All Forum Posts by: David Lock

Well darn. I really thought I was doing the right thing with this. Sounds like I need to up the price on paper or just forget the 1031 with their property completely, buy a rental and finance it, pull the money to buy them out without a 1031 afterwards. I'm building my rental portfolio anyways, just thought this would be the easiest way to get them comfortable and me with some secure income without the 45 day timeframe of searching for another property. After my CPA confirmed the fair market rates should be fine I thought I had it made. But the attorney was worried and thats why I thought I'd bring the conversation to this thread. Thanks @Bill B., @Dave Foster for your input. Looks like I'm going to have to go back to the drawing board

Dave,

Thanks for the response. The family members would be my parents. There would be no entities involved. I would be buying the house and 5 acres for what it appraises out for, and then renting it to them for what fair rental rates are in our area.  

The farm itself has a fair market value which is very broad in our area. Land is being sold between 2-4k per acre, and I would be right at the low end of that range. I guess I say discount because I know its nothing lower than what I'm potentially going to buy it for. 

Good Afternoon,

I wanted to get some more information on performing a 1031 exchange when a family member is involved with the replacement property. 

I am selling some land, and buying a 75 acre family farm which has a house and 5 acres within it, but on its own separate legal description from the remaining 70.

I am trying to buy out their debt and help push them into an easier retirement while inheriting and transferring the property out of their name and into mine at a discount. 

Its helping them- putting them at ease knowing if anything ever happens to them its all taken care of. It helps them in knowing they are debt free, and it eases their financial obligations for the next 5 years heading into retirement. 

It's helping me collect enough replacement value to execute the 1031. It's helping me to walk into family earned equity. 

The question would be this: Can I buy the house and 5 acres for what its worth, buy the 70 acres for a discount, go through with the 1031 and then rent the house back to them as a rental property? I've heard mixed opinions on this, I'm trying to see how much of a red flag if any that creates. 

Any information would be greatly appreciated.