Answer
Aug 14, 2025 - 11:59 AM
Most of the transactions that we are helping clients with in a 1031 exchange are investing into Delaware statutory trust properties, typically a multifamily class A property that's a $100 million property in a suburb of a major market. And so you go from selling, you know, typically – you know, a rental housing property that you are owning and operating. Perhaps you have a property manager, but essentially maybe a one to four unit property close to where you live, doing a 1031 exchange and on the other side of that, investing as a fractional owner in a Delaware statutory trust that owns this $100 million Class A new apartment community and you are essentially... receiving your pro rata share of all the net income of that property. You get to receive your share of the depreciation subject to your own depreciable cost basis, of course. And then ultimately, you get your pro rata share of the appreciation of that property. And by the way, if I'm increasing your income by 50% or doubling your income in that 1031 exchange, it may be less relevant that the but the underlying property tax for your share of that investment may be higher than what you sold. At the end of the day, you know, if the, if the net of the revenues and expenses is a significant increase to your income, you know, I'm not sure, you know, how important it is that, that, that one expense item may have gone up in the context of, you know, of a significant increase in your income. But, As I mentioned earlier, in that scenario where you've depreciated your rental property and you invest in a DST that has built-in financing, then we routinely are helping clients increase their depreciation deduction by investing in DST's properties that not only have built-in leverage and therefore allow you to acquire more real estate, but are also, as I mentioned, located in places where there's much more depreciable improvements than a typical West Coast property. And so you get the double benefit to sort of start over a new depreciation schedule, even when you've fully depleted the depreciation on the property you sold.
