7 Keys to Success in 1031 Exchanges Series – Key #1 Property Type

In facilitating 1031 like-kind exchanges we have found there to be 7 Keys to Success for investors who most successfully and profitably exchange properties.

The First Key to Success in 1031 Exchanges…Property Type

The first key to a successful 1031 exchange is recognizing the difference between investment property and property held for personal use. Property type is determined by your usage of the property. Section 1031 deals with deferring the taxes on an exchange of property “held for productive use in a trade or business or for investment” and is not applicable for property generally held for personal use.

Section 1031 allows for the exchange of non-owner occupied real property such as a rental home, duplex, apartment building, farm, raw land, or a tenant-in-common interest in an office building. I’ll talk more later about what properties are Like-Kind. Any property that is owner occupied as a primary residence will not qualify for tax deferral under Section 1031 unless there is mixed use in the same dwelling unit. E-mail me if you have questions about mixed use as it can be very complicated. Section 121 deals with primary residences, which have better tax breaks than those for investment properties. Second homes, vacation condos, and recreational lots are part of a special group and are usually considered personal use property and are not eligible for tax-deferred exchange unless personal use of the property amounts to 1) less than 10% of the time the property is rented or 2) no more than 14 days in a year.

So, think money making property and not your primary residence as the type of property that you can do in a 1031 exchange. Discuss amongst yourselves and let me know how I can help flesh out how property types are key in 1031 exchanges.

– Chad

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9 Comments

Filed under 1031 exchange basics, 7 Keys to Success in 1031 Exchanges

9 responses to “7 Keys to Success in 1031 Exchanges Series – Key #1 Property Type

  1. Pingback: Why farmers may get stuck in the 1031 ditch… « 1031 Like-Kind Exchange Blog

  2. Pingback: Why farmers now MAY NOT get stuck in a ditch « 1031 Like-Kind Exchange Blog

  3. It is very interestingly written, to the author thanks.

  4. Glad i ran across this web site. Love 7 Keys to Success in 1031 Exchanges Series – Key #1 Property Type « 1031 Like-Kind Exchange Blog!

    • I’m glad you like the blog. As you can tell, we have not updated it in some time. We are in the process of getting our new site up and will be moving everything from this blog over to the new site. Check back in the next few weeks and check for updates! In the meantime, you can check out the 7 Keys to Success in a single document at our current home website, http://www.1031eci.com .

  5. Awesome, I was looking for something along the lines of this. I was thinking, do you think newsletters are still an effective way of marketing online? Does anybody still use them well and actually acquire readers?

    Thanks!
    Eric

  6. Pingback: Why farmers may get stuck in the 1031 ditch… | 1031 Exchange Coordinators

  7. Great Information for First Time 1031 Candidates! We will refer clients to your Seven Steps to get a basic understanding of the process.

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