Real Estate Crowdfunding Explained

Generally not, because most crowdfunding platforms structure their offerings as membership interests in a limited liability company or shares in a fund that owns the property, which is an interest in an entity rather than a direct interest in the real property itself. Section 1031 requires the replacement property to be real property, so entity interests of this kind, even though the entity's only asset is real estate, typically do not qualify.

Yes, a subset of platforms specifically structure certain offerings as Delaware Statutory Trust interests, which the Internal Revenue Service treats as direct interests in real property under Revenue Ruling 2004-86 when the trust follows the required operating restrictions. These DST offerings are marketed distinctly from the platform's standard LLC or fund offerings, so the eligibility depends on which specific product within the platform you are considering, not the platform as a whole. Both DST offerings and standard crowdfunded equity may be securities, and we do not sell securities directly; we connect investors with licensed providers for any offering that interests them.

Review the offering circular or private placement memorandum to see whether you are purchasing a direct or beneficial interest in real property, as with a DST, or a membership or fund interest in an entity, as is typical for standard crowdfunding deals. If the documents are unclear, ask the platform directly whether the specific offering is structured to be 1031 eligible before you rely on it as part of your identification within the 45-day window.

Crowdfunding platforms are often marketed around lower minimum investments than traditional DST sponsors, which can make them attractive for investors placing a smaller amount of exchange equity. However, the lower minimum does not change the underlying legal analysis of whether the specific offering is structured as a real property interest or an entity interest, which remains the determining factor for 1031 eligibility regardless of investment size.

Fee structures vary by platform and offering and commonly include acquisition fees, asset management fees, and a share of profits above a return threshold paid to the sponsor. We do not endorse or project returns for any specific platform, but we do recommend reviewing the fee disclosures in the offering documents carefully, since fees directly affect the net income and proceeds an investor ultimately receives.