I've seen investors make some costly errors when dealing with ExchangeRight and DSTs in general. Here's what you need to watch out for:
Waiting too long to start. The 45-day identification period and 180-day exchange period are non-negotiable. If you start shopping for a DST on day 40, you're setting yourself up for a panic decision. Start the process before you start you sell your property.
Chasing yield without understanding risk. Some ExchangeRight offerings advertise higher distribution rates, but those come with more risk — maybe shorter remaining lease terms, or tenants in weaker financial shape. Higher yield always means higher risk. Don't let the monthly check blind you.
Ignoring the liquidity constraints. This is the one that gets people. You cannot sell your DST interest whenever you want. There's a limited secondary market, and it's not a liquid one. If you think you might need that money in two years, this is the wrong investment for you.
Not reading the private placement memorandum. I know, it's dense. It's long. It's boring. But it's also the legal document that tells you everything that could go wrong. If you don't want to read it, at least have your advisor walk you through the risk factors section.
Step-by-Step: How to Invest with ExchangeRight
If you're thinking about investing, here's how the process typically unfolds. It's not complicated, but it is methodical, and you need to be prepared for the timeline.
Get qualified. ExchangeRight operates through a network of registered broker-dealers and investment advisors. You can't just call them up directly and wire money. You'll need to work with a financial professional who has access to their offerings. If you don't have an advisor, you'll need to find one who specializes in 1031 exchanges and DSTs.
Identify your replacement property. Here's the critical part — the IRS gives you 45 days after closing on your sold property to identify a replacement property. That's a hard deadline. No extensions. If you're working with ExchangeRight, they'll have a menu of available DST offerings that can serve as your replacement property. You'll want to review those options carefully with your advisor.
Complete the subscription documents. Once you've chosen a specific DST offering, you'll complete a subscription agreement. This is where you'll confirm your accredited investor status — you'll need a net worth of at least $1 million (excluding your primary residence) or annual income of at least $200,000 ($300,000 for couples) for the past two years. You'll also review the private placement memorandum, which is the offering document that spells out all the risks and details.
Fund your investment. You have 180 days from the sale of your property to complete the exchange. Your funds need to be held by a qualified intermediary — that's a third party who holds the money between the sale and the purchase. ExchangeRight works with established qualified intermediaries, and your advisor will coordinate the transfer.
Receive your ownership interest. Once everything is funded, you'll receive your ownership documents. You're now a fractional owner in a portfolio of properties. You'll start receiving monthly or quarterly distributions, depending on the specific offering. Most of ExchangeRight's offerings pay monthly, which is nice for cash flow.
Keep in mind, the entire process from sale to funding has to happen within that 180-day window. Miss it, and the tax deferral disappears. It's not the kind of thing you want to be racing against the clock on, so start the conversation with your advisor early — ideally before you even list your property.
What Is ExchangeRight Real Estate and Is It Worth Your Money?
Let's be honest. When you first hear about ExchangeRight Real Estate, your reaction is probably the same as most investors — what exactly is this company, and why does everyone keep talking about it? I get it. The world of 1031 exchanges and DSTs (Delaware Statutory Trusts) can feel like a secret club where everyone else got the memo and you didn't.
Here's the thing though. ExchangeRight has become one of the bigger names in the passive real property investing space, especially for people looking to defer capital gains taxes through a 1031 exchange. But ahead of you hand over your hard-earned money, you need to understand what you're actually getting into.
Let's break it down.
Pro Tips for Investing in ExchangeRight
Alright, let's get into the insider stuff. These are the things that experienced investors and advisors know but don't always talk about openly.
Diversify across offerings. Don't put all your exchange proceeds into a single DST. ExchangeRight offers multiple property types and geographic regions. If one market takes a hit, you don't want your entire investment tied to it. Split your proceeds across two or three different offerings if your capital allows.
Pay attention to the debt. Some DSTs carry more use than others. ExchangeRight typically uses moderate go with but it varies by offering. In a rising APR rate environment, floating-rate debt can eat into your distributions. Look for offerings with fixed-rate debt that's locked in for the long term.
Understand the exit strategy. The DST has a defined life — usually five to seven years. The sponsor's job is to sell the underlying properties at the end of that period and distribute the proceeds. But there's no guarantee the properties will be worth more than when you bought in. Look at the sponsor's history of exits and how they've performed relative to projections.
Think about the tax implications of the exit. Here's something many investors overlook. When the DST sells the properties, you'll face capital gains taxes on the appreciation — unless you do another 1031 exchange into a new DST or other qualifying real estate Have a plan for that exit before it happens.
Work with an advisor who's done this before. DSTs are complex. You want someone who has walked clients through multiple exchanges, not someone reading about DSTs for the first time. Ask your advisor how many 1031 exchanges they've help withd and what their track record looks like.
Frequently Asked Questions
What is the minimum investment for ExchangeRight DSTs?
Most ExchangeRight DST offerings have a minimum investment of $50,000, though some offerings may require more — typically $100,000 or even $250,000 for larger institutional-grade properties. That minimum is per offering, so if you're looking to diversify across multiple DSTs, you'll need significantly more capital. Your advisor will be able to tell you the specific minimums for each current offering.
Can I use ExchangeRight for a reverse 1031 exchange?
Yes, it's possible, but it's more complex. In a reverse exchange, you acquire the replacement real estate before you sell your current property. ExchangeRight can work with this structure, but you'll need to coordinate carefully with a qualified intermediary who specializes in reverse exchanges. A arrangement typically involves additional costs and tighter timelines, so it's worth discussing with your advisor whether it makes sense for your situation.
What happens if ExchangeRight's DST properties don't perform as expected?
If the underlying properties underperform, your monthly distributions could be reduced or suspended entirely. In a worst-case scenario, if the properties lose significant value, you could lose part or all of your principal investment. That said, ExchangeRight's focus on necessity-based retail and long-term net leases has historically provided a degree of stability. But past performance doesn't guarantee future results — you need to be comfortable with the risk profile before investing.
At the end of the day, ExchangeRight offers a legitimate path to deferring capital gains and building passive income through real estate. Just make sure you grasp what you're buying, why you're buying it, and when you'll be able to access your money again. That's the difference between a smart investment and an expensive lesson.
What You Need to Know About ExchangeRight
ExchangeRight Real Estate is a real estate investment firm that specializes in what are called Delaware Statutory Trusts, or DSTs for short. They've been around since 2012 and have grown into one of the larger players in this niche. Their bread and butter is helping investors who are sitting on significant capital gains from selling properties — think rental properties, commercial buildings, even raw land — defer those taxes by rolling the proceeds into a new investment.
The structure works like this. You sell your property, and instead of paying Uncle Sam a hefty chunk of your profit, you reinvest that money into a DST sponsored by ExchangeRight. The DST owns institutional-grade properties — mostly net-leased commercial real property like shopping centers anchored by national retailers, medical office buildings, and industrial properties. You become a fractional owner, receiving monthly income distributions, and you've successfully deferred your capital gains tax.
Sounds pretty good, right? Well, it can be. But there are layers to this onion.
ExchangeRight focuses heavily on what they call "necessity-based" retail — think grocery stores, pharmacies, dollar stores, and medical facilities. The logic is pretty sound. People need groceries and medicine regardless of what the economy is doing. That's a solid defensive strategy that has served their investors reasonably well through various market cycles.
One thing that stands out about ExchangeRight is their track record. They've sponsored over 90 DST offerings and raised billions in equity. They've also been pretty consistent with their monthly distributions. That consistency matters when you're looking at passive income investments.
But — and this is a big but — DSTs aren't liquid. You can't just cash out whenever you want. We're talking about a five to seven-year hold period, sometimes longer. If you might need that money back sooner, this isn't your vehicle.
Is ExchangeRight the Right Choice?
Here's the real talk. ExchangeRight is a legitimate, established player in the DST space. They've got a solid track record, a focus on defensive real estate types, and a streamlined process that works well for investors looking to defer taxes. For many people facing a massive capital gains bill, their offerings make a lot of sense.
But they're not for everyone. If you need liquidity, if you're not an accredited investor, or if you're not comfortable with a five to seven-year lockup, you should look elsewhere. And honestly, even if you fit the profile, you should compare ExchangeRight's offerings against other DST sponsors to make sure you're getting the best terms.
The bottom line is this — a 1031 exchange into a DST can be a powerful wealth-building tool, but it's not a set-it-and-forget-it type of investment. You're still a real estate owner, just a passive one. Do your homework, work with experienced professionals, and go in with your eyes wide open.