1031 Exchange: What You Need To Know

Many homeowners have heard of a “1031 Exchange,” but few understand the basics of what an exchange actually entails.  Today I want to cover just a few of the basics of the process, as it can be an invaluable method of homeownership for investment buyers. 

What is a 1031 Exchange?
Put simply, it is the sale of one property in exchange for the purchase another property of similar value without the required payment of capital gains tax, all performed within a specific time frame.  An example of when you might use a 1031 Exchange, as opposed to selling a home and purchasing a new one outright:  you want to sell your current vacation home and purchase a new, similar one that has a few better features.  You have not yet owned your current vacation home for two years, so you are subject to substantial capital gains taxes when you sell it.  If you were to use a 1031 Exchange, you could “exchange” your current home for a new one and be relieved of the capital gains requirement.  It is this difference between “exchanging” and not simply buying and selling which, in the end, allows you, the taxpayer, to qualify for a deferred gain treatment. In a nutshell: sales are taxable with the IRS and 1031 exchanges are not. US CODE: Title 26, §1031. Exchange of Property Held for Productive Use or InvestmentImportant Rules of 1031 Exchange
1.       The total purchase price of the replacement “like kind” property must be equal to, or greater than the total net sales price of the relinquished, real estate, property.
2.       All the equity received from the sale, of the relinquished real estate property, must be used to acquire the replacement, “like kind” property.

1031 Timelines and Rules 
Identification period – the seller has exactly 45 days from the sale of the original property to identify other replacement property(s) that he proposes or wishes to buy.   
Exchange period – the period during which the seller of the relinquished property must receive the replacement property.  This period ends exactly 180 days after the date on which the person transfers the property relinquished or the due date for the person’s tax return for that taxable year in which the transfer of the relinquished property has occurred, whichever situation is earlier. 

Now is the time to be thinking about investing in a Jersey Shore beach home, before summer is upon us again!  If you want to learn more about strategies for buying and selling investment properties, or are interested in Bradley Beach NJ real estate, please call me at 732-775-2774 or visit PatrickParkerHomes.com.  To begin searching Jersey Shore homes, please use my complimentary MLS search.Happy new year – see you in 2008!

Bradley Beach NJ Real Estate Update

Attention, home sellers!  Even in an uncertain real estate market, there may be good news for you – depending on where you live.  The National Association of REALTORS® has published the results of its quarterly sales survey and found that the median home price continues to rise in most metropolitan areas.  The median is a typical market price – meaning half of all homes sold for more, and half of all homes sold for less. 

Lawrence Yun, NAR chief economist, said the data underscores the fact that all real estate is local.  “Some metro areas are hot, while others are experiencing localized problems,” he said. 

Moving into 2008, we will keep a close eye on the Jersey Shore area market trends to see how prices affect sales volume.  Since the market changes month to month and neighborhood to area, please contact me at 732-775-2774 or visit PatrickParkerHomes.com to get the latest information on Bradley Beach NJ real estate.  To receive a complimentary home value analysis, please click here.   

Best wishes for a safe and happy holiday season!

Playing the Real Estate Game in a Down Market

Although the real estate market is slow in many areas, you may still want or need to sell your home or purchase a new one due to circumstances such as a job relocation.  This article from CNNMoney.com offers some tips on how you can still make a smart move in this unpredictable real estate market.  Here is a summary of the tips: 

• Sell smart – if you are trying to sell your home, make sure you set a realistic price based on the current market.  You will also want to discuss with your Realtor the current average “days on market” that most properties are taking to sell.  This will help you better plan for your move.  If you are not willing to list for the current market value, and you do not want your house to be on the market for long, consider waiting out this down market as it is likely to turn around soon.
• Spend wisely – try to follow the rule of thumb of spending no more than 20% of your home’s value on renovations.  At a time when your home may be worth less than it was this time last year, this is not the time to be sinking money into it.
• Foreclosures are still your problem – remember that, even though you are not facing foreclosure, the other properties in your neighborhood that are foreclosed upon will decrease your home’s value.  As a general rule, for every home that goes into foreclosure in your neighborhood, your property value drops about 1%.  That value will stay depressed for about two years.  To find out where the foreclosures are in your area, go to realtytrak.com or foreclosurenet.net and type in your zip code.
• Recheck your mortgage – many homeowners do not know what kind of mortgage they have.  If you are one of them, pull out your old closing documents and find out how often you’re rate will increase and what caps there are to how much that increase can be.  This information should be on the Adjustable Rate Rider, among the first few pages in your documents.

Remember, the Jersey Shore real estate market is always changing from month to month and neighborhood to neighborhood.  To find out what your home is worth, click here for a complimentary market analysis.  You may also visit PatrickParkerHomes.com to learn more about Bradley Beach NJ real estate, or call me at 732-775-2774.

Redevelopment on Main St. Bradley Beach

Last week the Bradley Beach Chamber of Commerce invited two top professional planners to discuss redevelopment options on Main St. No exact location was discussed, but the meeting was to educate residents about redevelopment. Planner Dave Roberts of CMX showed the residents examples of other towns and outlined the full process a redevelopment plan must go through. Mr Roberts also talked about the qualifications an area must have to be designated “in need of redevelopment”. Rehabilitation is another option which will take away the power of eminent domain. There’s no doubt that something needs to be done to some of these buildings on Main St. and also two on McCabe Ave. The owners of the buildings must be accountable. They are bringing the surrounding homes value down because they refuse to maintain the property. If they can’t afford to upkeep the appearance so it doesn’t look like an eyesore, then sell. The towns elected officials should step in and address this problem. With all the lawn signs during election time, they did want this job, didn’t they?

Patrick Henry of the Atlantic Group stressed the need for a plan that everyone can live with. Everyone must be on the same page. Mr. Henry also discussed the funding. The municipality would use the newly increased property tax revenue from the project to pay the debts incurred from the project.

There are a few ways to look at making Main St. more appealing and the fastest way is to call out the property owners of these run-down buildings, like the one across from town hall, and advise them to clean up or get fined. Our standards must be high if we want a great Main St.

How to Go Green This Holiday Season

This year it seems like everyone has been trying to “go green” – homeowners are making environmentally-friendly choices on everything from cleaning products to flooring.  So it should follow that this concern for the environment carries over into our holiday decorating this year.  If your home is in need of some holiday cheer, here are some “green” ideas to brighten things up: 

·        Use LED lights – using LED lights to decorate the inside and outside of your home will not only benefit the environment, it will help your wallet as well!  The lights last a whopping 50,000 hours – that means you could actually pass these lights down to your grandchildren some day!  Adding to their cost effectiveness is the fact that you will be using 90% less energy with LED bulbs – resulting in an electric bill that the Griswalds would envy.  LED lights are also safer – they don’t produce as much heat and considerably reduce the risk of fire, always a concern during the holiday season.

·        Use solar-powered decorations – the “new kid on the block” when it comes to holiday décor, these lights not only save you money on energy – they don’t use any energy at all!  Place the solar panels where they can collect light during the day, and the lights will automatically light up when it gets dark and shine for about 8 hours. 

·        Use mother nature’s decorations – forget going out to shop for decorations.  Some of the best décor can be found right in your own backyard!  Use a real Christmas tree rather than a manufactured, non-biodegradable one.  Even better, buy a young tree with roots and re-plant it after the holiday season!  A basket of pinecones make a beautiful and rustic centerpiece, and fresh pine straw can be made into a lovely and fragrant wreath to display.

 Happy tree-trimming! To learn more about Bradley Beach NJ real estate, please visit PatrickParkerHomes.com or call me at 732-775-2774.  To receive a complimentary home value analysis, please click here.