Real Estate 1031 Exchange Options
I have a $3M+ commercial property for which I would like to do a 1031 exchange, potentially taking on debt financing to procure a \~$6M property. I'm currently deciding between NNN properties, a mixed-use single owner property (not pure NNN, although could include a triple NNN tenant, amongst others), or a Delaware Statutory Trust. Can anyone tell me the differences between the three - I've read some online but having difficulty getting clarity on a lot of the details. How do the returns on these three types of investments compare? NNN vs non-NNN vs DST? Why would anyone do a NNN rather than a DST? My sense is non-NNN property investment is the highest risk, highest management-time investment, but highest return, while DST is the most passive, but least risky (w. a diversified portfolio of properties) - is that accurate? Do the returns generally reflect this (i.e., non-NNN highest risk highest return, NNN mid/low-risk mid/low return, DST low-risk low return)?   


Lastly, does anyone have any suggestions on a good book that addresses these types of questions?  
   

[{"id": "ek2slnl", "text": "I am the president of an apartment brokerage firm of 18 years. Returns in each type depend o. Location and risk. Would you rather a 5% return on a Starbucks in Times Square or a 7% dollar store in the Midwest? My choice is a DST because you can choose apartments, which yield higher returns and are safer. I can give you. Referral if you PM me. ", "replies": [], "depth": 1}, {"id": "ek2totj", "text": "I\u2019m work for Colliers on the investment sales team in Raleigh, NC. My focus is STNL properties. Not sure where you live, but would love to offer some insight into our world. There are a lot of options in your price range. Once you develop a investment/exit strategy you will know what choice to make. PM me if you\u2019d like to chat about your options. ", "replies": [{"id": "eyjr42b", "text": "Hi- is your focus DST?", "replies": [{"id": "eykafx6", "text": "No. Mainly STNL, office, and industrial. Not a huge fan of DST\u2019s because of returns and tax penalties.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ek3p01c", "text": "I don't think investment type makes much impact in returns... It's more about location, credit risk, and building quality.\n\nNNN vs gross(non-NNN) won't make much impact.  You still monitor and make sure bills get paid and then charge it back to the tenant (same efforts) for NNN deals.  In commercial deals tenant is paying their own utilities and operating expenses regardless. (Except in some office deals known as full service gross).\n\nIn a NNN you might be partially protected from inflation but those usually have caps in expense growth as well.\n\n", "replies": [], "depth": 1}, {"id": "ek4gwfg", "text": "First, DST to NNN is apples to oranges. A dst is a tax advantaged way of holding a 1031 investment, like an LLC or TiC(god forbid). Think of it like a fancy wrapping paper around the present that is the real estate asset, it makes it simple and pretty to hold. \n\nWithin the DST box, you can hold anything, multifamily, self storage, medical office, office, retail (multi tenant), retail (single tenant), and both varieties of NNN retail as well. That list is in order of risk vs return, multifamily is typically less risky than office and commands a lower return, but compensates by being more resistant to downturns inflations etc. the other driver of risk/return is location, a core location in a major growing city is less risky than a shrinking rural area, so returns are adjusted for the risk or lack thereof.  \n\nDSTs can hold a portfolio of assets as well. Given your level of expertise, you can either arrange the 1031 yourself, or buy into a DST offering, at any time there are a few open and you pick the ones you like, eg apartments in Denver, office bldg in NY, storage in texas. You can then just receive your checks as opposed to active mgmt, and of course they take a fee for doing the work. \n\nSource: worked on billions of 1031 exchanges :)", "replies": [{"id": "ekk3ed9", "text": "This is a very good explanation.", "replies": [{"id": "ekka37j", "text": "I have a solid two upvotes to feel good about it, but apparently OP didnt give a shit", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eufkv8z", "text": "[Real estate](https://www.esconarena.com/) is the only asset that qualifies for 1031 Exchanges. That means that an investor can defer capital gains tax payments by conducting a 1031 Exchange for the sale of a property, but not for the sale of any other kind of appreciated assets such as stocks or bonds.", "replies": [], "depth": 1}]