1031 Exchange Land for Fix and Flip

[Kyle Kershner]

Investment Info:

Other buy & hold investment.

Purchase price: $40,000
Sale price: $135,000

Originally purchased 27 acres to build a new home, but purchased a spec home instead. Held the land, obtained wastewater permits and subdivided. Sold one lot, retained other; executed a 1031 tax exchange to defer the capital gain. Purchasing a fix and flip ski house as replacement property.

What made you interested in investing in this type of deal?

Knowledge of 1031 tax exchange benefits.

How did you find this deal and how did you negotiate it?

The owner had two lots, but one of them failed tests for septic, so purchased as one large lot instead of two building lots. State wastewater requirements changed in 2008, allowing for a workaround which enable me to revert the land back into two lots.

How did you finance this deal?

Cash

How did you add value to the deal?

Held for many years and created two lots from one.

What was the outcome?

Made a large profit and still have one of the lots to sell or build on later.

Lessons learned? Challenges?

I had septic designs done in 2007, but never filed for the permits and had to pay for all new tests and engineering again in 2022.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am real estate professional.