rental property to 2nd home #2
@Dave Foster gave me some great advice previously, and based on my new understandings, I want to restate my objectives here to make sure that I know fully the situation and my options.
I bought a new home in 2003 in the San Diego area, and rented out my old home, which I purchased in 1996. It appreciated significantly over the years. In 2017 we sold the rental, but in the process realized that we would be paying a huge capital gains tax (~$125K), so we did a 1031 exchange and bought a condo, which we rented out at a nice profit.
But now we want to get out of the landlord business and find a nice piece of property in nearby Arizona or Nevada on which we can someday build our dream house. We plan to keep our current home here in San Diego, but establish residence in AZ or NV and spend parts of the year in both locations.
We have the cash to buy a nice property now, but as @Dave Foster advised me, there's that pesky '2 of 5' year rule, and that you can't exchange on a property you already own.
So here's the options as I understand them:
OPTION 1 Buy the property I want then sit on it till I'm ready. Then 1031 exchange my current rental for a similar property with the intent to rent it out. When I can't find renters, I then move into it and live there for 2 years. Sell, it, use the proceeds to build my dream home on the property I already purchased.
OPTION 2 Find a larger property that is equivalent to condo with an existing home and do a 1031 exchange on it. Then rent it out, or attempt to, and then live in it for 2 years.
OPTION 3 Do option 2, except lease out some of the land for grazing or some other business. When I am ready to build my dream home, I sell off a chunk of the land I don't need/want to fund my dream home.
I'm sure there are other options for me, and I welcome ANY suggestions. I will add that I am not interested in any situation that is not legal, or even skirts the line, and want to avoid even the appearance of impropriety.
Thanks in advance!