1031 with land owned outright

[Andrew Merritt]

I'm going to be selling some land that I own w/o a mortgage and will be doing a 1031 exchange with the proceeds.  Am I allowed to finance another property with the proceeds?  For example, my proceeds will be about $200k.  Could I use that as a 25% down payment on an $800k property?  Would there be any kind of negative tax consequences with this strategy or maybe I wouldn't be able to deduct mortgage interest?