1031 Tax Deferred Exchanges:

Advantages of Trading Real Estate Thru Tax Deferred Exchanges

There are three basic types of 1031 tax deferred exchanges that can take place:

1.) Straight exchanges
—two parties trade properties of equal or approximate value. This is the simplest exchange.

2.) Multi-party exchanges
—this involves three or more parties buying, selling, or exchanging properties. Don't attempt these exchanges without the aid of a tax professional; they tend to be very complex.

3.) Delayed exchanges
—this exchange allows the sale of the relinquished property and the buying of the replacement property to occur at different times as long as stringent rules are followed. This is the exchange most often used.

What's the Advantage of the 1031 in Terms of Taxes?

As the law's title indicates, the capital gains tax is deferred, but not eliminated. However deferral is a great way to leverage small real estate holdings into larger ones! Since you can postpone gains, you're able to use a tax-deferred exchange strategy to transfer equity to a larger property, all without paying taxes!

Another advantage is that there’s no limit on exchanges. This means you can make as many exchanges as you want! So, over the course of your lifetime, you can keep growing income and appreciation by adding new properties without having to pay the capital gains tax!

If you specialize in buying and renovating properties and want to keep reinvesting your profits into larger properties, then this strategy is especially attractive.

Note: If you don’t keep reinvesting, you risk being classified as a real estate dealer by the IRS and will not be able to participate in exchanges.
What Are the Basic 1031 Qualification Rules?

There are some basic rules that must be followed in order to qualify for a 1031 exchange. These include the following:

1.) The properties to be exchanged must be located in the United States. Note: You can exchange foreign property for foreign property and domestic for domestic. However, you can’t mix these exchanges together.

2.) You must trade only like-kind real estate.
3.) An exchange must be made that’s equal to or greater in both value and equity. Any cash or debt relief received above this amount is considered “boot” and is taxable.

4.) The like-kind property must be identified within 45 days of the closing on the initial property.

5.) All proceeds from the initial sale must be turned over to a"qualified intermediary" (also called a QI, facilitator, exchanger, etc.) who is the person or company playing the role of middleman.

6.) Any of the proceeds not under the control of the middleman are subject to taxation.

7.) The middleman holds the funds from the initial property in escrow until such time as the closing on the second property occurs.

8.) The middleman also assists the owner with the preparation of paperwork and other services to ensure the transaction progresses in a smooth manner.

9.) The closing on the second property must take place within 180 days following the closing on the first property.

Wow, as you can tell, this is pretty complex subject and can't completely covered here! But if you're an investor or plan to be one, I hope I whetted your appetite for this subject.

As always consult your tax and legal counsel before investing.  And please, if you have any further questions, feel free to call me.  I'd love to show you more was to benefit when investing in real estate.

Big Advantages of Selling & Buying in Winter

Fall and Winter Present Great Opportunities for Selling and Buying 

Contrary to popular belief Fall and Winter present a great opportunities for smart Sellers and Buyers. Many sellers are unsure whether or not to wait until next spring before listing their home. The confusion comes with a combination of age-old schools of thought that predict the spring season as being almost the only season that homes to sell. Not true.

Many homeowners are under the impression that homes don't sell during fall and winter, whereas in our current market the opposite is true with actual shortages of homes in several price ranges.  We are actually defying the myths of never ending days on market statistics with many properties going under contract in approximately two weeks. Here’s why.

There are so many buyers in the marketplace right now that are eager to lock in the phenomenal interest rates and there is simply not enough inventory in some parts of town.  Market conditions continue to allow a significant amounts of buying power. The interesting thing is that while it is a strong buyers’ market in that sense, sellers are still enjoying an edge with the lower inventory that comes with it being this time of year.

Regardless of which side of the fence you are on, either way you look at it the market is strong. People are out there buying. If there are fewer homes available on the market, then that only means that there is less selling competition. This of course translates into more money for you and incredibly quick, hassle-free transactions in which everyone comes out a winner.

And Now The Top Ten Reasons To Sell During Winter

1.  Fewer Showings means less hassle with less buyer traffic, but the buyers that are coming are very serious about buying a home. 

2. Less Competition- Most people wait until spring and summer to list their home, which means during the winter you will have far less competition than at any other time of the year. 

3. Homes Show Better During the Holidays- Buyers love homes that can tell a story. The holidays are a great time to show homes because the home is usually dressed up for holiday celebrations. 

4. January is the Biggest Transfer Month- Did you know that more corporate moves happen during the month of January than at any other time of year? This is  be a great reason to list your home during the winter. 

5. Timing- By putting the home on the market during the winter months you will probably have your home sold by spring and be looking at the biggest inventory of homes available when it sells. 

6. Pricing- By starting to market your home early you may be able to secure a higher price, because of less competition. 

7. Great Time to Shop- If your home sells quickly you will be able to shop for your next home during the winter and winter sellers are motivated. 

8. More Market Exposure- Because most agents and offices have less inventory during the winter so your home will have more presence and be more visible websites and more often than during the spring months

9. More Attention- Most agents will be able to devote more specialized attention to your needs during the winter because they have fewer clients to manage. This means your property gets more attention and it of your listings to more websites, search engines, and portals. 

10. The Market- Today’s interest rates are at historical lows. This gives buyers more buying power, and will be even more important when you begin shopping for your next home!

This is a Great time to buy or sell real estate. That’s why it is important to make sure in today’s market, you hire someone who knows what they’re doing and will work hard to get the job done. My knowledge of the real estate market, technology, negotiating skills, and ability to listen to my client’s needs and wants has always kept us ahead of the competition. 

Buying or selling a home in today’s greater Milwaukee, Wisconsin real estate market can be complicated without having the proper expertise and guidance throughout the process. Plan ahead to reach your real estate goals by contacting us early to make the most of the season.  As always call or email us and let us know what we can do for you.

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Jim Geracie Team October 2012 Greater Milwaukee Real Estate Market Update

The Market is Improving in many parts.  Watch the video below for an update.