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 what DFW landlords specifically weigh when they evaluate 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 why some exchangers consider a DST as one option alongside a direct purchase — whether as a fallback or as the replacement itself. 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.
If you own rentals anywhere from Uptown to Oak Cliff, Lake Highlands to Deep Ellum, or up the tollway through Frisco and Plano, you've lived the last three years of the supply wave. After a historic construction run — more than 44,000 apartment units delivered across DFW in 2024 — the metro spent 2025 and early 2026 digesting it. Here's where the numbers sit. Market figures below are from one tracker, Yardi Matrix's Dallas Multifamily Report, July 2026, so they're internally consistent; the delivery outlook and population figures come from a second, Marcus & Millichap, and are labelled as such. Each figure is dated to the month it was measured — this is the latest published data, not live prices.
The supply wave is receding. Marcus & Millichap's Q2 2026 DFW outlook puts roughly 21,000 units delivering across the metro this year, down from about 30,000 in 2025 and more than 44,000 in 2024. Demand, per the same outlook: North Texas added 100,000 residents and 47,000 households in the year ending March 2026, the most of any U.S. metro.
On the property-tax side — the line item Texas landlords actually feel — both major counties moved in 2026:
What does any of this mean for a landlord thinking about selling? Two honest facts. First, Texas has no state income tax, so the tax math on a sale is federal: long-term capital gains up to 20%, the 3.8% net investment income tax, and unrecaptured depreciation taxed at up to 25% — that's the bill a 1031 exchange is designed to defer, whether you sell into a hot market or a flat one. Second, no market snapshot tells you whether an exchange makes sense for your property; that turns on your gain, your depreciation, and your timeline, not on metro rent trends. Run the numbers on your sale before you decide anything.
Market figures: Yardi Matrix, Dallas Multifamily Report – July 2026, via Multi-Housing News (rents as of May 2026, occupancy as of April 2026, deliveries through May 2026, pipeline at time of report). Outlook: Marcus & Millichap Q2 2026 DFW multifamily outlook, via D Magazine, Aug. 2026. Dallas County rate: Dallas County Commissioners' vote, Aug. 11, 2026 — adopted, pending Nov. 3, 2026 voter-approval election; other Dallas County rates per Dallas Central Appraisal District 2026 published tax-rate schedule. Collin County rate: Collin County Commissioners' vote, Sept. 14, 2026 (first increase since 1993); county budget example of median-value homestead; Collin College rate per district resolution, Aug. 2026. This section is refreshed quarterly — next refresh January 2027.
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.
Yes, if the delay happens before your sale closes. No, once it has. The 45-day identification period and the 180-day closing period both start on the date your relinquished property actually transfers, so a later closing on your sale starts both clocks later. There are no exchange deadlines before then. After your sale closes, the clocks are fixed: they run at the same time and aren’t extended for a slow buyer, a slow lender, or a holiday. The narrow exception is a federally declared disaster. One more wrinkle: the 180-day period also ends on your tax return due date for the year of the sale if that comes first, so on a late-year sale, filing an extension can preserve the full window.
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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