Real Estate Exit Strategy Comparison
Selling a long-held property can turn most of the price into taxable gain in a single year. A 1031 exchange into another building defers that gain but keeps you a landlord. A 1031 exchange into a REIT-sponsored Delaware statutory trust, later converted into operating partnership units, defers the gain and lets you sell a portion at a time. This tool compares all three paths on your own numbers.
Your Property
What it would sell for today, before selling costs.
What you paid plus improvements, minus all depreciation taken.
Gain up to this amount is unrecaptured Section 1250 gain, taxed at up to 25%.
Commissions and closing costs, applied the same way in every path.
Your Tax Picture
Uses 2026 federal brackets, the standard deduction, and the 3.8% net investment income tax.
Pensions, wages, and retirement plan withdrawals. Held constant every year.
Texas has no state income tax. Applied as a flat rate to every dollar of gain.
The 1031-to-upREIT Program
Sales charges, placement fees, and offering costs on the DST purchase. One large sponsor's current materials total roughly 4.25% for a debt-free offering.
As a share of your original position. Repurchase programs commonly cap redemptions at about 20% a year.
The REIT's option typically opens about two years in, and units are commonly held a year before they can be exchanged.
Units not sold by the end of the comparison are shown both sold and held for your heirs.
Market Assumptions
Applied to the building, the units, and reinvested sale proceeds alike. Zero isolates the effect of timing.
Rent or distributions as a share of what you have invested. Shown for comparison only; not taxed in this model.
The year at which every path is valued, sold, or passed to heirs.
Result
Three Paths, Side by Side
Your Liquidity Timeline
Each sale of units is taxed as a sale of that share of your position. The depreciation-related portion of the gain is taxed at up to 25% and the rest as long-term capital gain. After-tax cash is assumed to be reinvested at the same growth rate.
Value by Year, Before Any Final Sale
Chart unavailable in this view. The tables above carry the same information.
Selling outright starts lower because the tax is paid on day one. The other two paths keep the full amount invested; the program line includes after-tax cash from units already sold.
Is the 1031-to-upREIT path right for your property?
The numbers above depend on facts this tool cannot see: the terms of the specific program, including whether the REIT's option pays in units or cash; the sponsor's fees and redemption limits; the debt on your property and how it will be replaced; and how the exchange fits your estate plan. The decision also has to be made before the 45-day identification window starts.
Book a consultation to talk through your exit before you list the property.
Disclaimer:
This tool is for informational purposes only and does not constitute legal or tax advice. It is a simplified model. It applies 2026 federal tax brackets, thresholds, and the standard deduction in every year without inflation adjustment; holds other income, growth, and yield constant; treats state tax as a flat rate on gain; assumes the 1031 exchange qualifies in full with no boot and no mortgage, that the operating partnership exercises its option for units rather than cash, and that every sale of units is a taxable sale at the then current value; excludes taxes on rent and distributions, depreciation on the replacement property, the alternative minimum tax, and the time value of money; and values property held at death at full value with a stepped-up basis and no estate tax. Program terms, fees, holding periods, and redemption limits vary by sponsor. The application of Sections 1, 1014, 1031, 1250, and 1411 of the Internal Revenue Code, Revenue Ruling 2004-86, and related provisions depends on individual facts and circumstances. Consult a qualified tax attorney or CPA before making decisions based on this information. Circular 230 Notice: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.