1031 Exchange Offerings: How to Evaluate Your Best Reinvestment Options

Selling an investment property can unlock significant equity. It can also trigger a sizable tax bill. That’s why many investors begin searching for 1031 exchange offerings before they even close a sale.

A 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds into like-kind real estate. But not all replacement properties are equal. The quality of the offering you choose will directly impact your income, risk exposure, and long-term results.

In this guide, we’ll break down what 1031 exchange offerings look like today, how to compare them, and how Available DSTs fit into the picture for passive investors.

What Are 1031 Exchange Offerings?

1031 exchange offerings are investment properties structured to qualify as replacement assets under Section 1031 of the Internal Revenue Code.

These can include:

• Multifamily apartment communities

• Net lease retail properties

• Industrial and distribution facilities

• Medical office buildings

• Self-storage facilities

• Fractional ownership through Delaware Statutory Trusts

Each offering comes with its own return profile, management requirements, financing structure, and risk level.

The key is not just finding a qualifying property, but selecting one that aligns with your financial goals.

Common Types of 1031 Exchange Offerings

1. Direct Ownership

This is the traditional route. You purchase and own 100% (or a controlling share) of a replacement property.

Best for:
Investors who want control over operations and value-add potential.

Considerations:
You’ll manage tenants, maintenance, and financing decisions.

2. Tenant-in-Common (TIC) Structures

Multiple investors hold fractional interests in a property. While less common than in previous years, TIC structures still appear in certain deals.

Best for:
Investors seeking shared ownership with some degree of control.

3. Delaware Statutory Trusts (DSTs)

For investors looking for passive income, many turn to Available DSTs as replacement options.

DST structures allow multiple investors to hold fractional beneficial interests in large, professionally managed properties. The sponsor oversees operations, and investors receive proportional income distributions.

Available DSTs: What Investors Should Know

When reviewing Available DSTs, it’s important to go beyond projected returns.

Here’s what to evaluate:

Asset Type

Is the property multifamily, industrial, healthcare, or retail? Different sectors respond differently to economic cycles.

Tenant Quality

Long-term leases with creditworthy tenants can create more predictable income.

Debt Structure

Some DSTs include fixed-rate financing already in place. Review loan terms carefully since investors cannot refinance within a DST.

Sponsor Experience

The sponsor’s track record matters. Look at past performance, asset management history, and communication practices.

DSTs are often attractive to:

• Retiring landlords

• Investors tired of active property management

• Those facing tight 45-day identification deadlines

• Investors seeking diversification across multiple properties

Because DST investments are passive and illiquid, thorough due diligence is essential.

How to Compare 1031 Exchange Offerings

When evaluating 1031 exchange offerings, ask practical questions:

• What is the projected cash flow?

• Is the return based on current income or future appreciation?

• How stable is the tenant base?

• What are the exit assumptions?

• How does this property fit into my broader portfolio?

Avoid choosing an offering simply because it is available under deadline pressure. A rushed decision can reduce long-term returns.

Timing Matters in a 1031 Exchange

Remember the two key deadlines:

• 45 days to identify replacement properties

• 180 days to close

Many investors begin reviewing 1031 exchange offerings before listing their property. That preparation expands options and reduces stress.

Having backup properties identified can also protect you if a primary deal falls through.

Direct Ownership vs. Available DSTs

Your choice often depends on how involved you want to be.

Direct Ownership

• Greater control

• Potential for higher upside

• Active management required

Available DSTs

• Passive income

• No landlord responsibilities

• Limited flexibility and liquidity

There is no universal “best” option. The right offering depends on your income needs, risk tolerance, and long-term plans.

Final Thoughts

The range of 1031 exchange offerings today gives investors flexibility. You can pursue hands-on growth strategies, consolidate assets, diversify geographically, or move into fully passive structures through Available DSTs.

The most successful exchanges start with clear goals. Know whether you’re prioritizing income, appreciation, simplicity, or diversification. From there, evaluate offerings carefully and consult qualified tax and exchange professionals.

A well-chosen replacement property does more than defer taxes. It sets the direction for the next phase of your real estate portfolio.