How we build your replacement portfolio

We start with your exchange math

Every plan begins with four figures from your relinquished sale, because they constrain everything that follows:

• Net sale proceeds — the equity that must be reinvested to fully defer gain.
• Debt to replace — the mortgage paid off at sale. You generally must replace that debt (or add equivalent cash) to avoid taxable “boot.”
• Timeline — 45 days to identify and 180 days to close, with no extensions in practice.
• Goals & constraints — income vs. growth, hold horizon, estate plans, liquidity needs, and risk tolerance.

How many DSTs should you own?

There is no single “right” number, but the decision is driven by competing forces: diversification pushes the count up; investment minimums ($25,000–$100,000) push it down; the 45-day identification rules shape the list; and each position is a separate K-1 and full-cycle event to track.

As a general framework — not a recommendation — most exchanges we work on land between three and six DST positions, with larger or more complex exchanges supporting more. We also identify backup properties within the 45-day rules so a single sponsor closing cannot derail the exchange.

The diversification framework

Once the position count is set, we diversify deliberately across several independent axes — not just “different buildings,” but different sources of risk:

Matching debt — or going debt-free

If your relinquished property carried a mortgage, replacing that debt is usually necessary to avoid a partial taxable event. DSTs carry property-level, non-recourse financing, so your share of a leveraged DST's debt counts toward your replacement requirement. Where an investor prefers no new debt, debt-free (all-cash) and low-leverage programs can be used instead. We model the blended leverage so your debt replacement lands where it needs to — not by accident.

Illustrative portfolios

The scenarios below are hypothetical illustrations of how a diversified plan can be structured — not recommendations, offers, or projections, and not based on any specific investor or current availability.

$600,000 equity · no debt to replace · debt-free preference · long hold. 4 positions, 4 sponsors; no single sector above ~30%.

$1.2M equity · ~$480k debt to replace (≈40% leverage). 5 positions, 5 sponsors; blended leverage tuned to the debt to be replaced.

$3.0M equity · step-up focus · optionality valued. 7–8 positions, 6+ sponsors; staggered holds; a 721-eligible sleeve preserves a path to REIT units.

$250,000 equity · mindful of minimums. 2–3 positions; diversification constrained by $25k–$100k minimums.

Identification & deadline strategy

The 45-day clock is unforgiving, so identification is a strategy, not a formality. Depending on the exchange we use the three-property rule (name up to three, any value) or the 200% rule (name more, capped at twice the relinquished value) to build in backups, and we sequence funding so the highest-conviction positions close first.

Ongoing stewardship

The plan does not end at closing. We track each position toward its full-cycle event, watch sponsor reporting, and help you plan the next move — another exchange, a 721 UPREIT roll where eligible, or a different allocation as your goals change.