You bought the rentals when DFW was cheap. Now they’re worth a fortune — and the tax bill on selling them is the only thing standing between you and done.
If you own single-family rentals in Plano, Frisco, McKinney, or anywhere else across Dallas-Fort Worth, you probably bought between 2012 and 2019, watched values double, and now face a federal capital gains tax bill that makes selling outright painful. A 1031 exchange into a Delaware Statutory Trust — a DST — lets you defer that federal tax while trading tenants, turnover, and 2 a.m. maintenance calls for a passive fractional interest in professionally managed property.
Selling DFW rentals? Talk through your exchange before you list: Call (214) 203-9192.
Reading this after hours? Book a 1031 strategy call instead.
This page is the Dallas-Fort Worth companion to our full guide to 1031 exchanges into DSTs. Start there for the deep mechanics — the IRS rulings, the fee tables, the full risk list — and stay here for the local math, the local deadlines, and why DFW landlords specifically keep choosing this exit.
Dallas-Fort Worth built a generation of accidental landlords.
Texas made landlording profitable — and then made it exhausting. Investors who bought single-family rentals across Plano, Frisco, McKinney, Allen, Richardson, and Garland in the 2010s rode one of the strongest appreciation runs in the country, fueled by corporate relocations and relentless population growth. A $220,000 rental bought in 2014 can be worth $450,000 or more today, with the mortgage mostly paid down by tenants. That equity is the good news. The bad news is everything that came with earning it: property taxes that often run 2% or more of assessed value in DFW — among the highest effective rates in the nation — rising insurance premiums, HOA battles, and a decade of managing the managers.
The math that pushes many landlords toward the exit is simple. Texas property taxes don’t care about your cash flow. When your tax bill climbs with every reassessment while rents flatten, the rental starts feeling like a part-time job you pay to keep. Add a roof replacement, a turnover, or one bad tenant, and plenty of DFW owners reach the same conclusion: the equity is real, the headache is optional, and the only thing worse than selling is selling without a plan for the tax bill.
Here is the honest version of the Texas 1031 story.
Texas has no state income tax. That means when a Dallas landlord sells a rental, there is no state-level capital gains layer waiting underneath — the way there is in California at 13.3%. Every dollar of tax you’re deferring with a 1031 exchange in Texas is federal: long-term capital gains at 15% or 20% depending on your bracket, the 3.8% net investment income tax for higher earners, and depreciation recapture taxed at rates up to 25% under Section 1250. Say it plainly: in DFW, a 1031 exchange defers the federal bill. There is no state-tax bonus, and anyone who implies otherwise is selling something.
That doesn’t make the deferral small. On a rental with $250,000 of embedded gain, the combined federal exposure — capital gains, net investment income tax, and recapture — can easily reach six figures. Deferring it through an exchange keeps that capital working instead of sending it to the IRS this April. And because there’s no Texas filing layer complicating the exchange the way California’s Franchise Tax Board complicates it for Bay Area sellers, the DFW version of this strategy is about as clean as 1031 gets. For the mechanics of the exchange itself, see how a standard 1031 exchange works.
One more honest note: a DST does nothing for your Texas property taxes. Property tax is a local levy on ownership, and exchanging into a DST doesn’t lower anyone’s appraisal district valuation — it defers the income tax triggered by selling. If property taxes are your main grievance, the DST solves a different problem than the one bothering you most. Worth knowing before you fall in love with the structure.
Same federal rules in Dallas as everywhere — the local part is the strategy, not the statute.
The mechanics are identical whether your rental is in Frisco or Fresno: before closing, you engage a qualified intermediary to hold your sale proceeds (touch the cash and the exchange fails); within 45 calendar days of closing you identify replacement property in writing; and within 180 days you complete the acquisition. In a DST exchange, the “replacement property” is a beneficial interest in a trust holding institutional-grade real estate — apartments, medical office, industrial — managed by a professional sponsor. You can read the complete step-by-step, including the debt-matching rules that trip up so many exchangers, in our full guide to 1031 exchanges into DSTs.
Two details deserve emphasis for DFW sellers. First, minimums for DST offerings often start around $100,000, and most are limited to accredited investors — income of $200,000 ($300,000 joint) or $1 million net worth excluding your home. Second, if your relinquished property carried debt, you generally must replace both the equity and the debt to fully defer the tax; a shortfall can create taxable boot, with depreciation recapture taxed first. Match your old loan balance against the DST’s allocated debt before you subscribe, not after.
This is where Dallas deals go to die.
DFW is a competitive acquisition market. Finding a quality replacement rental — at a fair price, with clean diligence — inside a 45-calendar-day identification window is genuinely hard when every decent listing in Collin County draws multiple offers. Investors who plan to identify a direct replacement property often spend the whole window bidding and lose. Meanwhile the clock doesn’t pause for weekends, holidays, or a seller who goes quiet.
That execution risk is exactly why DSTs have become the DFW exchanger’s backup plan — and often the primary plan. A DST subscription can close in days: no inspection, no appraisal contingency, no lender underwriting you personally. Many local investors identify one direct replacement property alongside one or two DST offerings, so that if the direct purchase collapses on day 40, the exchange still closes inside the window. Others skip the direct search entirely and trade control for certainty. Either way, review the 45-day identification rules before your sale closes — a defective identification fails silently until tax season.
Nobody in Dallas got rich ignoring the fee schedule.
DST offerings carry an upfront load — commonly 8% to 20% of invested equity, with many traditional offerings clustered around 15% to 20% — built from selling commissions, sponsor acquisition fees, and organizational expenses. Ongoing asset management runs roughly 1% to 2% a year, plus property management and a disposition fee of about 1% to 2% when the trust sells. All of it is disclosed in the offering’s private placement memorandum. The full fee breakdown, including the honest comparison against the 6% to 8% it costs to sell and rebuy directly, is in our full DST guide — read both sides before deciding the load is disqualifying.
The DFW-specific framing: compare the DST’s all-in cost against your actual alternative, which for most local sellers is buying another Texas rental — with its own brokerage commissions, closing costs, financing fees, and another decade of 2%-plus property taxes. Model both over ten years, fees included, and let the numbers argue it out.
Every benefit has a corresponding risk. The short list:
Illiquidity — plan on five to ten years with no reliable early exit. No control — the IRS restrictions that make the DST exchange-eligible also strip the trustee of flexibility. Concentration — many DSTs hold a single property, so tenant trouble hits distributions directly. Sponsor risk — you’re underwriting the operator’s competence as much as the asset. And fee drag — the property has to outperform just to get you back to even. None of this is disqualifying; all of it belongs in your diligence, alongside independent tax and legal advice.
The pattern is consistent among local investors who choose this path.
It tends to fit DFW landlords in their 50s, 60s, and 70s holding single-family rental portfolios in the northern suburbs — the ones bought cheap, appreciated hard, and now carry six-figure embedded gains with heavy depreciation recapture exposure. It fits California transplants who sold Bay Area property, bought DFW rentals, and are now selling again without wanting a third tour of landlording. And it fits anyone whose 45-day clock is already ticking and who needs certainty of closing more than they need control.
It fits less well if you enjoy direct ownership, might need the capital within a few years, don’t meet accredited investor thresholds, or have a gain small enough that the fee load consumes most of the benefit. If you’re still weighing options, compare the other ways to exit a rental property before defaulting to a DST — it’s one exit among several, not the exit.
Some conversations are better face to face.
Johnny Borrelli meets with DFW investors in person across the metroplex — Dallas, Fort Worth, Frisco, McKinney, Allen, Richardson, and everywhere in between. A first conversation covers your gain, your debt, your depreciation recapture exposure, and your timeline against the 45-day clock — the same review that prevents failed exchanges later. It costs nothing, and it happens before you list, not after the clock starts.
Call Johnny Borrelli, Investment Adviser Representative: +1 (214) 203-9192.
Rather pick a time? Book a 1031 strategy call.
Every tracker measures this market slightly differently, so the honest version is a range rather than a single number. Each figure below carries the source that published it. All of them change over time.
Depending on whose survey you read, DFW apartment rents are running somewhere between 1.6% and 2.8% below where they were a year ago. Yardi Matrix reported an average advertised asking rent of $1,524 in its July 2026 report, down 1.6% year over year. Marcus & Millichap put Q2 2026 effective rents at $1,460, down 2.8%. Transwestern’s Q2 2026 data, reported by CRE Daily, showed $1,496, down 2.6%. A separate CRE Daily reading had $1,518, down 1.9%. The spread reflects different methodologies — asking versus effective rent, different property samples — not disagreement about the direction.
Marcus & Millichap reported 90.1% for Q2 2026. Yardi Matrix reported 92.3% in April. CRE Daily reported 93.1%. Radix reported 93.42% as of September 13, 2026. Again: different samples, same story — occupancy is soft by DFW standards, and owners have been leaning on concessions to hold it.
Marcus & Millichap, reported by D Magazine in August 2026, expects roughly 21,000 units to deliver across the metro in 2026, down from about 30,000 in 2025 and more than 44,000 in 2024. Transwestern’s Q2 2026 count put roughly 43,320 units under construction; Marcus & Millichap’s Q2 figure was lower, which is worth knowing if you see the two quoted side by side. Either way, the pipeline is shrinking rather than growing.
Transwestern’s Q2 2026 data showed roughly 12,000 units absorbed against roughly 6,200 delivered in the quarter. RealPage, via CRE Daily on September 10, 2026, reported rents ticking up 0.5% quarter over quarter, with Class A rents up 2.2% in Q2. North Texas added roughly 100,000 residents and 47,000 households year over year, per Marcus & Millichap via D Magazine in August 2026.
Texas has no state income tax, but it funds itself through property tax, and the stack adds up from several taxing units rather than one rate. In Plano, the 2025 adopted rates were Plano ISD $1.03955, City of Plano $0.4376, Collin County $0.149343 and Collin College $0.08122 per $100 of taxable value — a nominal stack of roughly $1.71. In Dallas, the 2025 countywide adopted rates were Dallas County $0.2155, Parkland Hospital $0.2120 and Dallas College $0.106575 (a countywide total of $0.534075), with the City of Dallas at $0.6988 on top; combined with a school district, typical Dallas totals land in the range of roughly 1.7% to 2.0%.
Two changes worth knowing about: in September 2026 Collin County approved its first property-tax rate increase in 33 years. Dallas County approved a 15.4% increase, to $0.248650, which requires voter approval on November 3, 2026. Neither is final for your specific parcel until your appraisal district publishes the adopted rates for your taxing units.
Two things, and they pull in different directions. A market with soft rents and heavy concessions is a harder market to be a landlord in — which is what pushes owners toward the exit in the first place. But it is also a market where buyers have leverage, so the price you get may be below what you would have got two or three years ago. Nobody can tell you which of those matters more in your situation without looking at your numbers.
What is certain is the tax side. Selling outright triggers federal capital gains tax, plus the 3.8% net investment income tax where it applies, plus unrecaptured Section 1250 gain on the depreciation you have claimed, taxed at up to 25%. Texas adds no state income tax on top. A 1031 exchange defers that federal bill — it does not forgive it. The deferred gain carries forward into whatever you buy next and becomes taxable on a later sale unless deferred again.
Market figures are metro- and submarket-level estimates that change over time and are not a forecast. Tax rates shown are nominal adopted rates per $100 of taxable value for the units named; your own bill depends on your parcel, your taxing units and any exemptions. Confirm current rates with your appraisal district.
Texas has no state income tax, so there is no separate state capital gains tax on the sale. The federal bill still applies in full: long-term capital gains, the 3.8% net investment income tax where your income reaches the threshold, and unrecaptured Section 1250 gain on depreciation you have claimed, taxed at a maximum of 25%. A 1031 exchange defers that federal liability. It does not forgive it.
No. Section 1031 requires like-kind real property held for investment or productive use in a trade or business, and real property anywhere in the United States is generally like-kind to other U.S. real property. You can sell in Dallas and buy in another state. Be aware that if you later exchange out of a property in a state that tracks deferred gain on its own source property, that state may have filing requirements of its own.
Texas appraisal districts reassess at market value annually, and Texas has no statute that carries a prior assessment forward on a sale the way some other states do. Whatever you buy will be appraised on its own merits. If you are moving from a long-held Texas property to a different one, expect the tax basis for appraisal purposes to reset rather than transfer.
No. The 45-day identification period and the 180-day closing period both run from the date your relinquished property closes, and they run concurrently. They are not extended for a slow buyer, a holiday, or a lender. The 180-day period is also capped by your tax return due date for the year of the sale, including extensions, so a late-year closing can shorten the window in practice.
Yes. Nothing requires you to sell an entire portfolio. Each relinquished property has its own deadlines running from its own closing date, which is why owners selling more than one property often stagger the closings rather than running several clocks at once.
There is no Texas state income tax to save. When you sell a DFW rental, the entire tax you’re deferring with a 1031 exchange is federal — long-term capital gains at 15% or 20%, the 3.8% net investment income tax for higher earners, and depreciation recapture at rates up to 25% under Section 1250. The deferral is real and often six figures; it just has no state layer underneath it the way a California sale would.
No — and this is worth stating clearly. Texas property taxes, often 2% or more of assessed value in DFW, are a local levy on owning property. A 1031 exchange into a DST defers the federal income tax triggered by selling; it does not reduce your appraisal district valuation or anyone’s property tax bill. If property taxes are your primary complaint, a DST addresses a different problem.
Yes. The federal rules are the same everywhere: engage a qualified intermediary before closing, identify the DST offering in writing within 45 calendar days, and complete the acquisition within 180 days. Where your rentals sit doesn’t change the statute — it changes the strategy, which is why local guidance around the 45-day window matters.
Often in days, once you’ve chosen an offering and completed the subscription paperwork. There is no inspection, no appraisal contingency, and no lender underwriting you personally. That’s precisely why DFW exchangers use DSTs as a backup identification — but the identification itself must still be delivered to your qualified intermediary in writing before midnight of day 45. Speed of closing doesn’t excuse a missed identification deadline.
Expect an upfront load of roughly 8% to 20% of invested equity on the DST, versus roughly 6% to 8% in selling costs plus purchase closing costs on a direct buy — before a decade of property taxes, insurance, and management on the new rental. Neither side is free. Model both over a ten-year hold, fees included, and compare the after-tax, after-fee outcomes.
It can. California tracks deferred gains on California-source property and generally requires an annual information filing until the gain is recognized — even after you’ve moved. If your gain originated on a California property, an exchange into a DST defers the federal tax but doesn’t remove California from the picture. Texas, by contrast, adds no state layer of its own. Your specific history determines which rules follow you, so bring it to the conversation early.
For most DST offerings, yes. Under SEC rules that generally means $200,000 in annual income ($300,000 with a spouse) or $1 million in net worth excluding your primary residence, plus the sponsor’s verification process. If you don’t meet the thresholds, a DST exchange is generally off the table and your exchange needs a different replacement property.
Yes. Johnny Borrelli meets investors in person across Dallas-Fort Worth — Dallas, Fort Worth, Frisco, McKinney, Allen, Richardson, and surrounding suburbs. An early, in-person review of your gain, debt, and timeline is the simplest way to keep an exchange from failing on a technicality.
This page is for educational purposes only and does not constitute tax, legal, or investment advice. Tax laws are complex and subject to change; consult your tax adviser and attorney before making any exchange decision. Johnny Borrelli is a Registered Representative of Crescent Securities Group, member FINRA/SIPC, and an Investment Adviser Representative of Crescent Advisor Group, an SEC-registered investment adviser. CRD #6788697.
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