1031 Help! 3 Rental Property exchange for specific raw land

[Angela P.]

Hi Everyone - here's the facts, can someone help me understand if I am going to run into any issues or if this will work and I should pursue? 

I have three rental properties I am interested in selling and buying raw undeveloped land (for investment for at least a few years - and then I will either sell it, or I will build on it and use as my future primary residence). 

Property 1 - $305k value, $146k debt = $159k equity (**note, this was once my own personal residence, has been a rental for 7 years-does this matter??)

Property 2 - $307k value, $155k debt = $152k equity - held for 5 years

Property 3 - $298k value, $136k debt = $162k equity - held for 3 years

Purchase property - undeveloped land - for sale for $475k 

Questions:

Is it as easy as selling the rentals, sending the cash to the intermediary, identifying that I want to buy the land, having the intermediary buy the land with the cash? 

If I hold the land for a few years (how many?) and then decide I want to make it my personal home - do I indefinitely defer the gains on the rental properties?

Thank you in advance for your guidance!

Angela

[Dave Foster]

@Angela P., Well your plan is doable but there's some road blocks you'll want to watch out for.  Here's a couple thoughts.

1. Your residency of the one property is past the dates that would have given you that profit tax free.  So it is now just an investment property like all the others.

2. In order to defer all tax you must purchase at least as much as you sell and you must use all of the proceeds in the purchase.  If you sell all three and want to 1031 that would mean you need to purchase at least $900K ish in real estate using all $473K ish of proceeds.

So you can purchase the undeveloped land, hold it for investment, later convert it into a primary residence or build on it.  But It would only eat up $475K of the reinvestment target and would need to purchase another $425 K or so if you want to defer all tax.

Yes, as long as you own the replacement you will continue to defer all tax.  Or if any time you sell and do another 1031 you'll continue to defer all tax.