Middle Door HomesMiddle Door Homes
Brick three-flats on a tree-lined street

For property owners

Turn your real estate equity into a diversified portfolio.

Contribute your building instead of selling it. You receive ownership in a diversified portfolio of neighborhood buildings, owe no tax at closing, and hand off the management on day one.

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0%

Taxes at closing

30,000+

Units of experience

8-12%

Target annual return

You've spent years building equity in your building. Selling means giving up 30-40% of your gains to capital gains tax and depreciation recapture, the tax on depreciation you've already deducted. Holding means staying a landlord, with everything riding on one property. Middle Door Homes offers a third path.

The tax problem

Long-term owners carry decades of appreciation. Selling triggers capital gains and depreciation recapture, often costing 30-40% of your gains.

Operational drag on returns

Multifamily buildings require constant attention: tenant calls, aging systems, deferred maintenance. At some point, the active management burden stops being worth the return on your time and capital. You built this as an investment, not a job.

No clean exit from operations

A 1031 exchange defers taxes, but requires identifying a replacement property in 45 days and closing in 180. You're not exiting active operations; you're just changing which building you're running.

Where owners start

Which sounds like you?

Tired of managing

You have held a long time, built a large gain, and you are done with tenants and repairs.

On a $1M building, about $200K more of your equity stays invested.

Loan maturing

Refinancing at today's rates can mean a much larger payment on the same building and the same management.

We pay off the loan at closing.

Planning a 1031

A 1031 defers the tax, but only by taking on another building to find, finance, close, and run.

The same deferral, with no 45-day clock and no new building.

Building with upside left

Rents that could be higher and units that could be updated. Sell as-is and the next owner keeps that upside.

Plus get a share of the future upside.

Illustrative. Figures will differ for your building.

The solution

A 721 exchange, not a sale

A 721 exchange is a long-established part of the tax code that allows you to contribute your building to a professionally managed portfolio, in exchange for a passive ownership stake, with no taxable event at closing.

You do not sell. Your equity moves forward intact into a diversified, professionally operated portfolio.

The key distinction

A 721 exchange is a contribution, not a sale. The tax event that would occur at sale is deferred, so you keep 100% of what you have built.

Why not a 1031 exchange?

A 1031 also defers taxes, but you face a 45-day identification window and 180-day closing deadline, and you end up managing a new building. A 721 exchange has no deadlines and no replacement property. You contribute once and exit active ownership permanently.

Greystone and brick buildings on a tree-lined street

How we add value

We invest in improving every building.

We look at every building for improvements that pay back: better units, rents set to the market, lower operating costs, and where the building allows, additional units. We arrange the financing and do the work. No capital required from you.

Two ways to work with us

Contribute your building, or partner on it.

Contribute

Trade your building for ownership in the portfolio

You contribute your building and receive ownership units of the same value. No tax at closing, you keep earning income, and you are done managing.

Partner

Keep your building and share in what it becomes

For buildings with upside left in them. Your building goes into its own partnership with us. We handle the renovation, operations, and rents, and we split the upside with you.

Compare your options

How a 721 exchange stacks up

Self-manageHire PMSale1031DSTMiddle Door
No tax event at transition✓✓✗✓✓✓
Exit active operations completely✗✗✓✗✓✓
Ongoing upside participation (vs. fixed distributions)✓✓✗✓✗✓
Diversified portfolio exposure✗✗✗✗✓✓
Renovation capital & value creation provided✗✗✗✗✗✓
Purpose-built for 2-49 unit buildings✗✗✗✗✗✓

Middle Door is the only structure that clears all three: no tax event at contribution, complete exit from active management, and ongoing upside participation. Every other option trades at least one away.

DST = Delaware Statutory Trust. DSTs defer taxes but require a 1031 exchange process, use a blind-pool structure with fixed distributions and limited upside, and offer no redemption mechanism. Hiring a property manager reduces but does not eliminate active ownership: owners remain responsible for capital decisions and pay 8-10% of gross rents regardless of performance. 1031 exchanges defer tax but require identifying a replacement property within 45 days and closing within 180, and you remain an active operator afterward.

Equity calculator

How much equity do you keep?

Adjust the sliders to match your situation. See how a 721 exchange compares to a traditional sale, line by line.

Building value

$1,000,000

$200K$5.0M

What you paid for the building

$575,000

$50K$1.0M

Outstanding mortgage

$200,000

$0$750K

State income tax rate

5.0%

0%10%

Traditional sale

Sale proceeds$1,000,000
Sale costs (6%)-$60,000
Mortgage payoff-$200,000
Capital gains tax (est.)-$122,000
Depreciation recapture (est.)-$78,000
Equity you keep$540,000

721 Exchange: Middle Door

Contribution value$1,000,000
Sale costs (6%, non-cash)-$60,000
Mortgage payoff-$200,000
Capital gains tax$0 (deferred)
Depreciation recapture$0 (deferred)
Equity as ownership units$740,000

With a 721 exchange you preserve

$200,000 more equity

compared to a traditional sale

Illustrative only. Assumes 20% federal capital gains, 25% depreciation recapture, 3.8% net investment income tax, and your state rate, with 40% of the purchase price depreciated.

What you receive

A tax-efficient transition to passive income

Tax deferral & estate planning

No capital gains or depreciation recapture at closing. Your full equity basis rolls forward intact. Ownership units can pass to heirs with a step-up in cost basis, potentially eliminating the deferred tax liability entirely.

Continued ownership with upside

You own a share of a diversified, professionally managed portfolio, with quarterly distributions and a share of its growth over time.

Truly passive income

Our team handles tenants, maintenance, leasing, and compliance. You receive distributions, not work orders.

Structured liquidity

A three-year minimum hold applies to all units. From year four, we target quarterly repurchase windows, at your option and subject to portfolio liquidity.

Working with us

How professional management grows your income

Many owners are not earning everything their building could. Deferred maintenance, below-market rents, and high operating costs hold returns down year after year.

Full-time, experienced management lifts income through lower operating costs, rents set to the market, and efficient operations. That upside flows to you as an owner.

Our team has driven $120M+ in annual net operating income growth across a 30,000+ home portfolio. We bring the same playbook to every building we own.

Brick courtyard apartment building with a garden walkway

Qualifying

Is this a fit for you?

MDH works best if:

  • ✓You own one or more multifamily buildings in the 2-49 unit range
  • ✓You've held long enough to build up a large gain
  • ✓You're ready to exit active operations, but the tax cost of a sale is too high
  • ✓You likely qualify as an accredited investor; most long-term multifamily owners do (net worth over $1M excluding primary residence, or income above $200K)
  • ✓You do not need a debt-free building: we pay off your mortgage at closing

It's probably not the right fit if:

  • -You need immediate, unrestricted liquidity
  • -Your mortgage is close to the building's value, leaving little equity to contribute
  • -You want a short-term exit rather than a long-term passive investment
  • -The illiquid nature of a private partnership does not fit your financial situation

The best way to find out is a conversation. There's no cost, no obligation, and we'll give you an honest answer.

Process

Step by step

01

Conversation

We discuss your building, your financial situation, and your goals. No obligation. We want to understand if the model is genuinely a good fit.

02

Evaluation

We assess the building and structure the exchange terms. You get full transparency on your passive ownership stake and what to expect.

03

Contribution

You contribute the building via 721 exchange, not a sale. Not a taxable event. Your existing mortgage is paid off at close. Your equity moves forward intact.

04

Ongoing income

You receive quarterly distributions from a diversified portfolio. Our team manages all operations, working to grow the portfolio's value and income over time.

The owner experience

What happens after you contribute

On close, the building transfers to our partnership and your ownership units are issued. Your equity is now a passive stake in a diversified, professionally managed portfolio. The first quarterly distribution hits your account. That is the entire job from here.

Quarterly distributions

Regular passive income from the portfolio, paid after operating expenses, debt service, and capital reserves, subject to portfolio cash flow.

An annual K-1

You keep pass-through tax treatment and receive a Schedule K-1, the yearly tax form a partnership sends its owners. What it is worth in a given year depends on your own basis.

Audited financial statements

Annual audited financials and quarterly portfolio reports covering occupancy, capital improvements, and market conditions, with full transparency into what you own.

Nothing to manage

Tenants, maintenance, leasing, compliance: all transfer at close. You are a passive owner from day one.

Common questions

Frequently asked questions

The 721 Exchange

What is a 721 exchange?+
A 721 exchange (also called an UPREIT contribution) is a long-established part of the tax code that lets you contribute real property to an operating partnership in exchange for ownership units (often called OP units): a passive ownership stake in the partnership. It is the same tool large REITs have used for decades to buy from owners who did not want to sell. What is new is applying it to buildings your size. It is a contribution, not a sale, so no taxable event occurs at closing.
How is a 721 exchange different from a 1031 exchange?+
A 1031 exchange also defers taxes, but requires you to identify a replacement property within 45 days and close within 180, and you end up managing a new building. A 721 exchange has no identification window, no deadline, and no replacement property. You contribute once and exit active ownership permanently.
Is this a sale?+
No. You are contributing your building to our partnership in exchange for ownership units. Because it is a contribution rather than a sale, no capital gains tax or depreciation recapture is triggered at closing.
Is this a loophole?+
No. It is a contribution structure that has been in the tax code for decades, and large REITs have used it to buy from owners who did not want to sell. What is new is applying it to buildings your size.
How is this different from a property manager or a REIT?+
A manager takes work off your plate but leaves the title, and the liability, with you. A public REIT means selling first, so you invest what is left after tax rather than your full equity. This gives you a diversified position, built from your whole equity, with no operating role.
Do I need to be an accredited investor?+
Yes. Ownership units are securities and this offering is limited to accredited investors: generally those with a net worth over $1M (excluding primary residence) or annual income above $200K ($300K joint). We can walk you through the requirements.

Tax & Structure

What taxes do I defer?+
Both federal long-term capital gains (typically 20%) and depreciation recapture (25% rate on prior depreciation) are deferred at closing. Your equity rolls forward intact. State taxes vary by location.
What happens to my deferred taxes eventually?+
Deferred taxes become due when you sell or redeem your units. However, units can be passed to heirs with a step-up in cost basis, which can eliminate the deferred tax liability entirely for the next generation.
What is my ongoing tax treatment as a unit holder?+
You keep pass-through tax treatment and receive a Schedule K-1 each year. What that is worth in a given year depends on your own basis.
What happens to my mortgage?+
We pay it off at contribution. You do not need to bring a debt-free building. Your unit count is based on net equity, meaning value less outstanding debt.
What if I need some cash?+
Some owners take part in cash and contribute the rest. If you need a straight all-cash sale we are not your buyer, and that is worth knowing early. Run the after-tax number first, because that is the real comparison.

The Process

What does the process look like from start to finish?+
A first conversation about your property and your timeline, at no cost. A valuation and preliminary underwriting. A proposed value and unit count. Then diligence on both sides, documentation, and close, when your property transfers, your mortgage is paid off, and your units are issued.
How long does the process take?+
Typically a few months from first conversation to close, depending on due diligence and third-party timelines. We move as efficiently as possible.
What diligence do you do?+
What a long-term owner would: physical inspection, independent appraisal, title, a rent roll and lease audit, environmental, and a neighborhood-level market analysis. We are selective, and not every building is a fit for the portfolio.
What happens to my building after I contribute?+
From the day we close you are done being a landlord. We take over tenants, leasing, repairs, rent collection, maintenance, renovation, compliance, and reporting. The building keeps producing income; you simply stop running it.
Where do you buy?+
We are a national platform. Within our cities we concentrate on neighborhoods with real tenant demand, proximity to employment and a trajectory we have conviction in, rather than areas already priced for perfection.
Do I need my own attorney or CPA?+
Yes, and we will make sure you have everything you need for a proper review. We have our own counsel on the structure, and your interests and ours are not identical.

Returns & Income

What return can I expect?+
We target 8-12% annually at the portfolio level, combining current income and long-term appreciation. That is a target, not a guarantee. The more useful comparison is what a sale costs you: if taxes and costs take 30% of your equity, a moderate return on your whole equity can beat a strong return on what is left.
How do distributions work?+
You receive 100% of the first 6% of annual total return before we participate at all. Above that, 70% goes to unit holders and 30% to us up to a 12% return, and the excess above 12% is split 50/50. We never take more than 30% of a year's total return, and if portfolio value falls we earn nothing further until it recovers. Distributions are targeted quarterly, subject to portfolio cash flow.
How does Middle Door Homes make money?+
An annual management fee of 1.25% of assets under management, our share of the upside above the 6% preferred return, and our own units alongside yours. We do our best when the portfolio does.
How does my income compare to what I earn now?+
Most long-term owners are not capturing full income potential: deferred maintenance, below-market rents, and high operating costs reduce returns. Our team has driven $120M+ in annual net operating income growth across a 30,000+ home portfolio, and we bring the same playbook to every building we own.

Liquidity & Exit

Can I get my money out?+
Ownership units are not publicly traded. A three-year minimum hold applies to all units. From year four, we target quarterly repurchase windows, at your option and subject to portfolio liquidity. Liquidity is not guaranteed on demand, so treat this as a long-term investment.
What are the risks I should understand?+
Property values can fall, and your units track the portfolio. Units are not publicly traded, there is a minimum hold, and liquidity is not guaranteed on demand. The portfolio is geographically concentrated, and results depend on our execution. We hold low leverage against occupied, cash-flowing buildings, which reduces the downside but does not remove it.
What if I change my mind after contributing?+
Once you contribute, the building belongs to the partnership and cannot be returned. Units can be redeemed through quarterly repurchase windows from year four, but you should treat this as a long-term commitment going in.
What are my long-term options?+
Redeem through the repurchase windows, transfer units to another accredited investor, participate in a portfolio-level event if we recapitalize, or hold and pass units to your heirs with the step-up in basis. Selling units is generally a taxable event when you do it.
What visibility do I get?+
Quarterly financial reports, annual audited statements, annual K-1s, and updates on renovation progress, occupancy, and market conditions.

Terms in plain English

Ownership units (OP units)+
Your stake in our partnership, received instead of cash when you contribute your building.
Section 721 contribution+
Contributing a building to a partnership in exchange for ownership units, without triggering tax at the time of transfer. Often called a 721 exchange.
Depreciation recapture+
Tax owed on depreciation you have already deducted. It is why the tax bill on a sale is usually larger than owners expect.
Basis+
Your tax cost in the building. Your gain is measured against it.
Preferred return+
The first 6% of annual total return, which owners receive in full before we participate.
K-1+
The yearly tax form a partnership sends its owners.
Accredited investor+
Someone who meets an income or net worth test and can therefore own securities like our units.

This is illustrative only and does not constitute an offer to sell securities. Actual tax liability depends on your individual circumstances. Consult a qualified tax and legal advisor before making any decisions.

You built something real. Let's make sure it keeps working for you.

No obligation. We start with a conversation to understand your building and your goals, and give you an honest answer on whether a 721 exchange is the right fit.

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