Can I 1031 Exchange Into Land? Here’s What You Need to Know
Hey guys, Jacob here with High Point Land Company. Today, I want to tackle a common question we get: “Can I exchange into land using a 1031 exchange?” The short answer is yes, you can, under certain conditions.
Why Consider a 1031 Exchange?
Many of our clients own rental properties, commercial buildings, or other investment assets that come with their own set of management headaches—like roof leaks, tenant issues, and constant maintenance. These challenges often drive investors to consider land as a more straightforward, lower-maintenance investment.
How Does It Work?
If you’re looking to 1031 exchange into land, here’s an overview of the process. First, sell your current investment property—whether it’s a rental, commercial building, or anything held for investment. From the sale date, you have 45 days to identify up to three potential replacement properties and 180 days (six months) to complete the exchange into one of those properties.
Steps to Take
- Due Diligence: Before you sell, make sure you’ve done your homework. Identify the land that fits your goals and work with a qualified real estate agent.
- Professional Guidance: Collaborate closely with a qualified intermediary, your accountant, and your attorney. This team will help you navigate the complexities of the exchange.
- Finalize the Exchange: After selling your original property and identifying the new land, complete the 1031 exchange within the six-month period. This allows you to move from a high-maintenance asset to something more manageable, like land.
What About Reverse Exchanges?
Sometimes, you may find the perfect land before selling your current property. In these cases, a reverse exchange is an option, but it requires careful planning and coordination with your team of professionals.
Disclaimer
Now, I’m not a financial advisor, accountant, CPA, or attorney—I’m a real estate broker in about six states currently. My advice is based on our experience in the real estate market, and it’s essential to consult with your financial and legal professionals before making any decisions. Additionally, laws and regulations around 1031 exchanges can change, so it’s crucial to have up-to-date advice.
Conclusion
In summary, 1031 exchanges into land are not only possible but are happening frequently. We’ve helped numerous clients transition from high-management investment properties to more passive and potentially rewarding land investments. As long as the property is held for investment, a 1031 exchange is generally feasible across the real estate asset category, provided it’s like-kind.
If you’re considering this move, make sure you have the right team in place to guide you through the process. Thanks for tuning in, and feel free to reach out with any questions! If you like this content please Follow, like and share on our Social Channels linked here: Can you 1031 Exchange into Land?