What Is Like-Kind Property?

We'd love to meet you and find you the perfect investment

Link-Kind Property Defined

Many of the people that come into my office have a huge misconception of what types of properties they can exchange into. Most people I’m dealing with are selling multi-family rentals, for example, a four-plex or 6-unit apartment building. They think that the IRS definition of “like-kind property” is another four-plex or 6-unit building.

The truth is the IRS considers any deeded property that you don’t live in and is purchased for investment purposes qualifies as “like-kind.” For example, if you sell a 6-unit building, you can buy a piece of raw land, or several single-family residences or a small commercial building. They all are considered “like-kind” under the IRS guidelines. The only property that wouldn’t qualify would be a home that you immediately moved into and used as your primary residence. It can only be an investment property, not your home.

The replacement property must be valued as equal or greater to the property you sold. For example, if you sold a building for $800,000, you would have to buy one or more properties with a total value of $800,000 or greater. Another rule you must follow is that any debt on your property has to be replaced dollar for dollar as well. So if your $800,000 had a $400,000 mortgage on it, the replacement property(s) would have to have at least $400,000 of debt on it or greater.

Another example would be selling an $800,000 property with no debt and going into a larger property using all $800,000 of equity but buying a $1,600,000 property that has 50% loan to value (LTV) or $800,000 of debt. You can always “trade up” so this exchange would qualify as well.

These are very simple examples, everybody has details that must be taken into account, so be sure and discuss your particular exchange with a tax professional to make sure you’re following all the rules.


Share This

Share on facebook
Share on linkedin
Share on weixin
Share on email
Share on print

Read More

triple net lease pizza hut in california

Triple Net Lease (NNN) 2020 Guide for Investors

We are looking forward to meeting you to set up your 1031 Exchange portfolio Contact Us Table of Contents 2020 Triple Net Lease Guide for...

Read More

Best Manufactured Home Park Investing Guide for 2020

We are looking forward to meeting you to set up your 1031 Exchange portfolio Contact Us Table of Contents Are Manufactured Homes a Good Investment?...

Read More

High Cap Rates, Low Cap Rates, and Successful Real Estate Investing

Learn about a simple calculation that can reveal a trove of insight on potential real estate acquisitions. Some have even argued that this number is...

Read More

Get Access To Events & Quarterly Market Updates


Table of Contents

We have exclusive properties just for you, Leave your details and we'll talk soon.

Our #1 priority is to preserve investor capital. Sit down with us today to discuss how we can help you build a strong investment portfolio.