UNDERSTANDING ELIGIBLE 1031 EXCHANGE PROPERTY TYPES
WE SERVICE VARIOUS TYPES OF INVESTMENT PROPERTIES
QUALIFYING 1031 EXCHANGE PROPERTY TYPES
SINGLE FAMILY RESIDENCES
Single Family residences include a variety of different types of residences. These residences include houses, condominiums, co-ops, townhomes, and other residence types. Ultimately, to meet 1031 exchange guidelines, you must show rental activity and hold the property for a minimum of a year or two to qualify as an investment property.
Multi-Family residential properties include apartment complexes and other multi-residence properties. In fact, well-positioned multi-family properties are highly sought after by investors. Notably, these investors include real estate holding companies, pension funds, partnerships, and joint ventures. When managed efficiently, they have attractive cash flow and long term potential for appreciation.
Vacation homes can qualify for a 1031 exchange as an investment property. In order to be eligible for a 1031 exchange a vacation home must be managed in a specific way that positions them to business and investment use.
Office buildings are common among real estate industry veterans. Common challenges include economic risks, property management efficiency, insurance, legal challenges, zoning changes, and air rights. Operational experience coupled with a long term investment horizon creates an opportunity for a significant return.
SINGLE & MULTI-TENANT RETAIL
Single and Multi‑Tenant Retail can be a risky investment depending on the tenant(s). As a result, you must be careful to monitor all macroeconomic risk factors. Additionally, you must understand your tenants business & operating outlook. It's important to analyze marketing data such as verifiable traffic counts, steady franchise sales, and competitor analysis when evaluating a property. However, in a robust economy, the CAP rates are among the highest in commercial real estate.
Hotel opportunities typically exist in emerging markets, as primary market hotel properties require longer-term holding periods to justify the investment ask prices.
Warehouses are desirable 1031 exchange properties for the investor looking for single user creditworthy tenants with decreased day-to-day management duties.
Self‑storage facilities are solid investments experiencing strong growth in recent years for 1031 exchanges. When managed well, these properties could provide decent cash flow with minimal property management. These properties may see a large increase in value over time.
Land is always considered an investment property which the IRS will not question. As a result land is a common property in 1031 exchanges.
Marinas are specialty properties that perform well in specific locations. Typically, these locations have significant tourism, fishing, and cargo shipping industry presence. Deed & title challenges occur due to government leases in place, and land vs. water boundaries. In the event of title challenges, the proper title holding requirements of a 1031 exchange may be at risk.
OIL & GAS
Oil and gas properties are risky investments for obvious reasons. Although highly speculative, their returns can be substantial if a well hits oil or gas reserves. The promoters of these investments structure them in complex lease arrangements to qualify for 1031 exchanges.