UP-REIT (721 Exchange) for Real Estate Investors
Here at Diversified Investment Strategies, we want to help you determine the best 1031 investment strategy for you, and you may have many options! This could seem overwhelming as a real estate investor, especially because there are so many rules and restrictions to follow. Working with a team of professionals can ensure that your 1031 exchange runs smoothly!
Our team of professionals at DIS can also help you determine which type of exchange option will work best for you and your needs. We’ve already discussed the details of a DST and a Triple-Net (NNN) exchange in past blog posts. Today, let’s discuss the details of an UP-REIT (721 Exchange).
REITs are real estate portfolios made up of a variety of commercial properties, such as shopping malls, hotels, medical facilities, apartments and office buildings. As a real estate investor, you could own shares in a REIT!
You cannot exchange directly into a REIT, because that is not considered a like-kind property for a 1031 exchange. However, by working with our team of real estate professionals at DIS, we can properly structure it as an exchange.
To do this, it must be exchanged into a DST fractural ownership investment and then be UPREITED after 18 to 24 months in exchange for shares in the REIT. It is extra steps and takes extra time, but you reap the rewards when it is all said and done. It is important to note that not all REITs are available for a 1031 exchange, so be sure to contact 1031 exchange professionals to help you plan the exchange!
Once completed, you will own shares of multiple properties, up to hundreds or thousands even, and can enjoy full diversification of them. However, once you are in a REIT, you can no longer complete another 1031 exchange.
An advantage of a REIT is that taxes can be paid a little at a time as the shares are sold. This is a great option for estate planners. It may also be used in conjunction with a DST, NN or direct buying.
For more information on an UP-REIT (721 Exchange) and all of the details, rules, regulations and perks that go along with it, contact DIS’s inclusive advisory team! We can help you determine if this is the right type of 1031 exchange for you and your investment needs.
Bryan Hakola
Diversified Investment Strategies
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