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See how simple it is to exchange your property through Flock’s 721 Exchange platform—from initial consultation to fund ownership. Understand each step, what to expect, and how we handle the details for you.
The 721 Exchange:
Unlocking Real Estate’s Best Kept Secret.
A 721 Exchange lets you trade your rental property for ownership shares in a diversified real estate Fund—like swapping one stock for a mutual Fund. You keep your equity, defer capital gains taxes, and earn real estate returns across hundreds of properties without landlord responsibilities.
It’s an IRS-approved strategy long used by institutions, now available to individual property owners through Flock.
A 721 Exchange, also known as an “UPREIT transaction”, lets property owners contribute their real estate into a partnership in exchange for ownership units—without triggering immediate capital gains taxes. Rather than selling and facing a large tax bill, you roll your property into a diversified real estate portfolio and continue to share in its growth and income.
Unlike the better-known 1031 Exchange, there are no strict timelines or replacement properties to chase. You’re not trading one property headache for another—you’re transitioning to truly passive ownership. Your property becomes part of a professionally managed Fund, while you hold units that represent the equity value of what you contributed.
This strategy has long been used by institutional investors and wealthy families to defer taxes and compound wealth. Flock brings the same powerful tool to individual landlords, helping them exit day-to-day management, preserve their equity, and build a smoother path toward long-term financial and estate planning.
721 Exchange Benefits
Defer paying capital gains tax and depreciation recapture when you exchange your property for shares in Flock's Fund.
You avoid the hit from an outright sale—you keep generating income and maintain appreciation potential.
Passing on properties to your heirs is hard, but passing on shares is seamless. They come without the headaches but with the same "step-up in basis", creating a smoother, more tax-efficient wealth transfer for your family.
Unlike selling and exiting the market altogether, a 721 Exchange keeps your equity tied to a diversified, professionally managed portfolio—delivering growth and passive income without the burden of being a landlord.
721 vs. Common Alternatives
(Flock)
Statutory Trust)
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- Passive ownership,
no deadlines
- Diversification + professional management
- Strict timelines & rules
- Remain an active landlord
- Passive ownership
- Rigid structures + limited liquidity
- Immediate cash access
- Significant taxes, no real estate exposure
- Passive ownership, no deadlines
- Diversification + professional management
- Strict timelines & rules
- Remain an active landlord
- Strict timelines & rules
- Remain an active landlord
- Immediate cash access
- Significant taxes, no real estate exposure
721 Exchanges Simplify Inheritance
Step-Up in Basis
Heirs inherit units with a stepped-up basis to current market value, effectively eliminating deferred capital gains tax liabilities.
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Simple to Divide
Shares can be easily split among beneficiaries—avoiding disputes, forced sales, or complicated property transfers.
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Preserve Generational Wealth
Your family keeps your real estate wealth working for them, with income and appreciation compounding across generations.
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Understanding the Tax Impact
The 721 Exchange allows you to defer all capital gains and depreciation recapture taxes, keeping more of your money working for you.
is lost to taxes
(100% value preserved)
How Flock Implements the 721 Exchange
- Once limited to institutions and wealthy families
- Now available to individual property owners through Flock
- No strict deadlines or intermediaries
- Legal and tax details managed by our team
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- Contribute into a diversified pool of single-family rentals
- Properties selected across growing U.S. markets
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- Transition from landlord to passive investor
- Earn income and appreciation without the midnight calls
FAQ
721 exchange refers to Section 721 of the US Internal Revenue Code, the same tax code that stipulates the commonly utilized Section 1031 (also known as the 1031 exchange). Section 721 was established in 1954 and has been used for decades by institutional investors to minimize taxes on real estate. Flock Homes has pioneered a platform that empowers individual landlords to access the same benefits of the 721 exchange. See our 721 exchange page for more details.
Many real estate investors utilize the 1031 exchange to sell their home for proceeds, and use those proceeds, tax-deferred, to purchase other investment real estate. With Flock Homes, investors can use the 721 exchange to seamlessly exchange their homes, tax-deferred, for direct ownership in Flock’s managed real estate fund. With a 1031 exchange, investors commonly continue to be active investors and operators of real estate properties. With Flock, the 721 exchange enables investors to take a long-term, passive approach to real estate investing.
Depending on your ownership history, you could trigger thousands in capital gains and depreciation recapture taxes when you sell your rental homes. Instead of buying shares of a REIT and investing with significantly reduced after-tax proceeds, Flock Homes allows you to earn from a fund with tax-advantaged proceeds. The difference in returns can be substantial. Furthermore, Flock’s fund is purpose-built for long-term-oriented, retiring investors. Our platform also provides unparalleled reporting transparency. If you’d like an assessment of your estimated Flock returns, click here to submit a rental address, and one of Flock’s Single Family Rental Directors can provide you with a complimentary evaluation and a demo.
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