--- title: Which Kind of Like-Kind is Best for You? description: All about cash-out refinancing options and considerations in a 1031 exchange. image: https://blog.fgg1031.com/hubfs/Like-Kind.png --- [info@firstguardiangroup.com](mailto:) [(866)398-1031](tel:(866)398-1031) [![fgg](https://blog.fgg1031.com/hubfs/FirstGuardianGroup_2022/fgg.png)](https://brokercheck.finra.org/individual/summary/6470002) [![fgg-871923](https://blog.fgg1031.com/hubfs/FirstGuardianGroup_2023/fgg-871923.png)](https://www.bbb.org/us/ca/san-jose/profile/commercial-real-estate/first-guardian-group-1216-887513) [![logo](https://blog.fgg1031.com/hs-fs/hubfs/FirstGuardianGroup_2022/logo.png?width=175&height=56&name=logo.png "logo")](http://fgg1031.com) - [Home](https://fgg1031.com/) - [About Us](https://fgg1031.com/about-us/) - [Current Offerings](https://fgg1031.com/property-listings-directory/) - [Resource Center](https://fgg1031.com/resource-center/) - [Glossary](https://fgg1031.com/glossary/) - [Accommodators](https://fgg1031.com/accommodators/) - [FAQ](https://fgg1031.com/faqs/) - [Tax eBook](https://pages.fgg1031.com/resources/real-estate-tax-deferral-strategies-ebook) - [Real Estate eBook](https://pages.fgg1031.com/real-estate-investing-in-the-new-era2) - [QI eBook](https://pages.fgg1031.com/resources/qualifiedintermediary/ebook) - [Tax Calculator](https://fgg1031.com/tax-calculator/) - [Newsroom](https://fgg1031.com/newsroom/) - [Blog](https://blog.fgg1031.com/blog) - [Events](https://fgg1031.com/events/) - [Contact Us](https://fgg1031.com/contact/) ![search-interface-symbol](https://blog.fgg1031.com/hubfs/FirstGuardianGroup_2022/search-interface-symbol.png) ![loader](https://f.hubspotusercontent-eu1.net/hubfs/24949188/Business%20and%20Finance/global/22.gif) ![close](https://blog.fgg1031.com/hubfs/FirstGuardianGroup_2022/close.png) From Pages From Blog Pages Load More Load More **Sorry, we couldn't find a match for  "".** Check your spelling or try a related search term. 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By [Paul Getty](https://blog.fgg1031.com/blog/author/paul-getty) When completing a 1031 exchange, investors are required to reinvest their proceeds into “like-kind” investment properties. Fortunately, the IRS allows a very broad range of investment properties to qualify as “like-kind” including residential and commercial properties and less obvious options including raw land, cell phone towers, billboards, water rights, mineral rights, oil and gas, etc.  When selling an investment property of one type, investors can freely reinvest in other property types e.g., single family rental into a retail store. By far, the two most popular 1031 reinvestment options selected by our clients are residential and commercial properties.  Residential properties include single family rentals, apartments, senior living communities, manufactured home parks, and student housing among others. Commercial properties include retail, office, fast food, service centers, distribution centers, healthcare, and government buildings among others.  #### **Pros and Cons of Commercial Properties** Commercial properties can generally provide investors with long term steady cash flow if occupancy remains stable over the holding period. The relationship between the tenants and the investor is defined in a lease contract that often places much of the responsibility of maintaining the property on the tenant. Among the most popular lease structures is the [triple-net lease (NNN)](https://blog.fgg1031.com/blog/why-many-investors-prefer-dsts-over-nnn) where the tenant is required to pay all property expenses including taxes and insurance and maintain the condition of the building thereby reducing the workload and responsibility of the investor.  Challenges can arise when tenants move out or fail to meet their lease responsibilities. Replacing tenants can be expensive since, to attract new tenants, investments must be made in marketing and upgrading the premises to fit the intended use by the new tenant. Tenant improvements (TIs) can be costly and, of course, there is usually a loss of rental income until the new tenant is found and begins to pay rent.  During periods of good economic growth and low inflation, investments in commercial properties can provide attract overall returns to investors and are generally very popular.  Relative to residential properties, commercial properties can be subject to greater risks during economic downturns and periods of high inflation. During recessions, vacancy is more likely to increase, and more time may be required to find acceptable replacement tenants and resume rent collection.  As highlighted in other recent blogs, the chief concern of many investors in today’s inflationary environment is that allowed rent increases in commercial properties are generally much less than annual reported inflation rates. For example, the average allowed annual rent increases in commercial properties managed by our firm ranges from 1% to 2% - far below today’s annual Consumer Price Index (CPI) increases. If rents cannot keep pace with inflation, the value of a property is likely to be negatively impacted at time of sale thereby raising the risk of a potential loss of equity.  While we expect to see new commercial lease terms that allow rents to be adjusted to meet reported CPI figures (as we saw in the 70’s) which should increase the appeal of commercial properties, our clients are generally reducing their exposure to this asset class.  #### **Why Residential Properties Now?** During the eleven or so recessions that I lived through and managed real estate, well-positioned residential real estate has proven to be the most resilient asset class. I remember my father commenting to me that when he lived through the Great Depression, the family’s first dollar would go to put food on the table and the second dollar would go to the landlord so that the family could have a roof over their head.  Residential properties can not only be good defensive investments, but they can provide investors with better than average returns in areas that are gaining population where housing shortages exist. Owners of rental properties generally have more flexibility to raise rents to meet changing market conditions and can therefore be a more attractive inflation hedge than commercial properties.  COVID has accelerated a mass migration from more expensive cost-of-living to areas that are more affordable spurred in part by a growing shift to remote work and a desire to have more living space. Working remote from one’s employer has become the new normal for a growing number of well-educated workers and many companies are adapting work polices to retain talented employees. As a result, demand for housing in secondary markets has accelerated creating attractive investment options for astute investors who are tracking strategic population shifts.  Unlike our last economic downturn in 2007-2009 which was caused by a bursting housing bubble and global financial crisis, there is a shortage of housing in high growth areas today. Buying a first-time home is also becoming more challenging due to rising mortgage rates that are fueling a growing need to rent versus buy.  In our daily conversations with investors who are selling rental properties, we routinely hear stories of double digit returns and a desire to reinvest sales proceeds in what many know best – residential real estate.  #### **Possible Changes Ahead** We are big believers in the concept of “reversion to the mean” and do not expect that the current hot residential market will remain so indefinitely. In time, high demand will create more supply and we might then be on our way to another correction. Readers are encouraged to read a recent article from Fortune Magazine entitled [“***Housing Bubble 2.0”***](https://fortune.com/2022/05/09/housing-bubble-watch-housing-markets-are-beginning-to-look-like-they-did-in-2007/) for additional perspectives on residential real estate investments.  #### **Next Steps** To learn more about market trends and investment strategies for allocating both cash and 1031 exchange funds, please schedule a meeting with our professionals at First Guardian Group at 866 398-1031 or [info@fgg1031.com](mailto:info@fgg1031.com).   --- #### Have you downloaded our ebook? [![](https://no-cache.hubspot.com/cta/default/5468919/interactive-183026367847.png)](https://blog.fgg1031.com/hs/cta/wi/redirect?encryptedPayload=AVxigLKNRkZx1dLQp1sXSKxk4KEa65VgCGh1StZYI6y7R5ifnLmmGq9gKSywYX9pwIFdlAjVla0I0PGro0UgBc03ceBmYZ%2BeC%2FKb4UitoSE1v%2BvbqLX7fWRFT2T6ocwXo3JUZjFWbvCJ0T0HJ9iNMsuQjr51Qk%2By852HQ%2FIuoJM4m86sSQ1kM%2FwO3oAk31QusaF4mJ0ezuCDzBFtnnckEhhyVnz7K4I5wRM3v%2BOM%2FhVMqsOM&webInteractiveContentId=183026367847&portalId=5468919)   1 [https://www.forbes.com/sites/forbesrealestatecouncil/2021/09/28/is-real-estate-a-hedge-against-inflation/?sh=265dbf1f19da](https://www.forbes.com/sites/forbesrealestatecouncil/2021/09/28/is-real-estate-a-hedge-against-inflation/?sh=265dbf1f19da) 2 [https://www.cnet.com/tech/tech-industry/how-covid-accelerated-a-shift-that-could-put-new-cities-at-the-forefront-of-american-life/](https://www.cnet.com/tech/tech-industry/how-covid-accelerated-a-shift-that-could-put-new-cities-at-the-forefront-of-american-life/) 3 [https://www.apollotechnical.com/working-from-home-productivity-statistics/#:~:text=Several%20studies%20over%20the%20past,and%20are%2047%25%20more%20productive](https://www.apollotechnical.com/working-from-home-productivity-statistics/#:~:text=Several%20studies%20over%20the%20past,and%20are%2047%25%20more%20productive). 4 [https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction-supply-chain](https://www.npr.org/2022/03/29/1089174630/housing-shortage-new-home-construction-supply-chain) 5 [https://fortune.com/2022/05/09/housing-bubble-watch-housing-markets-are-beginning-to-look-like-they-did-in-2007/](https://fortune.com/2022/05/09/housing-bubble-watch-housing-markets-are-beginning-to-look-like-they-did-in-2007/) --- ##### **Help Save 1031 Exchanges** Write to your Member of Congress and Senators urging them to oppose restricting Section 1031 like-kind exchanges. As part of the American Families Plan, the Biden Administration has proposed eliminating the application of Section 1031 for gains greater than $500,000. Like-kind exchanges have been part of the U.S. tax code since 1921 and are one of the tax code’s most powerful economic tools. It is critical that we all vigorously and visibly oppose this proposal. Make your voice heard with a pre-filled letter, which you can customize to add personal anecdotes or powerful client stories to highlight the positive impact of Section 1031 like-kind exchanges. Take action today by clicking [HERE](https://p2a.co/XLBiUYT)[**.**](https://p2a.co/XLBiUYT) --- ### [Paul Getty](https://blog.fgg1031.com/blog/author/paul-getty) Paul M. Getty is one of the most experienced 1031 exchange specialists in the United States, with a career in real estate that spans over 35 years and more than $5 billion in commercial transactions across every major asset class. His work covers single-family rentals, apartments, retail, office, multifamily, and student and senior housing, giving him a practical understanding of how different property types perform across market cycles and how investors can move between them using tax-deferred exchange strategies. As President and CEO of FGG1031 | First Guardian Group, Paul advises investors through the full 1031 exchange process, from identifying qualifying replacement properties to structuring acquisitions through Delaware Statutory Trusts (DSTs) and wholly owned real estate. His guidance covers both the compliance requirements of a valid exchange and the investment decisions that determine long-term portfolio outcomes – a combination that is difficult to find in a single advisor. Paul holds a California and Texas real estate broker license and carries Series 22, 62, 63, and 82 securities licenses as a registered representative with Emerson Equity LLC, member FINRA /SIPC. He has represented buyers and sellers across complex commercial transactions, sourced and structured debt and equity, and worked alongside nationally recognized firms including Marcus Millichap, CBRE, JP Morgan, and Morgan Stanley. Before founding FGG1031, he co-founded Venture Navigation, a boutique investment banking firm whose M&A and IPO activity generated over $700 million in investor returns. Paul holds an MBA in Finance from the University of Michigan and a bachelor’s degree in chemistry from Wayne State University. He has also completed coursework in artificial intelligence at Stanford University. He is the author of four books on real estate investing and tax deferral strategy, including Tax Deferral Strategies Utilizing the Delaware Statutory Trust (DST) and Real Estate Investing in the New Era, both available on Amazon. A frequent speaker on 1031 exchanges, DST investing, and real estate tax strategy, Paul Getty is a recognized voice for investors and advisors seeking guidance on capital preservation through tax-deferred real estate investment. ## Your Comments : This is a search field with an auto-suggest feature attached. - There are no suggestions because the search field is empty. - Latest Posts - Popular Posts [Partial 1031 Exchange: How It Works, What Gets Taxed, and When It May Make Sense](https://blog.fgg1031.com/blog/partial-1031-exchange-how-it-works) [ 1031 Exchange](https://blog.fgg1031.com/blog/topic/1031-exchange) [721 UPREIT Options in DST Programs (Part 3)](https://blog.fgg1031.com/blog/721-upreit-options-in-dst-programs) [ Real Estate Investors](https://blog.fgg1031.com/blog/topic/real-estate-investors) [ DST](https://blog.fgg1031.com/blog/topic/dst) [ 721 Exchange](https://blog.fgg1031.com/blog/topic/721-exchange) [ UPREIT](https://blog.fgg1031.com/blog/topic/upreit) [ New featured](https://blog.fgg1031.com/blog/topic/new-featured) [Can a 9% Taxable Return Beat a 4.5% Tax Advantaged DST?](https://blog.fgg1031.com/blog/can-a-9-taxable-return-beat-a-4.5-tax-advantaged-dst) [ Real Estate Investors](https://blog.fgg1031.com/blog/topic/real-estate-investors) [ DST](https://blog.fgg1031.com/blog/topic/dst) [ New featured](https://blog.fgg1031.com/blog/topic/new-featured) ### Categories - 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[CPA (1)](https://blog.fgg1031.com/blog/tag/cpa) - [Cost Segregation (1)](https://blog.fgg1031.com/blog/tag/cost-segregation) - [Mortgage (1)](https://blog.fgg1031.com/blog/tag/mortgage) - [PPM (1)](https://blog.fgg1031.com/blog/tag/ppm) - [Rent Relief (1)](https://blog.fgg1031.com/blog/tag/rent-relief) - [Retail (1)](https://blog.fgg1031.com/blog/tag/retail) - [The Tax Cuts and Jobs Act (1)](https://blog.fgg1031.com/blog/tag/the-tax-cuts-and-jobs-act) see all ### Read more of what you like. ## [Partial 1031 Exchange: How It Works, What Gets Taxed, and When It May Make Sense](https://blog.fgg1031.com/blog/partial-1031-exchange-how-it-works) ## [Understanding Loan-to-Value (LTV) in DST 1031 Exchanges](https://blog.fgg1031.com/blog/understanding-loan-to-value) ## [How 1031 Exchange Proceeds and QI-Held Funds Are Taxed](https://blog.fgg1031.com/blog/how-1031-exchange-proceeds-and-qi-held-funds-are-taxed) [![FGG_Footer_White](https://blog.fgg1031.com/hs-fs/hubfs/FirstGuardianGroup_2022/FGG_Footer_White.png?width=300&height=95&name=FGG_Footer_White.png "FGG_Footer_White")](http://fgg1031.com) 97 East Brokaw Road, Suite 350, San Jose, CA 95112 [(866) 398 1031](tel:(866)%20398%201031) [info@firstguardiangroup.com](mailto:info@firstguardiangroup.com) ## Recent Blogs - [Investing in Senior Housing October 20, 2022](https://blog.fgg1031.com/blog/investing-in-senior-housing) - [A Closer Look at the 7 Deadly Sins October 20, 2022](https://blog.fgg1031.com/blog/a-closer-look-at-the-seven-deadly-sins) - [What is a Springing LLC? October 20, 2022](https://blog.fgg1031.com/blog/what-is-a-springing-llc) ## Useful Links - Home - About Us - Blogs - Testimonials from Past Customers - Resource Center - Current Offerings Disclaimer: There is no guarantee that any strategy will be successful or achieve investment objectives. All real estate investments have the potential to lose value during the life of the investments. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the confidential Private Placement Memorandum (the “Memorandum”). Please be aware that this material cannot and does not replace the Memorandum and is qualified in its entirety by the Memorandum. This material is not intended as tax or legal advice so please do speak with your attorney and CPA prior to considering an investment. This material contains information that has been obtained from sources believed to be reliable. However, FGG1031, First Guardian Group, LightPath Capital, Inc., and their representatives do not guarantee the accuracy and validity of the information herein. Investors should perform their own investigations before considering any investment. There are material risks associated with investing in real estate, Delaware Statutory Trust (DST) and 1031 Exchange properties. These include, but are not limited to, tenant vacancies, declining market values, potential loss of entire investment principal. Past performance is not a guarantee of future results: potential cash flow, potential returns, and potential appreciation are not guaranteed in any way and adverse tax consequences can take effect.  The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All financed real estate investments have a potential for foreclosure. Delaware Statutory Trust (DST) investments are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments. Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions. Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits. IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, you should consult your tax and legal professional for details regarding your situation. DST 1031 properties are only available to accredited investors (generally described as having a net worth of over one million dollars exclusive of primary residence) and accredited entities only (generally described as an entity owned entirely by accredited individuals and/or an entity with gross assets of greater than five million dollars). If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney prior to considering an investment. Securities offered through registered representatives of [LightPath Capital, Inc.](http://www.lightpathcapital.com/) Member [FINRA](http://www.finra.org/) / [SIPC](https://www.sipc.org/). FGG1031, First Guardian Group, and LightPath Capital, Inc. are separate entities. Copyright 2022, All Rights Reserved, FGG1031 [![FGG_Footer_White](https://blog.fgg1031.com/hs-fs/hubfs/FirstGuardianGroup_2022/FGG_Footer_White.png?width=300&height=95&name=FGG_Footer_White.png "FGG_Footer_White")](http://fgg1031.com) 97 East Brokaw Road, Suite 350, San Jose, CA 95112 [(866) 398 1031](tel:(866)%20398%201031) [info@firstguardiangroup.com](mailto:) [![Bitmap](https://blog.fgg1031.com/hubfs/FirstGuardianGroup_2023/Bitmap.png)](https://brokercheck.finra.org/individual/summary/6470002) ## Recent Blogs - [Understanding the Difference Between Inheritance and Estate Tax August 3, 2023](https://blog.fgg1031.com/blog/understanding-the-difference-between-inheritance-and-estate-tax) - [Public or Private Real Estate? Your Investment Portfolio May Need Both July 27, 2023](https://blog.fgg1031.com/blog/public-or-private-real-estate-your-investment-portfolio-may-need-both) - [How to Use 1031 Exchange Funds to Improve Your Replacement Property July 20, 2023](https://blog.fgg1031.com/blog/how-to-use-1031-exchange-finds-to-improve-your-replacement-property) ## Useful Links - [Home](http://fgg1031.com/) - [About Us](https://fgg1031.com/about-us/) - [Blogs](https://blog.fgg1031.com/blog) - Testimonials from Past Customers - [Resource Center](https://fgg1031.com/resource-center/) - [Current Offerings](https://fgg1031.com/property-listings-directory/) FGG1031 | First Guardian Group and Emerson Equity LLC do not provide legal or tax advice. Securities offered through [Emerson Equity LLC](http://www.emersonequity.com/) Member [FINRA/SIPC](http://finra.org/) and MSRB registered. Emerson Equity LLC is unaffiliated with any entity herein. 1031 Risk Disclosure: - There is no guarantee that any strategy will be successful or achieve investment objectives; - Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments; - Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities; - Potential for foreclosure – All financed real estate investments have potential for foreclosure; ·Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments; - Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions; - Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits No offer to buy or sell securities is being made. Such offers may only be made to qualified accredited investors via private placement memorandum. Risks detailed in a private placement memorandum should be carefully reviewed, understood and considered before making such an investment. Prospective strategies and products used in any tax advantaged investment planning should be reviewed independently with your tax and legal advisors. Changes to the tax code and other regulatory revisions could have a negative impact upon strategies developed and recommendations made. Past performance and/or forward looking statements are never an assurance of future results. Many of the investments offered will be only available to those investors meeting the definition of an Accredited Investor under SEC Rule 501(A) and offered as Regulation D private placement securities via a Private Placement Memorandum (“PPM”). Prospective investors must receive, read and understand all of the risks associated with buying private placement securities. Investments are not guaranteed or [FDIC](http://fdic.org/) insured and risks may include but are not limited to illiquidity, no guarantee of income or guarantee that all tax advantages or objectives will be met and complete loss of principal investment could occur. **Risk Disclosure:** Alternative investment products, including real estate investments, notes & debentures, hedge funds and private equity, involve a high degree of risk, often engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Often, alternative investment fund and account managers have total trading authority over their funds or accounts; the use of a single advisor applying generally similar trading programs could mean lack of diversification and, consequently, higher risk. There is often no secondary market for an investor's interest in alternative investments, and none is expected to develop. There may be restrictions on transferring interests in any alternative investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in foreign markets may entail risks that differ from those associated with investments in U.S. markets. Additionally, alternative investments often entail commodity trading, which involves substantial risk of loss. NO OFFER OR SOLICITATION: The contents of this website: (i) do not constitute an offer of securities or a solicitation of an offer to buy of securities, and (ii) may not be relied upon in making an investment decision related to any investment offering by FGG1031 | First Guardian Group, Emerson Equity LLC, or any affiliate, or partner thereof. FGG1031 | First Guardian Group does not warrant the accuracy or completeness of the information contained herein. Copyright 2026, All Rights Reserved, FGG1031