What Kinds of Property Qualify for a 721 Exchange with Flock Homes?

Single-family and multifamily rentals can qualify for a 721 exchange with Flock Homes if they meet the Fund's financial return requirements. Homes with lower mortgages are more likely to be accepted.

That's the short version. Here's the longer one, including the cases where the answer is no.

What does Section 721 allow?

Section 721 of the Internal Revenue Code lets you contribute property to a partnership in exchange for a partnership interest, and that contribution is generally not a taxable event.

The law itself is broad, and it doesn't list approved property types. What qualifies in practice depends on the partnership you're contributing to and what it's built to hold. For the basics, our 721 exchange page is a good start.

What does Flock's Fund accept?

Flock's Flagship Fund accepts single-family and multifamily rentals that meet its financial return requirements. A few details matter.

• Occupied or vacant. Both are fine. If a resident is living there, Flock Homes honors the existing lease and works with the resident to renew when it expires.
• Lower mortgages. Mortgage balances generally under 30% of the property's value are more likely to be accepted. Flock Homes pays off the existing mortgage at close, and the equity you receive is tied to what remains, after fees and closing costs.
• Return requirements. Flock Homes only transacts on properties that meet its return criteria. After a formal inspection and valuation, we'll tell you whether yours does.

The Fund is built for long-term rentals, and that's how properties are operated after closing.

Where does Flock Homes consider exchanges?

Flock's Fund operates in 33 markets across 17 states: Arizona, Colorado, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Missouri, North Carolina, Ohio, South Carolina, Tennessee, Texas and Washington. We're expanding into 19 more markets, including 6 new states: Alabama, Arkansas, Mississippi, Nevada, Oklahoma and Pennsylvania.

Our largest markets are Mansfield (Ohio), Raleigh, Kansas City, Atlanta and Denver, and we're still growing: Mansfield and San Antonio both joined the Fund this year, and more markets are on the way.

Not sure if your rental is in one of them? Fill out our short onboarding form and we'll reach out either way.

What tends to disqualify a property?

Here's where the answer can be no, so you don't have to spend weeks finding out.

Location. If your rental is outside the markets we operate in today, we may not be able to consider it right now. Since we keep adding markets, it's still worth asking.

High leverage. If your mortgage is a large share of the home's value, there may not be enough equity to make the numbers work. The under 30% guideline isn't a hard rule, but it's a good signal.

Missing the return criteria. A home can be lovely and still not meet the financial requirements. Condition, location, and configuration all feed into that, and the inspection and valuation tell us.

Do I need a mortgage-free property?

No. Many of the properties we look at have a mortgage, and we pay it off at close. The balance does affect how much equity you receive and whether the property is likely to be accepted, which is why lower balances come up so often. Generally, homes with a mortgage are more likely to qualify when the outstanding mortgage is less than 30% of the property's value.

What if my property doesn't qualify?

Then a 721 may not be your best path, and that's okay. A 1031 exchange, another structure, or simply holding may fit better. Our 1031 exchange page explains that route, and our post on 7 options when selling a home with tenants is a good starting point. A tax advisor can help you compare.

Want to find out if yours qualifies?

Submit your rental address for a free valuation. It's free, there's no obligation, and we'll get back to you either way.