Land Contract with 1031 Exchange? - Posted by Jack

Real Estate Investing Real Estate Law
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Posted by Jack on November 20, 2006 at 21:24:07:

dealmaker,

Thanks for responding. I will consult my CPA.

I need to use an LC, as I have a HELOC that can’t be subordinated, and I want to continue using it for a bit.

From what I have read, I think that an LC is both “seller financing” and a “sale.” I could be wrong. Let’s put it to a vote!

I may well have used the term “boot” incorrectly, but I do think that the unexchanged equity that I will be financing will be taxable. I know the interest-only payments will be.

My QI is charging $400, which seems reasonable to me.

Bottom line is that I have an extremely motivated buyer with 60% percent down now and I have a darn good deal on a replacement property on contract now. I need to close ASAP.

So are there any 1031 exchange experts who can give me some advice?

Cheers–Jack

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Land Contract with 1031 Exchange? - Posted by Jack

Posted by Jack on November 19, 2006 at 20:02:42:

I am selling via a land contract a half duplex/townhouse that I’ve owned for 13 years. The LC was not my first choice, but it has turned out to be the best way to sell to this buyer, who is my best prospect. (She owns the other side and wants my side more than anyone else–including me.)

My question is what are the ramifications of using a land contract in conjunction with a 1031 exchange?

I’m getting a substantial (60%) down payment, which I intend to exchange into a replacement property. The balance will be taxable boot, I’m told, but that is not a problem, this year.

My QI sees no problems, but I am interested in other opinions.

Thanks in advance.

Cheers–Jack

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Re: Land Contract with 1031 Exchange? - Posted by dealmaker

Posted by dealmaker on November 20, 2006 at 18:09:12:

I’m not sure the QI would be the best source of advice on this, check with your CPA, but I’m not too sure why you’re doing this.

LCs are generally used when the buyer is weak, your buyer has 60% downstroke! Why not just do a straight up sale, and seller finance the 40%?

With a LC you WON’T be transferring title at this time, I don’t see that you will have effected a “sale”.

I’ve read your post 5 times now and I’m not sure you have the correct understanding of “boot”.

Just my opinion. BTW, how much is your QI charging you?

dealmaker