Raw land keep it? Or sell it?

4 Replies

Sooo have a question for you all. I bought property about 7 months ago that's raw land zoned for 4 units. I got an offer on it that would basically give me 148.2% ROI with everything said and done. Now if I do a 1031 exchange my ROI goes up significantly because I'm not paying the short term capital gains.

Also the property is on a 5/5 arm and my plan was to have it paid off within 5 years before my interest rate changes. I've taken a big pay cut at work and still think I could have it paid off in 5 years, but if not. Who knows what rates will do and it makes me a little nervous.

Again at the same time it's been such a great equity builder and investment in such a little time frame it makes me want to hold onto it.

What do you think I should do?

@Collin Perry , I have a love/hate relationship with raw land personally. I love how simple it is to own and how good the returns are when it's in the path of progress. I hate it when it's got debt on it and I have to make mortgage payments with no income to use.

The risk meter is creeping up on you - job change, maturing loan, maturing market etc.  I'd be tempted to sell and 1031 into cash flow which would mitigate all three.

You haven't held for long so you want to make sure you can demonstrate your intent to hold if you want to do a 1031.  It sounds like that was your intent.  Just want to make sure you can demonstrate it if required.

Shop the land to like-minded suitors and see if you get some takers to create a  highest/best. With raw land, I like to leave a little meat on the bone to entice the buyer. Like Dave said, you can get stuck carrying some interest for just the chance at a little more money, meanwhile that land is producing nothing. Keep your money moving.

Clint