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1031 Exchanges

Managing the tax implications of your real estate assets can be overwhelming and discouraging. We take a holistic approach to 1031 Exchanges, taking into consideration your entire financial life and your retirement needs. Let us help you navigate the real estate tax landscape through the use of 1031 Exchanges and Delaware Statutory Trusts (DSTs).

What is a 1031 Exchange?

A 1031 Exchange is a tool used by real estate investors since the 1920s to help defer tax liability on the income generated from the sale of a property. To do this the property owner transfers the rights to the piece of property they wish to sell to an intermediary. The intermediary holds the income generated from the sale to purchase a similar or “exchange” property thereby rolling the earnings into a new property and legally avoiding taxes on the gain.

What are the potential benefits of a 1031 Exchange?

  • Tax Deferral
  • Increased cash flow for reinvestment
  • Relief from problematic properties
  • Wealth and asset accumulation

What is a 1031 Exchange DST?

DST is an acronym for Delaware Statutory Trust. A DST is a fractional ownership trust. Through a DST a separate legal entity is created as a trust under Delaware state law. In essence, the DST is used as the “exchange property” for a 1031 Exchange.

What are the potential benefits of a 1031 Exchange DST?

Perhaps the biggest advantage of a 1031 Exchange DST over a traditional 1031 Exchange is the fact that you no longer have to be a landlord. With a DST you may be in a pool of 100 or more investors with fractional ownership of anything from a healthcare facility to a gym to an office building. On the other hand, you lose direct control over your investment, however, for many investors that is a benefit, not a detractor.

Extensive property due diligence is also an attractive feature of a 1031 Exchange DST. Significant due diligence is done on the properties before they come to the market and are approved by the DST.

There are six levels of due diligence:


Provides research, underwriting, and sourcing for all third-party reports including appraisal, environmental, and property condition reports along with financial underwriting analysis.


Underwrites the property and sponsor in their own due diligence.


Drafts the private placement memorandum (PPM) and writes the tax opinion on the property.


Review’s sponsor, PPM and third party reports to their strict standards.

Third-Party Due Diligence Firm

Provides an internal report to the broker-dealers.

Registered Representative

Review’s all information plus establishes client suitability.

As additional due diligence, investors are able to tour the properties before investing.

What are the potential risks of a 1031 Exchange or a 1031 Exchange DST?

Risks including general real estate and market risk, as well as the risk of owning, selling, and operating real estate. Additionally, DSTs are subject to the fact that there can be no assurance that a property will perform as projected. DSTs are also subject to economic volatility and tenants not paying their rent in a timely fashion. Beneficial Owners possess limited control and rights. The trust will be operated and managed solely by the Trustee. Beneficial Owners have no right to participate in the management of the trust. Beneficial Owners do not have legal title. Beneficial Owners do not have the right to sell the property.

The “Seven Deadly Sins” of DSTs

If one of these “sins” is committed, certain actions may occur that would likely preclude investors from conducting further 1031 exchanges and may adversely impact the value of their investment.

  1. Once the offering is closed, there can be no future contribution to the DST by either current or new Beneficial Owners.
  2. The Trustee cannot renegotiate the terms of the existing loans, nor can it borrow any new funds from any party.
  3. The Trustee cannot reinvest the proceeds from the sale of its real estate. Proceeds must be distributed to beneficial owners who have the option of transacting another 1031 exchange.
  4. The Trustee is limited to making capital expenditures with respect to the property to those for (a) normal repair and maintenance, (b) minor non-structural capital improvements, or (c) those required by law.
  5. Any cash held between distribution dates can only be invested in short-term debt obligations.
  6. All cash, other than necessary reserves, must be distributed on a current basis.
  7. The Trustee cannot enter into new leases or renegotiate the current leases.


The contents of this site constitute neither an offer to sell nor a solicitation of an offer to buy any security which can only be made by prospectus. Investing in real estate and 1031 exchange replacement properties may not be suitable for all investors and may involve significant risks. These risks include, but are not limited to, lack of liquidity, limited transferability, conflicts of interest and real estate fluctuations based upon a number of factors, which may include changes in interest rates, laws, operating expenses, insurance costs and tenant turnover.

Investors should also understand all fees associated with a particular investment and how those fees could affect the overall performance of the investment. Neither Platinum Wealth Group or its representatives, nor DFPG Investments, LLC. provide tax or legal advice, as such advice can only be provided by a qualified tax or legal professional, who all investors should consult prior to making any investment decision.

Contact Platinum Wealth Group today and explore the opportunities available to you.

Thank you!