1031 exchange transactions have surged in the last couple of years. As the tax plan overhaul was negotiated, some investors were concerned that 1031 exchange guidelines would change under the new plan. While 1031 exchange opportunities were eliminated for many asset classes, like wine and art, thankfully, real estate was left unchanged. As a result, 1031 exchange transaction volumes should continue to grow in the next year.

“For real estate, the ability to continue to do exchanges remains, and I think that will allow the momentum that exchanges have been driven to lately to continue,” Davin Carey, managing financial advisor at Carey & Hanna, tells GlobeSt.com. “We have seen a massive increase in volume the last several years from people that own traditional real estate and want to exchange into something different. We have been working on a lot of DST-focused real estate investment products, where it allows clients to still have a real estate-to-real estate-qualified transaction.”

While many different investment groups have been interested in transitioning out of management intensive asset classes, investors entering retirement are specifically driving this activity. “We have been seeing a lot of clients get into that, and it is a handful of groups of people that are leading that wave,” Carey says. “One has been people who are older that are into their retirement years and are simplifying their life. When we are posed with the cost of taxes, we run through the calculations with an outright sale, and usually, it is a pretty big number. That group of people have been finding DST products as a way to eliminate management headaches, not have to pay taxes and continue to receive income.”