Types of 1031 Exchange Properties

Consultant giving advise for a 1031 exchangeSome people have caught on to the benefits of 1031 exchanges when it comes to amassing real estate. However, the lines regarding the kind of property are not clear for many. For instance, the IRS will not question land used in an exchange, but few people know the rules for retail space or an office building. A whole industry has grown around 1031 exchange, with firms like 1031ex.com providing expert advice to help guide you through the complex tax bureaucracy.

To qualify for a 1031 exchange, investors must consider whether the asset in question produces income. For instance, a rented house is income generating and so it qualifies, but a family home is not an investment property under IRS. Below are types of assets that would be considered investments:

Single and multi-family houses

A single-family house such as a condo is regarded as a dwelling unit for personal use. To meet 1031 guidelines for exchange, it must be rented out for a minimum of 12 months or more, depending on type. Multi-family residential properties such as apartment complexes qualify directly. Managed correctly, they have a potential for appreciation and increased cash flow.

Commercial offices and warehouses

Veterans in the real estate industry are attracted to commercial offices. They are better able to handle changes in zoning, insurance and the local economy. However, an investor looking for creditworthy tenants can turn to warehouses. If held for long periods, their returns are worth the wait.


Marinas are commercial assets that work well for cargo shipping, tourism and fishing. Since most of them are connected with government leases, they tend to have deed restrictions. Additionally, water versus land boundaries can make it hard to confirm the deeds. Be sure that such issues do not cause you to contravene exchange period rules.

Note that the IRS frowns upon 1031 exchange properties sold with the intent to fix and flip. Additionally, some properties are featured as short-term gains as opposed to income-generating investments. For this reason, choose a qualified intermediary to advise you accordingly.