My name is Bryant Diel, and I reside in Kansas City, Missouri. Aside from listening to the BP podcasts and reading the Rich Dad Poor Dad book series, I don't have any actual experience in real estate investing. I rented houses and apartments while I was in college and for the first three years of living in KC, so I know how it works from the tenant's point of view. My fiance bought the house that we live in, so through that I have a mild understanding of the home buying process. I'm a CPA and worked in public accounting as a financial statement auditor for 3 years, and have since moved on to an accounting role at a large corporation here in town. The goals that I hope to achieve through real estate investing are: 1) to provide a cash flow stream for my mother as she gets older and requires assisted living or nursing home facilities, 2) provide a cash flow stream for my younger brother (who has Down's Syndrome) as he gets older and requires assisted living facilities and increased medical attention, and 3) provide a means of early retirement for me and my older brother.
While listening to BP podcast #276 (my favorite) the other morning, I had that lightbulb moment of how to get started in real estate investing. Me and my family own 160 acres of wheat ground in northern Oklahoma that is only paying around $8k per year in cash rent (before taxes). The land does not have a loan on it, so we own it free and clear. My lightbulb idea was to sell the land and use that as the down payment on a small multifamily or apartment building here in the KC area, and utilize a Section 1031 exchange to avoid taxes on the sale of the land. Since this real estate business would be owned by my mother and us three boys, I am unsure what legal entity would be best to setup for all of this to achieve the most legal security and tax advantages down the road. I can guarantee that a 4 unit or more rental property in KC with a substantial down payment would provide more than $8k/year in cash flow, but again I'm unsure how to structure it all. The goal from there would be to buy another small multifamily property each year from that point on.
I appreciate anyone that takes the time to read this post and look forward to connecting with other BP'ers!
Hello from St. Louis. Welcome aboard.
There seems to be a big presence on the forum from the KC area so you should be able to get some good advice.
It looks like you have your WHY figured out, -- an extremely important motivator. Good luck to you on your transition into the world of Real Estate investing.
are you sure you can 1031 exchange farm land for residential real estate? i would need to read up on it again but i think you have to do like kind for like kind but dont quote me on this.
A 1031 should the way I read it work for them.. *legal disclaimer I am not an attorney and you will want to talk to one*.. but this is from the irs website on 1031's
Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land.
With that aside where about in Northern Oklahoma, is your land? I know a few people in the market for a decent bit. It is likely too far for my people but I feel I would be remiss if I didn't even ask.
@Bryant Diel and @Rhett Tullis , Yep that's a great plan from the 1031 perspective. @Adam Greene nailed it. "Like kind" is defined as any real property that has been purchased with then intent of holding for productive use in business, trade or for investment. It is the use that is key. So any type of investment real estate can be exchanged for any other type of real estate intended to be held for investment use as well.
A very common tactic is to change classes of real estate using the 1031 exchange to capitalize on cycling stages of different types within a market period. Exactly this example - selling agricultural and purchasing a multi family residential rental building.
One limiting factor though is going to be that you will need to take title to the new property as the same taxpayer that owns the old property at least initially. Once your exchange is complete you can then work with your financial planners to determine the best entity to move to for the long haul.
Kudos on your thinking!
@Adam Greene the land is northwest of Burlington, OK, just a few miles south of the KS border. We plan to offer it to a family friend/farmer that has been the lessee since we stopped farming and another friend of mine in the area who farms. It has an oil well on it, so we plan to keep the mineral rights since there's no better ROI than ROI on something you don't have to put any money into - just hope the price of oil continues to climb. Appreciate the response!
@Dave Foster nice to find a 1031 exchange expert on these forums! We can continue this conversation via direct message.
@Bryant Diel seems like a sound plan.. Good luck.
Welcome Bryant! I’m a licensed RE agent and invest as well, so let me know if I can assist with finding anything for you.
Welcome @Bryant Diel - I'm over in the Topeka area so not far from you - have any quail on your land in OK? I've quail hunted a couple times near Buffalo just a bit west of your land.
I think the folks are right - you can 1031 the farmland into multi family rental etc. I'm not sure what crop land is going for in OK - guess it depends on if it's dryland or irrigated land and the type of soil, crop land vs pasture etc - anyways lets say you get 2-3k an acre - that's plenty to get you going. As another guy pointed out as well however title is held on the property when you go to sell it is how you'll have to buy the exchange property - IE - Bryant Diel and Bryant Diels Mom - youd have to buy Bryant Diel and Bryant Diels Mom - or ABC Co LLC - ABC Co LLC will need to purchase the exchange property.
You could leverage up to a significant property with your first purchase if your farmland is free and clear. I'm not a 1031 exchange expert but have bought and sold 6 properties this way in the past 2 years (1031 exchanges)
Would be glad to help how I can - can also give you some tips on what I've learned may be beneficial for estate planning as far as navigating Assisted Living/Medicaid HCBS etc - (Tip - unless you want your mother to go private pay in assisted living and drain all your money you may want to start getting assets out of her name now - guess it depends on where she'd want to live and how much you want to spend) -- Anyways we've been trying to become experts at our facility on HCBS and the different waiver programs (specifically Physically Disabled - which your brother may fall under at some point and Frail Elderly which your mother can fall under at some point)
@Trista Fenner Thanks! Still in the early stages so we are likely months away from being ready to start looking.
@Shane H. I went to Washburn U, so I'm very familiar with Topeka. No quail on the farm land, used to have a lot of pheasant in the area but it's so much dryer now that they didn't stick around. Your valuation per acre range is in the ballpark - it's roughly 98% crop land - can't speak to soil quality though - if it rains enough the yields are always good. We plan to set up a trust or other legal entity to do the sale and purchase, so sounds like that would qualify it for 1031 from a title perspective. Would love to leverage it all for 25% down on multiple deals, but since we don't have very extensive real estate investing experience, thought it might be best to start with one property and refinance to have funding for the second property a year after the first. In regards to estate planning and assisted living, my mom is considering long-term care insurance to help with her living costs once she retires. Would we want to include her in the legal entity we create to handle this transaction or no - for estate planning/getting assets out of her name? Appreciate the help, will send a colleague request to continue privately.
@Bryant Diel I love it. I am an agent and GC in the Northland and love helping new investors. (this isn't a pitch to you, I am speaking in generalities - so I am happy to see you starting your REI journey) Anyways, get a great CPA and then an attorney to help you structure this. Honestly, if itis a fourplex or smaller you could hold it in your name and have a large umbrella insurance policy. Which means residential loans, cheaper rates, etc... If you want something bigger then you definitely need an LLC and some further protections. Now it is a commercial loan, higher rates, etc... Best of luck to you!
@Dan Krupa Thanks for the response. Since you're an agent, do you have access to the real estate "portals" that send out the automatic emails showing properties that satisfy my selected parameters? Would love to get set up on that if you have the ability to do so. I plan to get in touch with a CPA and attorney in the coming weeks, will likely set up an LLC to have more legal protections vs holding it all in our own personal names. I've seen a lot of nice fourplexes and other small multifamily properties north of the river!
Hmm . . .are you getting all the money out of your land that you should be???
I have a friend who raises cattle near Venita and he has a bunch of income off land that is not being used for anything.
1. Getting paid to rotate crops and not plant or grow anything from year to year.
2. Farming or renting out to a farmer the years it can be grown on.
3. It seems every plot of land he buys comes with a house or a mobile home that he then rents out for rental income. So he makes good rental income on the non-farmable areas near the roads. He was even thinking of taking some of the plots and building a small mobile home park.
4. He gets paid for the hay a few times a year.
Just thought we needed some input for keeping the farm land. I like your 1031 Idea too.
@Kim Tucker The house on the property is run down and likely just needs to be bulldozed or lit on fire. We rent the land out to a family friend who farms and $50/acre per year is the going rate. We could do a crop share, but then you have to get insurance on it and are at the disposal of mother nature as far as yields are concerned. Annual appreciation on the land is pretty low. There's an oil well on the property that has been shut off for 2-3 years since oil prices tanked, but will likely be turned back on as oil prices continue to recover. We plan to keep the mineral rights and only sell the topsoil, and use that as a 25% down payment on some rental properties in the Kansas City area. I just don't think the land makes enough in comparison to getting a real estate business started that could scale much faster and be worth much more a decade from now and provide additional cash flow for our family. Thank you for responding, great questions and great recommendations!
I just know when we visited the friends farm and he outlined about $80,000 in income he was getting for land that no one was using and as a real estate investor, that just seemed amazing to me.
Getting paid for doing nothing from the government, getting people to buy his grass and he backs up to a landlocked nature preserve, so he gets paid by the government again to drive across his land so they can get to the nature preserve that they are studying for something. Plus renting out the few mobile homes.
Oh, yea and he ranches cows on the rest
@Kim Tucker I assume he owns much more than 160 acres of flat wheat ground if he is making $80k/year for grass and land usage. Our land is flat wheat ground that my family has not farmed or ranched on for over 15 years, and none of us live in the area anymore to make better use of it. I have asked other friends who farm the area and they say the cash rent we get for the land is in line with what normal crop leases are in the area. If there was a way to make more in rents on the land, we would have identified it and wouldn't be looking to exchange it for another investment property.
@Bryant Diel sure thing. PM me and we will figure out exactly where to target and other criteria. I will get you set up with the auto emails and the insights I have here. I am an agent but I use my license for my own business and other investors only. Looking forward to chatting.
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