I also worked as a buyer's agent specializing in 1031 exchanges with retail NNN properties.

When 2020 hits, I 1031 exchanged most of my OH houses to North GA and later 1031 into commercial properties.What I found is 1% rule doesn't really matter that much. 

For your first ground up it might make sense to bring in your contractor as an equity partner building the project at cost in exchange for equity.

Research selling under a Land Contract or Structured Installment Sale- It's an alternative to a 1031 exchange that investors use to delay the tax man.   

Another angle you could consider is to diversify into different asset classes to reduce your risk, potentially continue your low tax burden and earn cashflow passively through 1031 exchanging into Delaware Statuary Trusts (DSTs). 

Notice that the article doesn’t cover asset distributions (only the exchanging of stock).

Can this used in a 1031 exchange?

We sold 2 properties and did a 1031 exchange and used a combination of hard money and private financing to acquire the building.

@Lee Falkenhagen no particular reason other than Cozy was recommend to me here on BP, and offers me the ability to complete more steps of my process than a straight money exchange program would (background/credit check, rest analysis/estimator, offers the tenant the ability to make service requests etc.).

If you do not have enough equity in the home you may want to sell it to break even or 1031 exchange into a property with a positive cash flow.Unless you are in California there are multiple States or Counties to buy a good investment property that can cash flow.