Ownership Structures Used for 1031 Exchange

For those investors who would like to access investment-grade properties together with other accredited investors, the two most common ownership structures are the Delaware Statutory Trust (DST) and Tenancy in Common (TIC). Both of these structures can qualify as a like-kind interest in real estate for the purposes of a 1031 exchange.

The tenancy-in-common structure dates from the time of English common law, and has been the traditional vehicle for multiple-owner 1031 exchanges in the US. In the last 10 years, most exchangers have begun using the DST structure, which is considered a simpler and more flexible vehicle for owning investment real estate, and which has some tangible advantages for the investor.

Both DSTs and TICs are usually available as turnkey, pre-packaged investments, with management and non-recourse financing in place. Therefore, they offer superior efficiencies in the identification, acquisition, financing, closing, and operating stages of real estate ownership. These efficiencies are especially helpful and often critical given the strict time restrictions confronting investors if they are funding the investment through a 1031 tax-deferred exchange. Click to compare DST and TIC ownership structures.

In addition to DSTs and TICs, investors seeking to purchase real estate for the purpose of a 1031 exchange can consider the options of oil and gas offerings or direct ownership of NNN leased properties. While most oil and gas programs are not viable for 1031 exchange, some are designed for this purpose. (Click to see our Oil and Gas Offerings.) Lastly, an investor may find direct ownership of a NNN leased property most suitable. While not securitized offerings, NNN leased properties are often attractive to investors seeking to own a piece of high quality retail real estate themselves, or together with one or two other owners. (Click to see our NNN lease properties.)