Putting It All Together: 1031 Strategies You Can Use
Tax strategy conversations are some of my favorites, especially when they bring clarity to areas most investors never hear about. Many people feel boxed into buying yet another rental property after selling an investment home but there’s a much wider landscape of choices that can lighten the workload, protect your cash flow, and keep your tax bill manageable.
I’m sharing how 1031 exchanges can go far beyond the usual “property-to-property” route. Options like Delaware Statutory Trusts (DSTs) and oil & gas mineral rights can preserve your tax advantages while shifting management responsibilities to someone else. For many investors, especially later in life, these alternatives offer a smoother path forward and reduce stress for the next generation.
Top 3 takeaways to keep in mind:
1031 exchanges offer more flexibility than most investors realize. You’re not limited to trading one property for another.
DSTs and mineral rights provide passive, tax-advantaged options that remove the burden of active management.
Thoughtful planning today can simplify future wealth transfer, helping both you and your heirs navigate the process with ease.
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Introduction to the Unconventional Investor Podcast
Welcome to the Unconventional Investor Podcast. I'm your host, Michelle Moses, certified financial planner, licensed realtor, and founder of ME Financial. If you're an accredited investor feeling overwhelmed by managing your portfolio and looking for alternative investment strategies that go beyond the traditional stock market, you're in the right place.
Let's head into today's episode so you can start taking control of your financial future. Hello everyone, and thank you so much for tuning in.
Exploring Tax Strategies
Today is a solo episode and it's just going to be me talking about some tax strategies. In a previous episode we met with a, what's called a 10 31 exchange inter intermediary, and I wanted to, it's like I'm giving you all of these topics, right?
Of, oh, you can do a 10 31. Oh, you can do, this investment. And I, this is gonna be one of the episodes where I'm tying it all together and how you put these tools together to actually save on taxes or how you would actually do these financial strategies which is. My job and it's, what I do and why I get paid.
What I do is to bring all these pieces together into the financial strategies, because that's really where the magic happens. Or at least that's what I get excited about.
Understanding 1031 Exchanges
So I'm gonna share today about 10 31 exchanges. So in the previous episode of last week, we, I went over, with Michael he went over what 10 30 ones are right?
If you, and so I'm not gonna get like into the nitty gritty about what 10 30 ones are, but I want to start talking about how you would put these together in your portfolio and what your choices are. Because. Part of the reason I do what I do is I love alternative investments because nobody knows about them and you don't even know that you can do these financial strategies.
And that's what I want to get the word out about is that you can do these advanced financial strategies and they, they're available to you. It's just that they're not widely known. So in 10 31 exchanges, essentially what you're doing is if you have an investment property or a property for a business, okay?
So it could be a commercial property, it could be like a long-term rental that you've had. You're usually what happens is people get tired of managing it. They don't want deal with the tenants and things like that. And so you'll do a 10 31 exchange. And the reason that you do that is so that you don't have to pay the taxes because when you own a property for.
Investment purposes are for a business. You get depreciation on that, right? You're getting to write off all of these expenses. You get depreciation on the property itself every single year, and it's hugely beneficial to your taxes. That's generally why. One of the reasons why people own real estate is to write things off on their taxes, and they don't have a large tax bill.
So when you go to sell that, you would have to recapture all of that and you'd have a huge tax bill. So when you go to sell an investment property, a lot of times people will do what's called a 10 31 exchange. And so you are exchanging that property for another property. So it's easy to think of if you're going from a residential rental to another residential rental.
And we discussed in the previous episode about how it needs to be of equal or greater. Value. So if you're selling something for $300,000, then you need to buy something for 300 or higher. And we didn't get into if there's a mortgage on it that, there's a lot of things that might get into details of your situation.
But I wanted to talk about the different investments that you could actually use to invest your 10 31 because. You don't necessarily have to go from a residential property to another piece of real estate that you manage and you have to manage tenants. 'cause even if you're going from a. Like a residential property to a commercial property, you're still gonna have tenants to manage, right?
It is easier probably and cheaper, but if you just don't wanna manage at all, there are different areas that you can go into and namely is that you could 10 31 into other real estate, right? So that's your first option and the one that people talk about the most.
Delaware Statutory Trusts (DSTs)
But you can use these alternative investments to 10 31, so you can 10 31 into what's called a.
A-D-S-T-A Delaware statutory trust. And essentially what that is it is, I'm gonna totally simplify it. It is basically more real estate, but it's managed by someone else. Okay. And they keep it. In the 10 31 parameters. So there are whole companies that specialize in DSTs. There are a million DSTs. When I go to different, alternative asset conferences, I get tons of emails about DSTs.
It is a thing. So when you want to go from maybe one house. And then you could go into a DST that has commercial property into it, or you, it could have multiple properties. A lot of times I've seen some people, they go from a rental home and you can go into a hotel that is a Delaware statutory trust.
Now, when you go into a Delaware statutory trust, though, there's a lot of. Rules that go into it. And I hadn't been a fan of them for a long time because one of the rules is basically you can't refinance. You can't do any updates to the property. And so I was like, why would I wanna invest in a commercial property and not have it updated for however many years?
That, to me, that would be blight. And I don't want to put something like that in the world. I don't wanna add to blight out in the world. And so I've never been a fan, but now there's tons of other things out there that you can do a Delaware statutory trust into. And essentially the reason people do this is so that they can, defer their taxes still, right?
Because they go from a house into one of these investments but also then someone else is managing it. And then all you're doing is getting checks in the mail right from the rental of whatever property it is. So if it's a hotel from people staying at the hotel if it is a commercial property, it's from people leasing it.
And so you're basically getting what they call mailbox money. So you go from managing a property to having someone else manage it, and you are just getting, checks in the mail. So a lot of times as people are in retirement, they're tired of managing things they will do a 10 31 so they don't have to pay the taxes.
And I think the benefit of that too, let's say you're 75 and you do a 10 31 so that you can defer the taxes into an investment. When you pass away, that real estate gets a step up in basis for whoever your heirs are. So is it simple terms? If it was a house and you bought it for a hundred thousand dollars and you sold it for 300 and then you put it in the DST for 300 let's say it depreciates to three 50, by the time you pass away, then your heirs would get it at $350,000 and not have to pay the taxes.
You only have to recoup all of those taxes and the depreciation. When you're alive. So if you pass away, then it gets a step up in basis, which is what people are going for when they're doing this. So the other option, so the first two options for your 10 31 exchange, there's another piece of like real property, real estate.
Your second option is a Delaware statutory trust DSTs.
Investing in Oil and Gas Mineral Rights
And your third option is oil and gas. Most of the time this is going to be what's called mineral rights. And that is when you are purchasing the rights of the land. Because essentially you're going from what real estate, right? To another like kind thing, which is land.
So also real estate, just not with a house on it. And so that's why you why it works, right? Because you have to do in a 10 31, you have to do a like kind exchange. You couldn't go from like a house to, art. Or something like that. It needs to be like kind. You've got, you have to it needs to go from real estate to real estate.
But one of those options that I don't think a lot of people know about is oil and gas and the mineral rights. So mineral rights are essentially you own. You don't own the land, but you own all of the rights of the land from the ground down. So whatever oil is below land below the ground, you own the rights to that.
So someone else will drill it, someone else will, do the survey. You'll, they'll do all of that and then they basically pay you royalties. For having the privilege to drill on your land and get the oil and natural gas out of it. And so you can do a 10 31 into these. And I don't think a lot of people know about this option.
They just think that they need to go from property to property. But you don't need to manage all the property. If you're tired of managing the property and you have a large tax bill with. One of you know your business or investment property, you can go into a Delaware statutory trust or the oil and gas.
And with any of these though, you need to have a qualified intermediary. The timelines still hold true. There's still, timelines between when you sell your property and when you have to have the money invested. There is no negotiation on that, otherwise you lose all of your tax deferral.
And the qualified intermediary honestly could get in trouble. So they're gonna make sure that you're hitting those goals. And it might be easier, honestly, to not only from a management standpoint too. Do a 10 31 into some of these investments. It also just might be something that, you find more interest in and that you can learn about too.
And I think that the mineral rights is something that not everybody knows about. And I really love the mineral rights too, just because it's like yours and you can. Pass it off to your heir, you can give it to your heirs and it could just live forever. So like when you hear about these oil and gas families in Texas, a lot of times they own mineral rights and so they lease their land to, Exxon or whoever it is to drill, and then they just make all the royalties from everybody else doing the work because they own the rights to the land.
So those are I think, some other options that are. Big I in the 10 31 space, at least in my space. But I don't think that people know about them. And I wanted you to know about them and the different strategies that you can take, that you do not have to necessarily manage a property, that you can have someone else manage it for you and still defer the taxes and you still get the step up in basis when you pass away.
And I think that's important too. You don't want someone else to have to pay the taxes.
Conclusion and Final Thoughts
So, I hope this helps. I know this is just. The short little snippet here. I'm gonna do more of these financial strategy episodes. I'm going to, I wanna do them with some other things just on how you can save taxes and how to put things together because it's like, teaching you guys about all these one little.
Things, that's great that you know about them, but then how does it like really all come together with your taxes and your lifestyle and just logistics is what I call it. And this is one of the ways that you can, is that, when you have a property that you wanna sell, your only other option is not to just buy another rental property.
You have a lot of other options out there that I don't think are. Well known. So I hope this helps. Please forward to anyone that you think might be helped by this episode and let me know if you have any topics for other things that you wanna hear about. Thank you so much for listening, you guys.
I really enjoyed doing this and I hope you learned something today. Have a great day. Thank you for listening to the Unconventional Investor Podcast. I hope you feel more confident in how you can grow your wealth using the strategies I shared in this episode. If you're ready to take the next step in diversifying your portfolio outside the stock market with alternative investments, head to me financial.net/contact us to book a 15 minute consult call with me.
Let's discuss how we can work together to achieve your financial goals. Until then, I'll see you on the next episode.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.