Call UsLaguna Beach Real Estate News... Page II (Continued)
4/14/08
This month I thought we would present an overview of the 1031 exchange rules. An exchange allows a taxpayer to sell a property that is used in a trade or business or held for investment and defer the tax on capital gain by exchanging into other like kind property. The underlying theory is that the taxpayer be in the same economic position after the exchange that he or she was in before the exchange. Thus, the gain is not eliminated, but is deferred from the sale property into the replacement property.
A great reason to exchange is to enable the taxpayer to defer the payment of taxes to a later time and use the funds that otherwise would go to pay that tax to acquire additional property. This is also called leverage. The 1031 exchange is a tax concept that has evolved over the past hundred years. There are rules that must be followed in the structure of each exchange.
There are numerous ways to structure an exchange, but this article will concentrate on the structure we typically see and what we call the “tax deferred exchange”. In a tax deferred exchange, the taxpayer sells the relinquished property and subsequently acquires a replacement property using a qualified exchange intermediary such as Asset Services Inc. to effect the 1031 exchange on their behalf.
The Napkin Test
If the taxpayer wishes to defer all the gain into suitable replacement property, the taxpayer should, in addition to the documentation requirements discussed below, follow three basic rules.1. Purchase replacement property of equal or greater value to the value of the property sold.
2. Reinvest all of the exchange proceeds into one or more replacement properties which are like-kind properties.
3. Obtain equal or greater debt on the property acquired as compared to the debt on the property sold.
If the taxpayer wants to defer only a portion of the gain, the taxpayer can structure the transaction to acquire property of lesser value and pay tax on the amount of the step down in value. Or the taxpayer can acquire property of equal value and arrange to have cash left over which we call “boot” and pay tax on the “boot”. We call this a partially taxable exchange. There are many ways to structure exchanges so it is always important to understand what the client is trying to accomplish and then work with them to achieve their goal.
Time Lines
The tax code is very specific as to the time lines in which the exchange must be completed and the replacement property identified. The entire exchange process must be completed within 180 days after the sale of the relinquished property. The first 45 days of the 180 day exchange period is the identification period in which the taxpayer must identify to the exchange intermediary the replacement property they plan to acquire. There are three basic rules for identification. First, the three property rule in which the taxpayer can identify three properties of any value and acquire one or more of those three. Second, the 200 percent rule in which the taxpayer can identify more than three properties but the total value of properties identified cannot exceed 200% of the total value of the relinquished property. Third, the 95 percent rule in which the taxpayer can identify more than three properties, and there is no restriction on the value of property identified but the taxpayer must close on 95% of everything identified. However, it may be risky to use this rule.Documentation
The exchange must be set up in advance of the close of the relinquished property and properly documented. Typically, the taxpayer enters into a sale agreement and opens an escrow. Prior to the close of escrow, the taxpayer selects an exchange intermediary such as Asset Services Inc. who prepares an Exchange Agreement and an Assignment into the escrow to effect the exchange. Following the close of the relinquished property, the taxpayer identifies the replacement property in writing to the intermediary. Next, the taxpayer will enter into a sale agreement and open an escrow to acquire the replacement property. Asset Services Inc. will prepare an Assignment into the replacement property escrow to effect the final leg of the exchange transaction. This article is intended as an overview only and we will further expand in much more detail on each area of the exchange process in future articles. If you have any questions, in the meantime, please feel free to give me a call.
4/7/08
April showers and Laguna Beach are not synonymous! The beach has never looked better. Buyers are making offers on Laguna Beach real estate for beach front properties with the expectation of hot summer days and cool ocean breezes. Two coastal areas that showed an increase in March sales are Laguna Beach and Corona del Mar. Regular readers should not be surprised in that we have reported this trend every month this year. In fact, Prudential’s sales performance was 44.9 percent higher in value over five top competitors! We also sold 33.5 percent more Laguna Beach homes than our competitors. Would you be surprised to learn that Prudential’s average sales price was $1,337,271 for a Laguna Beach home? Knowledge is power and you know where to invest your dollars – Laguna Beach real estate and beach front real estate. Most of you who use hillaryandcharles.com to inquire about properties are asking about Laguna Beach view homes. We respond with the invitation to give you easy access to the available beach and beach front homes. You can get daily reports including price changes and scheduled open houses. We will personally customize your requirements. Call us today and find out how to be a coastal property expert.
3/24/08
Here at HillaryandCharles.com, we've been telling you Laguna Beach real estate, beach front and coastal properties are selling! Even the National Association of Realtors recently announced that existing homes sales increased for the first time in seven months.
Laguna Beach ocean front property continues to be in demand, and sellers are currently pricing their beach and beach front properties lower than a year ago. The supply is low and the demand is high. The locals are trading up and see the real value in Laguna Beach real estate.
In spite of "wait and see" media reporting that real estate activity is on hold and no one knows for how long, Laguna Beach homes are selling. People are looking for great buys, no doubt about that, and the market has moved from a seller's to a buyer's market.
Coastal property is selling in spite of "gloom and doom" accounts of buyers and sellers waiting out the market confusion and the lending crisis before moving forward. Let us not forget the barrage of information about how the credit crunch affects buyers by making loans more expensive and harder to obtain. And yet, the sales pace continues to improve for Laguna Beach real estate. There are very few foreclosures for Laguna Beach homes, and certainly not for Laguna Beach oceanfront property. What is very interesting is oceanfront condos have actually appreciated in value.
In January, the median price for homes in Orange County was $520,000 which was higher than any of the surrounding counties. The median price for Laguna Beach homes was $1,532,500 during the same time period. Newport Beach homes and condos had even higher median prices in two zip codes.
What does this tell you? Coastal property sales and sales in Laguna Beach continue to weather the market storm.
3/17/08
Good morning. In lieu of the Fed. lowering the interest rate today, in lieu of Obama making a powerful speech and in lieu of the stock market soaring 274 points, I would like to share a story of a smart young couple who are thinking outside of the box. This story will have an impact on all of you know to buy real estate but keep thinking, "I need to wait for the bottom." The reality is, the way you know you have hit the bottom is when the prices have already gone up! Now you have missed it.
On Saturday I received a phone call from a gentleman who said, " I want to buy real estate in Laguna Beach or real estate in Laguna Niguel or I would even consider real estate in Newport or Newport Coast." They had gotten my number from our web site, www.hillaryandcharles.com .After meeting with this young couple they shared the facts. They have $300,000 in a money market that is making 4% and a home in Riverside that is all paid for. They have no children and they have no debt. The Smiths (as we shall call them) said to me, while everyone is talking doom and gloom we know Orange County real estate, from Laguna Beachfront homes to condos in Laguna Niguel are a great buy. They believe they can make far more money on their money by buying a home in Laguna Beach for a $1.5 million then making 4 % on a money market. They want their money to work for them.The time is now when the country is scared and real estate is on sale.
It took all of three hours to find two condos in Laguna Niguel and a two homes in Laguna Beach. One home was a beachfront property with a phenomenal ocean view. The real estate market has made a correction and we offered 8% less on two out five homes. We have the two offers accepted and now the Smiths are considering buying two condos!
The point of this story is: the public always wants to know how do the rich get richer. The simple answer is they don't do what the masses do. They take a risk, and in this case start putting together a portfolio of real estate that in the next fives years will have made them 50% on their money! Now where can you get that kind of return?
The secret my friend is this: buy as close to the ocean, whether it be an oceanfront home or small condo with a oceanfront view. Next have your real estate agent negotiate the best deal out there and say thank you very much. Now watch your real estate investment grow.
Let us know if the Hillary Caston and Associates team can help you too.
949-922-8490
3/11/08
Laguna Beach real estate currently offers 227 ocean view homes for sale. Nineteen of these homes are ocean front, beach front or beach access homes and only three of the properties are ocean front condos! You’ll find these gorgeous homes priced from $1,225,000 to $29,900,000 – nine of these beach front homes are over $10 million.
Closed sales for beach front homes during the first two months of the year are exactly the same as last year. The sales dollar volume for this year, however, is higher. In other words, the number of sales for high end coastal property remains status quo but the properties are bringing in a higher sales price. This substantiates what we’ve been consistently telling you, Laguna Beach real estate continues to be a hot commodity.
Laguna Beach residents know the beachfront and beach access properties are 'on sale'. Remember, we are here to assist you with your Laguna Beach real estate needs. Give us a call, we’ll help you find that gorgeous beachfront home in Laguna Beach or a condo in the coastal area. Please continue to use our user friendly web site or contact us at 949-793-2034 to have immediate real time access to beach properties.
2/18/08
Beachfront property statistics show that the high end Laguna Beach real estate market remains strong! The ocean front and coastal property inventory decreases weekly as offers continue to be presented by savvy buyers. The properties that are selling are listed at $4 million and above. The value of beachfront property is stable, if not increasing, as potential buyers compete for the beach! The Laguna Beach locals are buying oceanfront homes and are trading up! They know that Laguna Beach real estate is 'on sale'!
There's also a lot of activity for beach property in Dana Point and Newport Beach right now. Among the reasons for the Dana Point surge is a $155 million renovation project at the Dana Point Harbor, a multi-million dollar development close to the beach in the Headlands, and a $20 million renovation of the one-mile village close to the beach. There's a steady increase in the number of requests for beach property in Dana Point and Laguna Beach. As for the beautiful coastal area, beach front property in Dana Point, Newport Coast, San Clemente, and San Juan Capistrano experienced a double digit increase.
We are initiating an easy way for you to stay on top of the market. Call us to get you set up so you can search MLS and receive 'real time' market updates. We want to help you with your Laguna Beach and Coastal Property real estate needs.
02/11/08
Last week the New York Football Giants shocked the sports world by upsetting the New England Patriots in the Super Bowl. Almost everyone believed the media's prediction that the Giants had no chance to win.
Similarly, the media and the economists continue to make predictions about the Southern California, coastal Orange County and Laguna Beach real estate markets. They are reporting and predicting furthur doom and gloom for the entire market. However, as reported last week, the beachfront and upper end markets in our area continue to do well.
Several times in the last two weeks, we've planned to show beach front property and found that the property was no longer available. Desireable Laguna Beach real estate is selling... and just that quickly. In our office alone in the last 60 days, we have generated over $129 million dollars in sales of Laguna Beach homes.
Call us and we'll assist you with your Laguna Beach or coastal Orange County real estate needs. We are the Coastal Property Experts.
2/04/08
Things are definitely on the move for high end Laguna Beach real estate and for Coastal O.C. real estate in general! In the last two weeks alone, almost one third of the Laguna Beach properties over $10 million have sold! We've seen a major change within the last week as competition for high end property and offers to purchase these homes have substantially increased. The number of condos for sale remains at a minimal level. There are only two beachfront condominiums for sale in Laguna Beach right now and only 17 additional condos are available for sale. This is an all time low for Laguna Beach property.
More and more, people are looking to purchase beach property as an investment strategy. The unstable stock market has brought many investors to our beach communities. Investors are also looking for short sale opportunities. It's a great situation for investors... not so great for the banks! Laguna Beach, Newport Beach, and Dana Point beachfront and near beach property are all attracting investors.
In 2007, the median price for an American single-family home was $217,800. For Laguna Beach home sales, recorded in December 2007, the median price was $1,290,000. This month, the median price is $ 2,149,900. We are in a different type of market in coastal South Orange County and beach community property is desirable. We are more than holding our own!
1/14/08
In Laguna Beach there are presently two hundred and twenty six homes on the market for sale. This is slightly up from this time last year. What is important in Laguna Beach real estate is that there are 118 homes over $2,000,000 and 10 of those homes are beach front. Their price tag is over ten million dollars!... and go as high as 30 million. Condos in Laguna Beach are still at a low of only twenty four currently available, leaving two hundred and two single family residence homes for sale. We have fourteen in a back-up position and eleven are pending to close. The market conditions are trying to hold their own. Three days ago a $2,150,000 three bedroom two bath home with no view sold in twenty four hours. Real estate in Laguna Beach will always be a commodity. Beachfront property is also selling. Two homes have sold in the last week with price tags of over nine million. It is an opportune time to look for a dream home in the great community called Laguna.
New Homes Sales Numbers + or - You Decide
New U.S. home sales jump 13.5%? Or fall 21.3% or 3.9%? Here's what the federal bean counters said this morning ... Sales of new one-family houses in February 2007 were at a seasonally adjusted annual rate of 848,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.9 percent (±17.4%)* below the revised January rate of 882,000 and is 18.3 percent (±12.2%) below the February 2006 estimate of 1,038,000.
*That's plus or minus 17.4 percent for the monthly change, the statistical error just like you see in political polls. So, take the 3.9 percent estimate and add and/or subtract 17.4% to find the ballpark range of the survey that creates this estimate: Somewhere between up 13.5 percent and down 21.3 percent.
This question is asked by every person I encounter. So let me give you an update of Laguna Beach real estate as of Dec. 3, 2007. Coastal properties and beachfront properties are selling. Yes, you can buy and oceanfront that sold 3 years ago for 9 million dollars, it still sits on the same beachfront with no improvements and you will pay around 13 million. You might say to yourself, how can coastal property still maintain their values? The simply answer is, using Laguna Beach as an example, there is virtually no land left to build on. Second, beach property is being bought with cash. Cash buyers will buy regardless of the current market. With this being said, inventory in Laguna Beach is up from 242 homes available in 2006 to 288 homes in Oct. 2007.
Laguna Niguel real estate is a little different. You have virtually the same homes available for this year as last, but the number of Laguna Niguel homes sold in Oct. was cut in half!
Dana Point real estate is another story. There were 305 Dana Point homes available last Oct. Now they have 358 Dana Point homes listed. The sales for Dana Point real estate remained the same.
In conclusion there are great deals to be made on coastal real estate... from beach front property, to a Laguna Beach cottage or a Laguna Niguel condo as a second home. Now is the time to make a deal while the interest rates are low and coastal property inventory is high.
The Time to Buy is Now And This is Why
Home prices have gone through the roof in Orange County and especially Laguna Beachreal estate. The height of the market was 2005 and has been slowly dipping till there is more inventory and less sales. Everyone is talking about the real estate market; it is not how high it will go but how low it will drop. Is now the time to buy? The answer is yes and this is why. For the next 45 days sellers want out and they want out at any price. If a seller is vacillating then he will pull his home off the market and put it back on after the holidays and maybe for a higher price. Great agents stay in town for the holidays and work. It is all about making the deal when the competition is soft amongst agents. Sellers will look at most any offer and counter. You as the buyer can close in 30 days and have great credit, you my friend can make a deal!
It may sound crazy to some but buying coastal property, let alone Laguna Beachreal estate, is where the very best deals are being made. I just heard of a home in Laguna Beach, sitting on the coast, was listed for 23 million and sold for 17 million the other day.Money is coming into high end coastal property, whether it is a Newport Beachhome, a Laguna Beachhome, a Dana Pointhome or even a Laguna Niguel home. Coastal property is selling and buyers are making incredible hot deals before the end of the year. If you wonder how smart people get all the best homes, this is how. They look for opportunities now, not wait for the very bottom and be greedy. They just may go in again and buy another property later. Buy now and reap the rewards of buying Laguna Beachreal estate and have a prize at the end of this cycle.
Laguna Beach Real Estate News III (continued)
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