-Kind Exchanges. The IRS says you file it with your tax return for the year of the exchange. The form reports what you sold, what you bought, the dates, and any boot. It figures your deferred gain and your new basis.

If your exchange spans two tax years, like the December sale in my example, the form is filed for the year you sold. If you bought several DSTs, your CPA may need extra statements. The Form 8824 instructions explain how to handle multi-asset exchanges and related-party exchanges.

I send your CPA the closing documents from each DST. Then your CPA prepares the return.

Yearly tax reports and distributions

Each DST sends you tax information every year. You'll report your share of income and expenses. Since you own a share of real estate, you may also have state tax filings in the states where the property sits. Ask your CPA about this.

If your DST pays distributions, they usually arrive monthly or quarterly. Again, they aren't guaranteed. A sponsor can lower or stop distributions if income falls.

Sponsor updates

Sponsors send regular updates on how the property is doing. I keep watching, too. If something changes, I'll tell you what I know.

Limited control

A DST is a passive investment. You don't make decisions about the property. The trustee and sponsor do. And under Revenue Ruling 2004-86, even they have limited powers. They can't take in new money from investors, renegotiate the loan, or make more than minor changes to the building, with narrow exceptions. Some people love not having to manage tenants. Others find the lack of control frustrating. It's worth thinking about before you invest.

When the DST sells

Most DSTs plan to hold for a set number of years. When the property sells, you'll receive your share of the sale money, if any. At that point, you generally have choices:

• Do another 1031 exchange into new property, if the timing and rules allow.
• Take the cash and pay the tax that was deferred.
• Convert through a 721 exchange, if the DST offers one.

A 721 exchange uses Section 721 of the tax code. It lets property be contributed to a partnership without recognizing gain. With some DSTs, your interest can be exchanged for units in a real estate investment trust's operating partnership. This is often called an UPREIT. Some DSTs make this optional. Some make it mandatory. Once you hold partnership units, you generally can't do another 1031 exchange with them. That's a big decision. I always flag it when we review an offering.

Planning ahead

When your DST sells, we can build the next plan together. Because we've done it once, the second plan is often easier. We start with your new goals and go through the same steps.

What are the risks of a 1031 exchange into DSTs?

I want to be direct about risk. Here are the main ones I discuss with every client:

• Loss of money. You can lose some or all of your investment. Property values can fall.
• No guaranteed income. Distributions depend on how the property performs. They can drop or stop.
• Illiquidity. There's usually no market to sell a DST interest early. Plan to hold for the full term.
• Limited control. You don't vote on major decisions. The trustee's powers are also limited by the DST rules.
• Debt risk. Leveraged DSTs carry loans. If income falls, the lender may take the property.
• Sponsor risk. Your results depend on the sponsor's skill and honesty.
• Fees. DSTs carry upfront and ongoing fees. They're in the PPM. They reduce what you receive.
• Tax risk. If the exchange isn't done correctly, you may owe tax. Tax laws can also change.
• Concentration. Even several DSTs may be exposed to the same market forces.

None of these mean you shouldn't invest. They mean you should invest with your eyes open. That's why the review step matters so much.

Mistakes to avoid

These are the mistakes I watch for most.

Touching the sale money

If the sale money comes to you, even for a day, the exchange may fail. Set up your QI before closing. Tell your escrow officer the sale is part of a 1031 exchange.

Waiting until day 40 to start

The 45 days go fast. If you start late, you'll have fewer choices and more pressure. Call me while you're in escrow, or earlier.

Forgetting about the debt

Many people focus on reinvesting their cash and forget the loan payoff. That can lead to mortgage boot. Run the full math, debt and all.

Identifying only one property

If your only choice fills up or falls through, you have no backup. List at least one backup that also fits your goals.

Breaking the identification rules

Listing four properties under the three-property rule, or going over 200% of your sale value, can break your identification. Check your list against the rules before you sign it.

Missing the tax return due date

If you sell late in the year, your deadline could be your tax return due date, not day 180. Ask your CPA about filing an extension.

Picking property only for the projected yield

A high projected rate can hide high debt, weak tenants, or rosy rent assumptions. Look at the whole picture.

Not reading the PPM

The PPM explains the risks, fees, and terms. Read it. Ask questions about anything you don't understand.

Ignoring the exit

Know how and when the DST plans to sell. Know if a 721 exchange is optional, mandatory, or not offered. Your exit shapes your future tax choices.

Leaving your CPA out

Your CPA should see the plan before you close, not after. They can catch problems with boot, basis, and timing that are specific to you.

What my data shows

I keep detailed records on every DST offering I track. Here's what my offering records as of October 2026 show, across 76 DST offerings from 38 sponsors. These numbers describe the market I see. They don't predict how any offering will perform.

Low minimums make splitting possible. The median minimum investment is $100,000. Minimums range from $25,000 to $500,000. And 21 offerings, or 28%, start at just $25,000. That's a big reason I can build mixes of several DSTs, even for smaller exchanges.

Nearly half have no debt. 36 of the 76 offerings, or 47%, are all-cash with no loan. Another 16, or 21%, have loan-to-value above 50%. Among offerings with debt, the median LTV is about 49%. This range lets me blend debt-free and leveraged DSTs to help hit a client's debt target.

721 exits are common. 44 offerings, or 58%, have an optional 721 exit. 13, or 17%, have a mandatory 721 exit. 17, or 22%, have none. Two are unclear. Since a mandatory 721 can shape your future tax choices, I flag it every time.

Apartments lead, but there's variety. By property type, there are 31 multifamily offerings (41%), 18 industrial (24%), and 15 net lease (20%, including energy royalty programs). There are also 5 self-storage, 4 retail, and 3 medical office offerings.

Projected distribution rates vary widely. Among the 71 offerings that published a projected first-year distribution rate, the median is 4.7%. The range is 4.0% to 9.0%. These are sponsor projections, not promises. A higher rate often comes with more risk.

Ten years is the most common hold. 31 offerings project a 10-year hold. Others range from 5 to 10 years, or 7 years, and a few are 2-year programs.

The market moves fast. Right now, 16 offerings are open, 6 have limited availability, 24 are under review, and 25 are closed. I reviewed and passed on 5. With 6 in limited availability, it's clear why backup identifications matter.

Properties are spread out. The offerings span 33 states. The most common are Florida (14), Texas (13), North Carolina (8), and Georgia (7). The median offering size is about $65 million of total capitalization.

I also track more than 1,100 full-cycle 1031 DST investments for performance. Full-cycle means the property has been bought, held, and sold. Looking at how past programs actually ended, not just how they were projected, is part of how I form my views.

Frequently asked questions

How long does it take to build a 1031 exchange solution?

It depends on where you are in your sale. If you call before listing, we can plan over weeks or months. If you call after closing, we work within your 45-day identification window, and DST closings can often take two to three business days once paperwork and funding are complete.

Do I need a qualified intermediary if I'm buying a DST?

Yes. In a typical delayed exchange, a qualified intermediary holds your sale money so you never receive it. The QI must be in place before your relinquished property closes. I coordinate with your QI, but I'm not one.

Can I do a 1031 exchange into more than three DSTs?

Yes, in many cases. The three-property rule limits you to three, but the 200% rule lets you identify more, as long as their total value is no more than 200% of what you sold. Confirm your identification list with your QI before day 45.

What happens if my DST sells out before I can buy it?

That's why I plan backup identifications. If your first choice fills up, you can buy a backup that was on your list, as long as you identified it by day 45. If you didn't list a backup, your options may be limited.

How much do I need to reinvest to avoid paying tax now?

A common rule of thumb is to reinvest all of your net equity and buy replacement property worth at least as much as what you sold, net of costs. That usually means replacing the debt you paid off too. Your CPA should confirm the exact numbers for your exchange.

What is boot in a 1031 exchange?

Boot is cash or non-like-kind value you receive in an exchange. Keeping some sale money is cash boot. Paying off debt without replacing it is often called mortgage boot. Boot can be taxable, but the rest of your gain can still be deferred.

Can I take some cash out of my 1031 exchange?

Yes, but the cash you take is generally taxable as boot, up to your gain. Some clients choose to do this on purpose. Talk with your CPA before you decide so you know the cost.

Are DST distributions guaranteed?

No. DST distributions depend on how the property performs. They can be lowered or stopped. A projected distribution rate is the sponsor's estimate, not a promise.

Do I have to be an accredited investor to buy a DST?

Most DSTs are private offerings open only to accredited investors. For individuals, the SEC test is generally net worth over $1 million not counting your home, or income over $200,000 ($300,000 with a spouse or partner) in each of the past two years. Some licensed professionals also qualify.

What if I sell my property in December?

Your 180-day deadline may be cut short by your tax return due date. If you sell in December, your return could be due before day 180. Filing an extension can often keep the full 180 days, so ask your CPA early.

What forms do I file after a 1031 exchange?

You report the exchange on IRS Form 8824 with your tax return for the year you sold your property. Each DST will also send you yearly tax information. Your CPA prepares the filings, and I make sure they have the closing documents.

Can I sell my DST interest early if I need the money?

Usually not easily. DSTs are illiquid, and there's rarely a market for your interest. Plan to hold for the full term the sponsor describes, which in my records is most often 10 years.

Sources

• 26 U.S. Code § 1031, Exchange of real property held for productive use or investment (Cornell Law School LII)
• 26 CFR § 1.1031(k)-1, Treatment of deferred exchanges (Cornell Law School LII)
• 26 U.S. Code § 721, Nonrecognition of gain or loss on contribution (Cornell Law School LII)
• IRS Revenue Ruling 2004-86
• IRS, About Form 8824, Like-Kind Exchanges
• IRS, Instructions for Form 8824
• IRS, Like-kind exchanges now limited to real property
• IRS Fact Sheet FS-2008-18, Like-Kind Exchanges Under IRC Code Section 1031
• SEC, Accredited Investors
• FINRA Regulatory Notice 05-18

This article is for education only. It is not tax, legal, or investment advice. Confirm your situation with your CPA, attorney, and qualified intermediary. Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments, LLC is independent of Aurora Securities, Inc. DST investments are speculative, illiquid, and generally available only to accredited investors. Distributions are not guaranteed, and you can lose your entire investment.