As you know it’s always tough to finance land, and in today’s world, it’s next to impossible. When selling land today, you are faced with the fact that it will either be a cash sale or seller carryback. This month’s featured deal highlights an innovative approach to overcoming these challenges.
The Exchangor is relinquishing a property that is raw land with a sales price of $105k. The buyer’s down payment is 10%, with the Exchangor carrying the 90% balance. Our client intends to do an Exchange and to be totally tax-deferred. To accomplish these objectives, the note on the Exchangor’s relinquished property will have to be converted to cash or used as consideration for the replacement property’s purchase.
We have historically offered a variety of options to convert or use the note while maintaining tax deferral. Consider the following:
- Use the note and cash in the acquisition of the replacement
- Discount and sell the note
- Exchange only the down payment
- The Exchangor may be the note
- Utilize a short-term note and complete the Exchange upon payoff
We are excited to offer a new opportunity: using your IRA to buy the note. It is a prohibited transaction for an investor to use a retirement account to buy a note from himself, but in an Exchange the note is the accommodator’s at settlement. The accommodator is not a disqualified party to the Exchangor’s retirement account, and therefore the investment can be made!
Overcoming land financing challenges requires innovation and informed strategies. This month’s deal highlights solutions like using an IRA for note purchases. To ensure compliance and maximize benefits, we strongly advise consulting with a tax or legal professional before proceeding.
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The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
