721 DST
What Is a 721 DST?
Pathway to Liquidity
Steps of a 721 Exchange
The 721 UPREIT (Umbrella Partnership Real Estate Investment Trust) strategy allows real estate investors to transition out of direct property ownership by first exchanging their property into a Delaware Statutory Trust (DST), and then converting their DST interests into Operating Partnership (OP) Units. These OP Units can potentially be exchanged for shares in a publicly traded or private REIT, offering greater diversification, potential liquidity, and continued tax deferral.
Because this approach involves multiple steps — including a 1031 Exchange and a DST investment — it’s important to work with experienced professionals to ensure the strategy aligns with your overall financial goals and is implemented correctly.
Because this approach involves multiple steps — including a 1031 Exchange and a DST investment — it’s important to work with experienced professionals to ensure the strategy aligns with your overall financial goals and is implemented correctly.
step 1
1031 Exchange into a Delaware Statutory Trust (DST)
You sell the property and defer taxes by using a Qualified Intermediary to do a 1031 exchange and invest the proceeds into a DST — a passive, institutional-grade real estate structure.
step 2
REIT Sponsor Absorbs DST Assets
At a later date (determined by the sponsor, usually 5-7 years), the REIT acquires the DST’s assets. This is a planned part of the REIT’s strategy, often known in advance.
step 3
Section 721 Exchange Occurs
In place of DST ownership, you receive Operating Partnership (OP) Units in the REIT's umbrella partnership — deferring taxes again.
step 4
Convert OP Units to REIT Shares
After a holding period around 2 years, you may choose to convert your OP units into REIT shares. This step will provide liquidity and though it will be a taxable event you can choose how much instead of all your equity being taxed from a traditional sale.
step 5
Passive Income with Continued
Tax Deferral
You’ve moved from hands-on property management to fully passive, tax-deferred ownership through a DST and ultimately into diversified REIT holdings with potential liquidity, consistent income, and long-term estate
planning advantages.
planning advantages.
Should you do a 721?
A 721 is Not For Everyone
Follow us for industry updates, educational insights, and the latest DST opportunities.
After doing a 721 there is no going back to the
1031 option.
1031 option.
The REIT controls the properties and what they do with them.
Liquidity may be limited.
Tax implications when converting OP Units to
REIT shares.
REIT shares.
Should you do a 721?
A 721 is Not For Everyone
Follow us for industry updates, educational insights, and the latest DST opportunities.
After doing a 721 there is no going back to the
1031 option.
1031 option.
The REIT controls the properties and what they do with them.
Liquidity may be limited.
Tax implications when converting OP Units to
REIT shares.
REIT shares.
