--- title: Building a Portfolio After a $16 Million Property Sale description: "How one investor used a 1031 exchange to pursue income, preserve capital and step away from active\nproperty management." image: https://www.wealthstonegroup.com/hubfs/Blue-Owl-Terrace-min.png --- - Client Portal [![Gold-Logo-1](https://www.wealthstonegroup.com/hs-fs/hubfs/Gold-Logo-1.png?width=2000&height=380&name=Gold-Logo-1.png "Gold-Logo-1")](https://www.wealthstonegroup.com/?hsLang=en) [![Wealthstone-logo-gold](https://www.wealthstonegroup.com/hs-fs/hubfs/Gold-Logo-1.png?width=2000&height=380&name=Gold-Logo-1.png "Wealthstone-logo-gold")](https://www.wealthstonegroup.com/?hsLang=en) - [About](https://www.wealthstonegroup.com/about) - [Real Estate](https://www.wealthstonegroup.com/real-estate) - [1031 Exchanges](https://www.wealthstonegroup.com/real-estate/1031-exchanges) - [1033 Exchanges](https://www.wealthstonegroup.com/real-estate/1033-exchanges) - [721 Exchanges](https://www.wealthstonegroup.com/real-estate/721-exchanges) - 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It was the largest asset in his real estate portfolio and had been an important source of income.' He was ready to retire from actively managing his properties. With approximately $10.2 million of equity available for his 1031 exchange, the sale gave him an opportunity to rethink how his real estate could support him in retirement. ## The Challenge Years of appreciation had created significant potential tax exposure. His primary objective was to achieve 100% tax deferral through a 1031 exchange while targeting at least $500,000 in annual income. He also wanted to preserve capital, diversify and retain some control over his investments. Concentrating the proceeds in another single property would expose too much of his retirement capital to one asset. The exchange also needed to account for approximately $4.85 million of debt associated with the property he sold. ## The Strategy Wealthstone Group and a net lease advisory firm spent nearly a year planning the exchange, ultimately combining directly owned properties and passive real estate investments in one portfolio. The investor acquired two directly owned net lease properties. These preserved a measure of control and a source of rental income while reducing the active management required by his former property. The remaining exchange equity was allocated across multiple DST investments to spread his exposure across additional properties and investment strategies. To address his longer-term liquidity goals, a meaningful portion of the DST investments was allocated to 721 UPREIT strategies designed to transition into a globally diversified REIT and a multifamily focused REIT. If the planned 721 UPREIT transactions occur, his DST interests would become operating partnership units in those REIT structures. The property he sold still had remaining tax basis. After a 721 UPREIT, that basis could allow him to access some capital through operating partnership distributions without immediately recognizing gain. ## The Outcome The investor completed a diversified 1031 exchange portfolio that achieved his full tax-deferral objective and was structured to meet his income target while preserving direct ownership of selected properties. The completed exchange also reduced his active management responsibilities and spread his capital across multiple investments. It addressed the priorities that shaped nearly a year of planning: income, capital preservation, diversification, control and a more flexible path for his heirs. The 721 UPREIT allocations added a potential route to future liquidity. ### Disclosures *This case study is for educational purposes and is not investment, tax or legal advice. Identifying information and certain property details have been omitted for privacy. The annual income figure was a planning target, not a guaranteed or realized result. Real estate and DST investments involve risks, including illiquidity, fees, expenses and loss of principal. Diversification does not assure a profit or prevent loss.* *Future 721 UPREITs, distributions, liquidity and tax treatment depend on the investments’ terms and the investor’s circumstances and are not guaranteed. 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