As a business owner, it’s beneficial to understand the 1031 exchange options. Learn whether 1031 exchange rules allow you to buy a property that your business can occupy as a tenant. David Moore of Equity Advantage examines the benefits of such an arrangement. Learn the ins and outs from a professional.


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Do 1031 exchange rules allow you to acquire a property that your business can occupy as a tenant?

Hello, David Moore here once again for Equity Advantage, IRA Advantage, and our questions this week are, do 1031 exchange rules let me acquire a property that my business can occupy as a tenant? Part two would be, are there any other 1031 exchange options that I might consider.

A lot of times people will create a business, build it, and do great with it, but ultimately the thing that makes them the most money is the business’s property—the property that the business actually occupies. To answer the question, yes, certainly, you can buy a property and have it acquired personally and have that property occupied by your business. It’s a great opportunity for people, really, because you can shift your income or gain one way or the other as needed. The business rents can go up and down and it’s really just a wonderful tool that can make your future, particularly your retirement, much better.

Very often, we have clients who will buy a property specifically to occupy it for their business. At some point, they sell the business off and they end up with the property leased out to whoever bought the business. This can be a opportunity for people. If you can do it, certainly, take the opportunity and do it. As far as the ownership, like I said, typically you’re going to have different ownership for the property and different ownership for that business, but it wouldn’t have to be that way.

This is a great option because you’re going to be paying rent to somebody—either to somebody else or to yourself—so I think is an opportunity. Other options are just to run the business wherever it is obviously and buy other income properties someplace else. Other options are always available. A lot of times we’ll take things, and maybe it comes and builds into that improvement exchange structure, so you might have something somewhere else. Or you may have a couple items and you don’t want them anymore, and you need a new business facility, so we can combine multiple properties into one and you can occupy that.

Do 1031 Exchange Rules Let Me Acquire a Property That My Business Can Occupy as a Tenant

It’s important to look at your business life and where you are at. Probably one of the only downsides is that your real estate is not considered to be a liquid asset, so if your business did need that money and you had all your capital tied up in that property, it’s harder to get access to it. But with that consideration in mind, talk to your lenders and do it. It’s a great opportunity. It’s no different than buying a house and living in it or renting from somebody else. As I said, often times the property the business occupied and the business property is actually worth more than the business after all those years of work. I’ve had many clients do this, because it’s a great opportunity.

If you’re considering a 1031 exchange, you want a team of professionals on your side. Let the experts at Equity Advantage help you navigate the details. Call them today! 503-635-1031.