The Growing Appeal of 721 Exchanges
August 18, 2026
As multifamily investing evolves, more property owners are exploring 721 exchanges as a tax-efficient way to transition from direct property ownership into a diversified real estate portfolio.
Unlike a traditional 1031 exchange, which requires investors to purchase another property, a 721 exchange allows an owner to contribute a property into a qualifying real estate partnership or fund in exchange for ownership units. This can help investors defer capital gains taxes while gaining exposure to a broader portfolio of assets.
For owners of highly appreciated multifamily properties, 721 exchanges offer several potential benefits:
- Tax deferral without the pressure of identifying replacement properties
- Diversification beyond a single asset or market
- Reduced management responsibilities through passive ownership
- Estate planning flexibility by converting real estate holdings into partnership interests
As investors seek ways to preserve wealth, reduce concentration risk, and simplify ownership, 721 exchanges are becoming an increasingly attractive strategy. While they are not the right fit for every investor, they provide another option for those looking to remain invested in real estate while transitioning away from active property management.
At Auben, we’re seeing growing interest in strategies that help investors build long-term wealth while creating greater flexibility and diversification. 721 exchanges are one example of how today’s real estate owners are rethinking portfolio growth and succession planning.
This week’s blog post comes to us from our Houston Market Sales Manager, Kristen Brady!
Want to learn more about how we can help you build long-term wealth?
Connect with us next week in Austin, TX at IMN’s SFR/BTR Property Management & Operations Forum!