Investing Guides
How To Invest In Real Estate
A general overview of the main ways investors put capital into real estate, and which of those paths remain eligible for 1031 exchange deferral.
Investing Guides
Passive Real Estate Income Explained
Passive real estate income generally refers to rental income received without active day to day management responsibility, and investors near Dallas, TX pursue it through a few common structures. A single tenant net lease property, where the tenant is contractually responsible for taxes, insurance, and maintenance, can generate largely passive income for a direct owner while still qualifying as real property for a future 1031 exchange. A tenancy in common interest, generally structured under Revenue Procedure 2002 22, allows an investor to hold a fractional interest in a larger institutional quality property managed by a professional sponsor, which can reduce management burden while generally preserving 1031 eligibility for the fractional interest. A Delaware Statutory Trust interest, generally structured under Revenue Ruling 2004 86, similarly allows passive participation in a professionally managed portfolio and is generally treated as real property for exchange purposes when trust restrictions are followed. These structures involve giving up direct management control in exchange for passivity, and DST and TIC interests are securities or securities adjacent interests that carry liquidity constraints, sponsor dependent outcomes, and other risks that should be reviewed with a licensed professional before investing. By contrast, income from a syndication or a real estate investment trust is also generally passive, but interests in those structures are generally not eligible as 1031 replacement property because they are treated as personal property or securities rather than direct real property. This page is general education, not investment advice, and outcomes on any specific property or offering are never guaranteed.
Why it matters
- Single tenant net lease property can generate largely passive income for a direct owner while generally remaining eligible for a future 1031 exchange.
- Tenancy in common interests allow passive participation in professionally managed property while generally preserving 1031 eligibility for the fractional interest held.
- Delaware Statutory Trust interests offer passive participation in professionally managed portfolios and are generally treated as real property for exchange purposes under Revenue Ruling 2004 86.
- DST and TIC interests are securities or securities adjacent and carry liquidity constraints and sponsor dependent risk that should be reviewed with a licensed professional.
- Syndication and REIT income is generally passive but those interests generally do not qualify as 1031 replacement property under current law.
Deliverables
- A general comparison of net lease direct ownership, TIC, and DST paths to passive income.
- Notes on the management tradeoffs and liquidity constraints associated with each structure.
- An explanation of why syndication and REIT interests generally fall outside 1031 eligibility despite generating passive income.
- A risk disclosure summary appropriate for DST and TIC offerings.
- A referral pathway to licensed providers for any specific DST or TIC offering.
Milestone Schedule
Income goal review
Clarify desired passivity level and whether future 1031 eligibility matters.
Structure comparison
Compare net lease, TIC, and DST options available to investors near Dallas, TX.
Licensed review
Engage a licensed securities professional before committing to any DST or TIC offering.
Frequently Asked Questions
Can passive net lease income near Dallas, TX still qualify for a 1031 exchange?
Generally yes, if the property is held for investment or business use and the owner directly holds real property, even a net leased asset near Dallas, TX generally qualifies for exchange treatment.
Does the forty five day identification period apply when replacing with a DST for passive income?
Yes. A DST interest used as replacement property is generally subject to the same forty five day identification and one hundred eighty day closing deadlines that apply to any 1031 exchange.
What is boot in a passive income focused exchange?
Boot is cash, net debt relief, or non like kind property received in the transaction, and receiving it generally triggers recognized gain regardless of whether the replacement produces passive income.
Do you sell DST interests directly to investors near Dallas, TX?
We do not sell securities. We introduce investors to licensed DST and TIC providers who handle offering documents, suitability review, and required disclosures.
Is REIT income the same as 1031 eligible passive income?
No. REIT shares are generally securities representing an interest in a company, not direct real property, and generally do not qualify as replacement property in a 1031 exchange.
Related Services
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Asset Class Guides
Triple Net Lease NNN Investing Explained
A general explainer of triple net lease investing, why the structure appeals to passive investors, and how NNN property fits into a 1031 exchange strategy.
Investing Guides
Fractional Real Estate Investing Explained
A general explainer of tenancy in common fractional ownership, how it differs from syndication and crowdfunding equity, and how it relates to 1031 exchanges.
Investing Guides
Real Estate Syndication Explained
A general explainer of how real estate syndications are structured as pooled equity, and why syndication interests generally do not qualify for 1031 exchange treatment.
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