Can you use a 1031 exchange to build a property?

[Aden Brust]

Hey guys! I have a potential deal I'm about to go under contract on, there is just one hiccup. The seller is seller financing me the property with a balloon in 3 years if it appraises for the current purchase price in 3 years. She wants to build her dream home in 3 years and wants to use the proceeds to build it. She says she is worried about having to pay 47k in capital gains in 3 years which is a big chunk that could go towards building the house. The property I would buy is in her LLC but she would like the dream home she's building to be in their personal names, can she use a 1031 exchange at the end of the 3 year balloon when I pay her off and use those proceeds towards a new construction build? If not, are there any other creative ways you can think of where it would defer her capital gains? Theoretically in 3 years could I refi and pull out the money she needs and lend it to her to build the house?

I really would like to stick to seller financing on this deal because the terms she wants are amazing and it really could be a win-win all around if she gets to build her dream home. 

Just brainstorming! I’d love to hear any ideas! Thanks!