1031 into new construction

[Paul Martinez]

Has anyone ever 1031 exchanged four properties and used the proceeds into constructing a brand new property from scratch ? If so can you please share your story or let me know why you can’t do it. Many thanks in advance!

[Dave Foster]

@Paul Martinez, A lot is going to depend on how you can cluster the sales of your relinquished properties.  Both of the above options can work.  So much is going to ride on the ability of the builder to complete the building within 180 days.  Whether or not you do a reverse or a regular exchange you're window to complete is going to be 180 days.

A couple other options that can save you the expensive reverse route:

1. Cluster the sales of your properties and find an under construction spec that you go into contract for as soon as your first property closes.  You can use exchagne funds for earnest money.  And your only big pressure is to get the other 3 sold before the spec is completed.

2. Find a builder willing to take title to the lot and build with a contract from you for periodic substantial earnest money payments.  They may need their own in house financing or you may be able to structure a series of earnest money that satisfies.  While it's under construction and within 180 days of completion you sell your houses using the proceeds for the earnest money payments.  

Timing is everything.  And the IRS really doesn't care about weather :)