Understanding 721 UPREITs and 1031 Exchanges

For investors considering a tax deferred exchange, a 721 UPREIT may be an appropriate allocation to consider.

For most investors ending up in an UPREIT is a two-step process.

The first step is to invest in a Delaware Statutory Trust (DST). Imagine you sell a property and want to defer taxes. A DST lets you invest in a big professionally managed property like a class a apartment building or industrial building alongside other investors. You own a piece without the hassle of managing it. You can choose a DST created by a REIT company that has an option to buy the property back from you as soon as 2 years after the DST is filled. If the REIT uses this option, they will swap you out of the DST and into the REIT by giving you operating partnership units in the REIT. You will move from a DST consisting of one property and end up in a REIT with potentially hundreds of properties and billions of dollars of diversification. You will retain your tax deferral benefits and continue to receive income from the REIT. One year after converting into the REIT you may have the option to sell shares if you need liquidity. This could come in handy for estate planning purposes.

The 721 UPREIT options from Corcapa 1031 Advisors offer many benefits including tax deferral, income & diversification, and potential liquidity.