I made the buyer submit proof of funds and a deposit of 6% to my broker's escrow.

We also charge 20% of gross but I like to be on the lesser side so that the owner makes more and we also strive to get the highest nightly rate that we can for our owners and optimize their properties for max ROI so 20% is sufficient for us at this point.

My issue is that I do not have funds to build a house on the land.

Such as having a ballon every year for 100K until it is exhausted.4) If, when I am entitled to receive the funds, if I instead want to 1031 the balloon into another property, can I do that?

Are you funding your buy and rehab with strictly cash or you're getting a HELOC or personal loan to complete the rehab?

So the only way to transform a seller carry into a 1031 (or 1031 substitute, if you will) is to (1) put the note into the exchange and then (2) Buy the note with outside funds?

OP @Trae Turner do you have your funding in place ready to buy sf fixer upper? 

As an investor (especially paying subs to do the work and using private funding....) you are at the bottom of the pile in that there are several categories of buyers who can pay more than you, as follows (starting with the highest-paying...): 1) Handy retail buyers with financing who can do the work themselves and plan on living in the house, 2) Retail buyers with cash, 3) Builder flippers with cash using their own guys to do the work, 4) Builder flippers using private money and their own guys to do the work, 5) Other investors with cash, using subs and finally, 6) You or me using private funding and subs to do the work.

Or allow them to withdraw funds (monthly or quarterly) and immediately recalculate % ownership? 

I plan on using a HELOC for funding.