A 1031 exchange lets real estate investors defer capital gains by swapping one property for another, and for over sixteen years, owners have also had the option to move into a passive DST structure. But Fred Hubler points to a different tool for investors who want beneficiaries to be free to go their own separate ways with an inherited asset: the 721 exchange, or UPREIT strategy, which exchanges a property sale for shares in a Real Estate Investment Trust.
He outlines several advantages of using a UPREIT: like a 1031 or DST, it defers capital gains on the sale. Unlike a typical 1031/DST, which usually involves a single property, a UPREIT gives investors shares in an already-built portfolio of multiple properties and tenants, some specialized in one asset class, others more diversified, so investors can choose the fit that matches their goals. Hubler also notes UPREIT shares tend to be more liquid than a DST or an individual property, letting each beneficiary decide independently whether to stay invested or cash out.
This is a one-way door: once you move into a UPREIT, there’s no going back to a 1031 – so it’s worth understanding fully before making the switch.
Discover the full strategy on Forbes, Get Off The 1031 Merry-Go-Round.