Luxury Housing Market Stays Strong as Trump Tariffs Hit Home Builders

Aluminum, steel, and lumber are all key ingredients to constructing a house. And these ingredients are seeing a soaring price increase. The price of housing materials shot through the roof this summer after tariffs imposed by the White House took effect. Experts are preparing for the long road ahead as the tariffs are likely to worsen.

While luxury housing is not above the fray, construction material is a smaller percentage of the overall cost of a luxury property. Luxury home buyers are also willing to shell out a little more cash to acquire the home they want. Demand for luxury homes has remained strong amid the chaos of rising prices.

2 Ways to Defer Capital Gains Tax in Real Estate Investing

While no one enjoys taxes, we should never avoid payment of any taxes rightfully owed. I enjoy driving on paved roads, going to national parks, and being able to enjoy all the things that my taxes help fund. Nonetheless, there is absolutely no reason to pay taxes you don’t legally owe. It is your right to follow the rules to eliminate unnecessary taxes. Supreme Court Justice Learned Hand once said, “There is nothing sinister in arranging one’s affairs so as to keep taxes as low as possible. Everybody does that, rich and poor and they all do right. Nobody owes a public duty to pay more than the law demands. Taxes are enforced exactions and not voluntary contributions.”

So, what are some ways that you can defer payment of capital gains taxes?

1.   A 1031 Exchange

One way to defer capital gains tax while investing in real estate is to carry out a 1031 exchange. A 1031 gives you the ability to exchange one investment home for another without the burden of capital gains tax. While there are strict requirements all can be easily met.

2.   Qualified Opportunity Zone

Opportunity Zones are new and still very much in a growing process. That being said, if you have always wanted to invest in Guam or Puerto Rico, there has never been a better way. Investments are made through Qualified Opportunity Funds and subject to numerous tax benefits. The island of Puerto Rico is considered a Qualified Opportunity Zone and is essentially a tax-free place to invest. For a map of qualifying areas look here.

While it is easy to get excited over the prospect of deferring tax, always make sure to consult with your local tax expert before making any big decisions.

Keeping The Right Name On The Paper In A 1031 Exchange

A 1031 exchange has very specific title and taxpayer requirements. Whoever the taxpayer was on the old property has to be the taxpayer for the new property. In general terms, it means that if you own a piece of property and sell it via a 1031 exchange, then you have to be the buyer of the new property.

Furthermore, any tax-paying entity that owns real estate can do a 1031 exchange, whether it is a corporation, a partnership, an LLC, a trust, or an individual. Individual members of these tax-paying entities, however, cannot solely carry out a 1031 exchange on a property owned by said organizations. The organization is the taxpayer, not the individual. The deed to a property might be in the name of a single member of an LLC. But, if it has chosen to be taxed as a sole proprietor, then all activity for the property owned by that LLC is reported on the individual (or joint) tax return of the single member. In that event, guess what? — The individual is really the taxpayer for 1031 purposes even though the deed is held by the LLC.

There is an easy rule to help you avoid trouble in all of this: Look at the tax returns and you won’t go wrong!

Are U.S. Home Prices Cooling Down?

Home prices are still growing, but it looks as though the pace is starting to slow. The price growth rate for July dropped to its lowest point in over two years. A flow of new inventory has accompanied the moderating growth of July. This will be welcome news for first-time home buyers who have been struggling with low inventory and little negotiating power in an unforgiving market. The hope is that the market is heading towards a more even position after years of shrinking inventory and out-of-control price growth.

Which U.S. Territories Qualify for a 1031 Exchange?

From the U.S. Virgin Islands to American Samoa, the United States administers quite a few territories. And for real estate investors it is important to keep in mind that while all of these territories are most certainly part of the U.S., they are not all treated in the same. So which islands contain property that is eligible for a U.S. to U.S. 1031 exchange?

There are three:

  1. Guam
  2. U.S. Virgin Islands
  3. Northern Mariana Islands

In 2008, the Treasury solidified these three islands as identical in treatment. Areas that are not on the list of coordinated territories do not contain property eligible for a 1031 exchange. However, with islands such as American Samoa and Puerto Rico now considered a Qualified Opportunity Zone, there is more than one way to defer capital gains taxes.

To learn more about Qualified Opportunity Zones continue on to here.

Where is the Fastest Growing Luxury Housing Market in the US?

Luxury home sales keep breaking records in 2018. According to Market Insider, a strong economy has created sizable demand for luxury housing. The entry-level price point for purchasing a home in half of the upper tier markets studied has surpassed more than a million dollars.

Interestingly enough, Sarasota tops the list as one of the fastest growing luxury housing markets. Despite sales prices rising more than 21 percent since last May, half of all luxury homes in the city sold within 157 days.

Luxury Home Sales in Miami Surge While Starter Homes Remain in Short Supply

2018 has been a great year for luxury home sales in South Florida. According to a new report by the Miami Association of Realtors, luxury real estate sales of properties over $1 Million have increased 21.5% and posted year-over-year increases in the last 6 of 7 months. Luxury condos are continuing to take the lead with sale increasing as much as 28%.

Homes valued under $600,000 are still facing severe supply shortages. Prices on single-family homes in Miami have continued to rise as lack of inventory and high demand plague lower tier markets.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.

What is the Luxury Housing Market Doing Now?

Despite rising prices, the luxury housing market is seeing an increase in home sales. While many buyers are struggling to find a starter home to call their own, luxury houses are changing hands quickly in 2018. According to Realtor.com, 91 counties in the U.S. have seen an entry price level increase of 4.6%. Leaving the entry point for luxury housing at no less than $1 million. With the stock market on an upward climb and high-paying jobs growing, buyers have been more than willing to put up with the costs associated with buying and owning a luxury home.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor.

3 Surprising Things That States Count as Real Estate

While all parts of the US generally agree on what is considered real property, every state has its own unique laws and definitions. Reading through each state’s legal definition for real property brings up some interesting tid bits here and there.

1.   Riverboats

Starting in the mid 90’s casino riverboats began appearing in Indiana. At the time, the state did not allow any gambling establishments to operate on land. However, once the states began to realize what a golden goose they had, the laws were loosened and changed. Riverboat casinos in Indiana are now legally defined as real property and given the right to remain permanently moored.

2.   Shellfish Land

Some fun facts from ct.gov, the state of Connecticut’s official website.

·     Connecticut shell fishing generates $30 Million plus in farm-gate sales annually.

·     The Connecticut shellfish industry provides over 300 jobs statewide.

·     Annually, Connecticut shellfish harvests exceed 450,000 bushels of hard clams and 200,000 of bushels of oysters.

·     More than 70,000 acres of shellfish farms are now under cultivation in Connecticut’s coastal waters.

Aquaculture is big business in Connecticut. It is easy to see why the state defines underwater shellfish lands as real estate.

3.   Fossils

While legal definitions may not be very exciting, dinosaur bones are. Fossils found on real property function in a way similar to oil, gas, and minerals. While the fossils are in the ground on your property, they are treated like real estate. Idaho, Minnesota, and New York are all states that explicitly define fossils as part of an individual’s real property.

While all of these items could potential be exchanged using a 1031 exchange, as Gideon Tucker once said, “No man’s life, liberty, or property are safe while the legislature is in session.” Always consult with a local expert in your area to see what your state defines as real property.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor

Choosing Your Qualified Intermediary

5 Things to Look For

Before you can begin your 1031 exchange, you will have to select a Qualified Intermediary (QI). A good QI can make or break your exchange. To ensure that everything goes smoothly it is important to make sure that your Qualified Intermediary is actually qualified. Here are four things to look for in a QI.

1.   They should use a segregated, qualified escrow account (at no charge)

Make sure that the QI you select does not have a pooled exchange account. It is important to ensure that your exchange account is not comingled with someone else’s funds. Your QI should have a segregated qualified escrow account so that only your money is in that account and it is identifiable to you.

2.   They must guarantee their exchange

Your Qualified Intermediary should do everything in their power to ensure that your exchange is successful. A good QI should be able to assure you that your exchange will be carried out without a hitch.

3.   Audit protection – providing support and documentation if needed (at no charge)

Make sure that the QI you select keeps their records and documents tidy. Should an audit occur, you want to be certain that your QI has all the documentation you need.

4.   They must be easily accessible to answer questions (at no charge)

Avoid Qualified Intermediaries with poor communication skills. You want your QI to be reachable and ready to answer any questions that you might have.

5.   Experience

You want to look for a QI who has experience, a reputation in the industry, and who has demonstrable results. Do not select a Qualified Intermediary who does not have a history to back up their claims.

Selecting a good QI is one of the most important steps to ensure that your 1031 goes as planned. If you select the right QI to guide you through the process, the rest of your exchange will run much more smoothly.

To learn more about how you can utilize the power of a 1031 Exchange visit The 1031 Investor