Compare your 1031 replacement-property options.
A 1031 exchange can involve different ownership structures and income drivers. NNN property, DST interests, farmland and producing royalty interests each carry distinct management, liquidity and market risks. Whether a specific property or interest qualifies depends on the interests and your transaction; confirm with your qualified intermediary (QI) and tax adviser.
Compare the trade-offs.
Ownership, income, management and liquidity vary by asset and offering. Use this as a starting point for questions; terms and risks depend on the property, operator, offering documents and your exchange.
| Option | Ownership | Income drivers | Management | Liquidity and risks |
|---|---|---|---|---|
| Oil & gas royalties | Rights to a specific mineral or royalty interest; confirm title and governing terms. | Production, commodity prices, operator decisions and applicable deductions. | Owners generally do not operate wells; diligence and ownership oversight still matter. | Resale timing and price vary. Exposure includes production decline, commodity, operator, title and concentration risks. |
| NNN commercial | Direct ownership of commercial property subject to a lease. | Contract rent, depending on lease terms, occupancy and tenant performance. | Lease terms may assign some expenses to the tenant; ownership and property oversight remain. | Vacancy, tenant, property-condition and market risks; sale timing and price are uncertain. |
| DST | Interest in a trust that owns real estate; rights follow its documents. | Distributions, if any, depend on property operations, expenses, reserves and financing. | Management and decision rights follow the trust and offering documents; investor control may be limited. | Transfer and exit options depend on the documents and market; property, financing and sponsor risks remain. |
| Farmland | Agricultural land held directly or through the transaction's ownership structure. | Cash rent, crop-share arrangements or other land use, depending on agreements and conditions. | Lease administration, upkeep, water and operating arrangements depend on the property and agreements. | Weather, water, tenant, commodity and local land-market risks; resale timing and price are uncertain. |
NNN commercial real estate.
A single-tenant retail or industrial property may be leased under a triple-net agreement. The lease sets the tenant's and owner's responsibilities. Rental income and property value depend on tenant performance, vacancy, expenses and market conditions.
Ownership and income
- The owner holds the property subject to the lease and its terms.
- Rent follows the lease; income depends on occupancy and the tenant's ability to pay.
- Responsibility for taxes, insurance and maintenance varies by agreement.
Management, liquidity and risks
- Owners retain property and lease oversight even when a tenant handles some expenses.
- Vacancy, tenant concentration, repairs, leasing costs and local property conditions can affect income and value.
- A sale depends on the property, market and available buyers; timing and price are uncertain.
Delaware Statutory Trusts (DSTs).
A DST offering may provide an interest in a trust that owns real estate. Review the offering and trust documents to understand the rights, fees and risks. Whether a specific interest may qualify for a 1031 exchange depends on its structure and your transaction; discuss eligibility with your QI and tax adviser.
Ownership and income
- The investor holds an interest in a trust; rights are set by the governing and offering documents.
- Distributions, if any, depend on property operations, expenses, reserves, financing and sponsor decisions.
- The underlying asset may be managed by the sponsor or property manager.
Management, liquidity and risks
- Investor decision-making may be limited by the trust structure and offering documents.
- Transfer, redemption and exit terms vary; a secondary market may be limited or unavailable.
- Risks can include property performance, financing, sponsor, fees and limited control.
Farmland and ranchland.
Agricultural land may generate income through cash rent, crop-share arrangements or other land uses. Ownership, operating responsibilities and income depend on the property, agreements and local conditions.
Ownership and income
- Ownership may be direct or through a structure used for the transaction.
- Income depends on lease terms, land use, tenants or operators and local agricultural conditions.
- Water access, improvements and upkeep can affect how land is used and maintained.
Management, liquidity and risks
- Management can include lease administration, maintenance and coordination with tenants or operators.
- Weather, water availability, commodity conditions and tenant performance may affect income and land value.
- Resale timing and price depend on the property's condition, local market and available buyers.
Oil & gas royalties.
Peregrine's specialty. Producing royalty interests may entitle an owner to a share of revenue under the governing instruments. Revenue varies with production, commodity prices, operator decisions and applicable deductions. The legal nature of a specific interest and the terms of the transaction matter; ask your QI and tax adviser whether it may qualify for your exchange.
Ownership and income
- Rights attach to specific mineral or royalty interests; confirm title, burdens and governing instruments.
- Revenue depends on volumes produced, commodity prices, operator performance and deductions.
- Owners generally do not operate wells, but diligence and payment oversight remain relevant.
Management, liquidity and risks
- Production can decline or change, and commodity prices can move in either direction.
- Operator, title, concentration and transaction-specific risks vary across interests.
- Resale opportunities, timing and price depend on the specific interest and market conditions.