% Ownership Transfer, 1031 Exchange And Capital Gains Question
I own a piece of raw land that I paid $92,000 for and will sell for $183,000. The buyer will pay my asking price if I will be flexible on the closing date (no sooner than May 2005 and he can wait as long as ~2 years). I have agreed, if we could make the closing coincide with my purchase of suitable 1030 exchange property. I would like to replace the property with rental houses that I would purchase in the $40,000 to $50,000 range. Finding 5 houses all at the same time to replace this property will be difficult for me since I only do this part time.
Now my question. Is it possible to transfer ownership of my raw land to the buyer in increments which would coincide with the purchase of replacement property until 100% of the property is transferred?
It is a cash sale so there would be no financing complications.
Would this satisfy my 1031 exhcange plans and avoid capital gains?
My suggestion would be to buy a small appartment building instead of 5 houses, as Rich Dad states the formula for wealth is: exchange 4 houses for one hotel. Then consider refinancing the appartment 12 months later to pull your capital back out.
You should contact a good 1031 exchange team now. You may run into problems with the "like kind" property. One might claim that the raw land was held for appreciation and so will the new investment, but you may be safer "renting" your land before sale to insure a tranfer into "rental" properties is considered a like kind exchange.
Yes, if you structure completely separate sale transactions of undivided interests in your property you would be able to do five separate 1031 exchange transactions, but you would also incur five separate 1031 exchange fees.
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