Ok, these two topics come up frequently enough with people unfamiliar with 1031 exchanges that I thought I should address them both. First, let's talk about Like Kind, and what that means according to the law. For my clients, it is as simple as "real estate" for "real estate". This means that you can exchange an apartment building for raw land; a commercial office building for a residential rental home; a fourplex for a motel. The only caveat is that it be used for income generating purposes or investment, NOT as a personal residence. But that's it.
There is the misconception that this like kind provision means that it has to be the same type of real estate. Not True! The things that you cannot do in a valid 1031 exchange are trade say, an office building for gold, or an airplane for a rental condo. Here, you are breaking the like-kind provision. But as long as you stick to real estate for other real estate, you are fine.
Another common misconception I find is that you actually have to find someone that wants your property, and you want theirs, in order to do an exchange. That would be tough! In fact, I have yet to see it happen. One party may want to trade with another, but to have this kind of agreement between both sides is exceptionally rare. Even when it does happen, still, one or both parties still likes to "look around" to see what else they can get, just like any other buyer would do. This exchange in a pure sense does not make sense for most people, since finding a counterparty that is in agreement and wanting the same thing is like finding a needle in a haystack.
The 1031 exchange provisions allow a seller to liquidate their real estate asset, have the money held by an intermediary, and then be able to purchase ANY property that they choose. No need for the counter-party to even be involved in swapping or trading, other than notifying them that you are doing an exchange. For the counter party, it is a transaction just like any other, from both the buy and sell side. Call me for more details, or visit my site, www.1031exchange.co
There is the misconception that this like kind provision means that it has to be the same type of real estate. Not True! The things that you cannot do in a valid 1031 exchange are trade say, an office building for gold, or an airplane for a rental condo. Here, you are breaking the like-kind provision. But as long as you stick to real estate for other real estate, you are fine.
Another common misconception I find is that you actually have to find someone that wants your property, and you want theirs, in order to do an exchange. That would be tough! In fact, I have yet to see it happen. One party may want to trade with another, but to have this kind of agreement between both sides is exceptionally rare. Even when it does happen, still, one or both parties still likes to "look around" to see what else they can get, just like any other buyer would do. This exchange in a pure sense does not make sense for most people, since finding a counterparty that is in agreement and wanting the same thing is like finding a needle in a haystack.
The 1031 exchange provisions allow a seller to liquidate their real estate asset, have the money held by an intermediary, and then be able to purchase ANY property that they choose. No need for the counter-party to even be involved in swapping or trading, other than notifying them that you are doing an exchange. For the counter party, it is a transaction just like any other, from both the buy and sell side. Call me for more details, or visit my site, www.1031exchange.co
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