|
When you decide to do a 1031 Exchange you have
many more options than you may realize. The term like-kind, which is
associated with 1031 Exchanges, has caused a lot of confusion.
By selling your investments property, you are not limited to exchanging into
another property of the same kind, but of like-kind.
In other words, if you sell an 8-unit residential property you do not have to
replace it with another 8-unit residential property. In fact, you dont even
have to replace it with a residential property. You do however, have to replace
it with real property, not
personal property, but that still leaves many
options.
In addition, with a 1031 Exchange you are not limited to replacing your property
with a single property. You may sell one property and replace it with 2 or more
properties as replacements. This strategy is used quite often by investors who
are looking for diversity.
Here are some of the options that 1031 Exchange investors have for replacement
properties - broken down into 3 categories:
|
1. |
|
Conventional Real
Estate |
| |
|
Conventional real estate are properties, most
commonly bought and sold by real estate investors, such as: single-family
rental homes, multi-family apartments, single-tenant commercial structures
and multi-tenant office or retail properties.
These are the types of properties typically listed on MLS systems and often
involve a real estate broker.
|
|
2. |
|
Tenant-In-Common (TIC)
Properties |
| |
|
TIC Properties, or TICs as they are referred
to, is a relatively new structure available to 1031 Exchange investors.
Essentially, a TIC structure is one where multiple investors, with a maximum
of 39, hold an undivided interest in a property. Each investor holds title
to the property for their portion of ownership. The property is usually
managed by one of the owners or a 3rd party.
NOTE: This is not a limited partnership
structure. It is sometimes confused with a limited
partnership structure but it has many distinct differences which
we is further discussed in detail within the Tenants-In-Common section of
this site. See: Tenants-In-Common
|
|
3. |
|
Energy Properties |
| |
|
You may not be aware that investment property
may also be exchanged into existing energy (oil, gas or coal) properties.
This is not to be confused with oil and gas drilling programs which are not
eligible for a 1031 Exchange but rather existing properties that are
currently producing product. This is also covered in detail within the
Energy Royalties section of this site.
See: Energy Royalties |
The latter two categories,
Tenant-In-Common Properties and Energy Properties, can be structured into a
Regulation D offering and still qualify for
a 1031 Exchange. |
