What is the 1031 exchange opportunity in Orlando hospitality real estate?

Orlando hotel properties are viable 1031 exchange replacement properties, but with important structural considerations that differ from the NNN retail or MOB replacement property universe. Hotels are operating businesses, not passive income vehicles: an exchange buyer who replaces an NNN retail property with a hotel becomes a hotel operator (or must hire one) rather than a landlord. The 1031 exchange requires that the replacement property be held for investment rather than for personal use, and hotels clearly qualify. The income structure differs materially: hotel cash flow is gross revenue minus all operating expenses, not rent minus minor landlord costs. The exchange buyer must also consider that hotels frequently require capital expenditure (PIP, Property Improvement Plan, requirements from flags that can run $15,000–$30,000 per key at flag renewal) that reduces effective cash flow relative to stated NOI. Buyers seeking truly passive hotel income should evaluate structured hotel DST offerings rather than direct ownership. While no Orlando hotel DSTs are listed in the current DST directory, Sun Belt hospitality DST offerings do exist through national DST sponsors and should be evaluated through licensed broker-dealers. For active operators who want the highest yield replacement property in a market with record TDT and Epic Universe demand, limited-service I-Drive hotel acquisitions at 7.0–8.5% cap rates represent the best yield-to-demand-quality ratio in the current Central Florida replacement property universe.