1st timer: I bought land for $385k, selling it for $1 million, now what?

Question

Hey All,

the facts: I purchased raw land in 2022 for $385k, this year I will be selling it to the county for $1 million and pay no commission fees. I still owe $318k. My primary residence is a condo that I could profit $600-800 per month once I move out or sell it and gross $150k.

I'm new to this level of real estate investing. I've bought and sold my primary residences a few times and this land. I understand my way through contracts and what to look for. But now I have to 1031 this money or take the capital gains hit.

MY question to savvy investors: what strategies should I be considering?

My idea now before my meetings this week with CPA, wealth management, and investor realtors, is to purchase a long term and short term rental. The STR scares me a bit due to having to foot the bill every month if it does not perform and the upfront costs associated with making it stand out. My market I want to get into is Asheville, NC.

Jaron Walling · Answer

@Michael C berry jr Why is the county buying the land for $1M? If that goes through you just hit the lottery.

Honestly, I'd slow down and focus on the property deal before selling or renting the condo. Constantly buying and selling a primary is not good long term strategy. It's also stressful and takes time away from finding/buying/creating long, mid, or short term cash-flow opportunities.

Bill B. · Answer

I’m never a fan of paying taxes today that you could avoid in the future. But. Remember if you do a 1031 out of Florida in to a state with income taxes you’ve just made those Florida gains taxable if you ever sell without an exchange. I’m usually doing the opposite. Do a 1031 of a property in a state with income tax back to Nevada to avoid the state income taxes.

Could you buy a beautiful 2-4 unit, maybe on the beach, where the $1m would only go towards the rental portion of the building where you could live in another unit as your primary? Good luck.

Michael C berry jr · Answer

@Jaron Walling first off thank you for the reply and helping me to grow for my kids.

Rereading my post I may have made my primary residence situation hard to understand. I have other capital to buy another primary residence aside from my 1031 exchange money. I also have family friends interested in renting my condo for the cash flow mentioned. It would be an easy transition for renting to them or others while I go about my business with the 1031 exchange and new primary residence.

the land is in Pasco County Florida and the county is buying it to keep it raw land.

Travis Timmons · Answer

Nothing fails like success, and stupid loses more than smart wins. I'd second @Jaron Walling and suggest that you do nothing for 6 months. I would not let the pressure of a 1031 force you into a bad or uninformed deal. There are worse things than paying taxes.

As far as STRs go, it's a good business if you want a part time job and like doing it. If not, it likely is a bad idea as margins are compressed down to 8-10% cash on cash returns in most markets.

You also don't have to buy real estate. Tossing that money in an index fund and leaving it there is a great idea as well. I have nothing to sell and would be happy to help if you think that I could be a resource. Feel free to send me a message.

Peter Fisher · Answer

@Michael C berry jr

Defer Capital Gains Taxes with a 1031 Exchange

A Delaware Statutory Trust (DST) can serve as a passive replacement property solution—offering potential income, diversification, and relief from active property management. DSTs are also commonly used as backup options for your first, second, or third identified properties to help ensure a successful exchange within IRS timelines.

Ashish Acharya · Answer

@Michael C berry jr You're in a strong spot, selling land for $1M with $615K in gains opens up major opportunities. Here’s how to move forward smartly using a 1031 exchange:

• Use a 1031 Exchange to defer capital gains taxes, identify and close on like-kind properties (e.g., rentals) within the IRS timelines (45/180 days).
• Split Investment: Buying one long-term rental (LTR) and one short-term rental (STR) works if both are held for investment. LTRs offer stability, while STRs can produce higher returns, but come with more risk and management needs.
• STR Tax Advantage: If you materially participate (100+ hours and more than anyone else), you can qualify for the STR loophole, allowing bonus depreciation to offset W-2 income, without needing full REPS status.
• Use Cost Segregation: Ask your CPA about doing a cost seg study to accelerate depreciation, especially if 100% bonus depreciation returns in 2025.
• Backup Options: If managing real estate feels overwhelming, consider a Delaware Statutory Trust (DST) for a passive 1031 route, or an installment sale to spread the tax burden over time.

Meet with your CPA and 1031 intermediary to ensure your reinvestment strategy is tax-optimized and aligns with your comfort level on risk and management.This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Mitch Davidson · Answer

@Michael C berry jr. If it were me, I wouldn't put the money towards STR, especially here in the Asheville market, unless you're really going to create an STR that's standout for the market, meaning very desirable but also uncommon. STR is super volatile across the country right now, and is even more painful here due to the lingering impacts of Helene. I'm happy to help you think on other strategies, and likewise introduce you to any local investor friends that can speak more to a specific strategy, location, etc. And if you're local, we have a twice-monthly BP meetup that you might really enjoy. I'll message you the details.

1st timer: I bought land for $385k, selling it for $1 million, now what?

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