1031 Exchange Case Studies: Solving Real-World Investor Challenges
A 1031 exchange is not simply about finding another property before the deadline. The more important question is what the next investment needs to accomplish.
Some investors want to retire from active property management. Others want to improve income, reduce concentration in one property or market, simplify an estate, replace debt, separate from co-owners, or avoid leaving exchange proceeds uninvested. The right strategy can look very different depending on the investor.
The case studies below illustrate common situations we see when evaluating 1031 exchange and Delaware Statutory Trust (DST) strategies. Each example is designed to help investors understand the problem being solved, the role a DST may play, and the tradeoffs that should be evaluated before investing.
These are hypothetical case studies — the investors described are not actual clients.
Explore the Case Studies
Filter by what you are trying to solve, then open the scenario closest to your own situation.
Showing all 12 case studies
Retire From Active Management and Diversify a Concentrated Property How a long-time multifamily owner could exchange one highly concentrated asset into a diversified portfolio of passive DST investments. Read the case study 
Simplify Estate Planning With a Phased DST Strategy How an owner of multiple smaller rentals could sell properties over time while gradually building a more transferable, professionally managed portfolio. Read the case study 
Use a 1031 Exchange to Potentially Create New Depreciable Basis How trading into higher-value replacement real estate with additional capital or debt may create excess basis that can potentially support future depreciation deductions. Read the case study 
Increase Income by Unlocking Return on Equity Why a property with strong historical appreciation can still produce a weak current return on equity, and how a 1031 exchange may reposition that equity. Read the case study 
Use DSTs to Help Fill a 1031 Exchange and Reduce Taxable Boot How DSTs can complement a direct-property purchase when an investor still has exchange proceeds that need to be reinvested. Read the case study 
Identify a DST as Backup Replacement Property What an investor can do when the entire exchange depends on one direct property closing, and that closing is not certain. Read the case study 
Replace Exchange Debt Without Personally Qualifying for a New Loan How a retired owner with a mortgage on the relinquished property could address the debt-replacement requirement without new personal underwriting. Read the case study 
Give Co-Owners Different Exit Paths From the Same Property How co-owners who want different outcomes might each pursue their own strategy instead of being forced into one shared decision. Read the case study 
Plan a Long-Term Exit Using a 721 UPREIT Strategy What happens when a DST hold period ends, and how a 721 exchange into a REIT operating partnership changes the picture — including what it gives up. Read the case study 
Weigh a Major Capital Project Against Redeploying the Equity How an owner facing a large capital expenditure on an aging building could compare that reinvestment against exchanging the equity into passive real estate. Read the case study 
Reduce Leverage in Retirement Without Creating Mortgage Boot Why paying down debt through an exchange can create a tax bill, and how an investor might step leverage down gradually instead. Read the case study 
Structure DST Holdings to Hold for Life and Pass to Heirs How staggering hold periods across several offerings could keep heirs from inheriting a portfolio that all matures at once. Read the case study No case studies match that goal. Select “All” to see every example.
Why Investors Use DSTs in a 1031 Exchange
DSTs can allow an accredited investor to acquire a fractional interest in institutional-quality real estate that may qualify as replacement real property for a 1031 exchange when the applicable requirements are satisfied. They can also provide access to professionally managed properties without the investor serving as the landlord.
- Passive ownership with no day-to-day property management.
- Ability to allocate an exchange across multiple properties, sponsors, markets, and asset types.
- Potential to match both equity and, when appropriate, replacement debt through leveraged DST offerings.
- A practical option when a direct replacement property does not use all available exchange proceeds.
- Fractional interests that can be sized to an individual owner’s share of proceeds.
- Access to replacement real estate without requiring the investor to negotiate and close on an entire property alone.
DSTs also have important limitations
They are generally illiquid, investors do not control day-to-day property decisions, projected distributions are not guaranteed, and private placements involve the risk of loss. The quality of the underlying real estate, sponsor, debt, assumptions, reserves, fees, and exit strategy all matter.
Case Study Disclosure
Illustrative examples only. These case studies do not represent actual clients and are not a guarantee of future results. The case studies are hypothetical composites informed by situations commonly encountered by real estate investors; the individuals described are not actual clients and the scenarios are not accounts of actual transactions. Photographs are stock imagery used for illustration and do not depict actual clients, advisors, or properties. The appropriate 1031 exchange or DST strategy depends on an investor’s individual facts, objectives, tax situation, liquidity needs, and risk tolerance. DST and other private placement investments involve material risks, including illiquidity and the potential loss of principal. Nothing on this page is tax or legal advice. Investors should review the applicable offering documents and consult their tax and legal professionals before making an investment decision.