Diversify Your 1031 Exchange—Without the Headaches
A 1031 exchange is a tax deferral strategy that allows real estate investors to sell an investment property and reinvest the proceeds into another like-kind property without paying capital gains tax at the time of sale.
When you sell an investment property, your 1031 exchange doesn’t have to go into just one new asset. With DSTs (Delaware Statutory Trusts), you can allocate your equity across multiple sectors—each with different tenants, geographies, and economic drivers.
It’s a powerful way to spread risk and create balance in your portfolio—all without taking on landlord responsibilities.
The Scenario
Let’s say a Kapolei investor sells their longtime rental and nets $700,000 in proceeds. Rather than replacing it with another hands-on rental or a single DST, they decide to diversify:
- $250,000 into a Sunbelt multifamily DST with high occupancy and population growth
- $200,000 into a grocery-anchored retail DST with a long-term lease to a national chain
- $250,000 into a last-mile industrial DST serving e-commerce distribution near urban hubs
Now, instead of relying on one tenant or one market, they’re invested across three different asset types—each with its own potential cash flow profile and risk exposure.
Why Diversify with DSTs?
- Spread risk across sectors and markets
- Target income stability with defensive assets like medical or necessity retail
- Participate in institutional-quality properties typically out of reach for individual investors
- Maintain 1031 eligibility while avoiding active property management
The Bottom Line
DST diversification can give investors a smarter way to stay invested in real estate—without being tied to one property, one market, or one income stream. It’s about protecting your capital and creating more predictable passive income in your next chapter.
Francein Hansen, 1031 DST Specialist
