1031 exchange to land that will become “B&B” type rental
I am not a real estate investor but my husband and I own a duplex worth about $300k with 100% equity that he’s owned for 25 years and a residence worth about $450k with 100% equity that we’ve owned for 18 years. We want to ultimately sell both properties and put the combined amount into buying land that we will eventually build on and live on with cabin(s) to rent out. We plan to live in our current residence until the new property has a house built, which could take us years to get done. The tax implications of selling the duplex affect how much money we have to put into the new property.
What do we need to do to maintain eligibility for a 1031 exchange? How do we determine how much the rental part of the property is worth versus the residence part when there is nothing there yet? How soon must we start to generate rental income? As soon as we move into the residence portion? We are planning a very specialized service, catering to guests with certain environmental sensitivities, and are unsure how strong (or weak) the demand will be for our rental cabin(s) so we plan to start with just one rental cabin. What happens if there is very little rental income?