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The Art of Doing a 1031 Exchange

by Kijner & Sons International Realty

 

Many clients of KSI Realty NY Inc. are savvy investors and one of our favorite topics of discussion is the 1031 exchange. Those 4 mysterious numbers are simply an IRS tax code identification that allows owners of a business or investment property to defer the recognition of the capital gain tax normally due upon the sale of the property as long as it is re-invested in a "like-kind" property of equal or greater value through the use of a qualified intermediary.

We often start our conversations with our sellers and prospective buyers by including their attorneys, wealth managers, bankers and accountants around one table to ensure that their short, mid and long term objectives are well understood. We start with a snapshot of their current state and open the discussion on their goals in 7, 15 and 30 years from now. It is crucial that all professionals have a clear understanding of what is happening first as many fields overlap and all professionals around the table will ultimately shape the final real estate deal decision making process. This is a pluridisciplinary effort.

Many misconceptions and issues can arise from the lack of communication between key professionals. Clients may sometime fail to realize that legal objectives may come in opposition with fiscal, or real estate ones. Having a clear overview and a dashboard of all mechanisms gives you the ability to take informed decisions. Multiple test scenarios are often studied in order to come up with the final approach. On a daily basis, we speak to our clients' attorneys, insurance brokers, accountants and other key financial actors to facilitate the deals. We never give financial advises, practice law or overstep in regulated and licensed industries but we talk, exchange and facilitate the flow of real estate related information to ensure that our client's end goals are achieved.

1031 exchanges are often looked as mysterious, difficult, lengthy and potentially cumbersome. To the contrary, they are actually very easy, reasonably fast and very transparent if you use the right professional. The cost is very minimal, most qualified intermediaries get a small service fee plus a percentage of the interest of the funds they hold.  This is often far less than the potential capital gain that may be paid especially for investments that have been kept for a long time. The likelihood of heightened capital gains is stronger over long periods as market prices often rise. A good business practice is to identify your qualified intermediary via your trusted professionals such as your licensed real estate broker, accountant, banker or attorney. A solid track record and years of experience in serving as a qualified intermediary is key. We advise our clients to research the nature of the guaranties offered by the qualified intermediary. Making sure their money will be safe and limiting the risk to see lifelong savings vanishing into the "wild".

Many clients forfeit the idea of a 1031 exchange thinking they have to find someone who is willing to swap, or worst that they have to buy the exact same type of property they are selling. Another classic misconception we see, is that the exchange must be simultaneous or that the entirety of the proceeds must be used for the replacement property(ies). This is all false. Even very complexed real estate deals such as REITS or other trust funds can have adequate solutions such as using DST's (Delaware Statutory Trusts) which are recognized 1031 exchanges. One of the main advantages of DST's is the ability to exchange immediately without delay on the day of closing ensuring the continuity of passive income as it is often one of the determining factors for many of our investors that are looking at ensuring the perennity of their flow of income. 

As licensed real estate brokers, we do not financially benefit from the 1031 exchange, we do not perceive a commission and at KSI Realty NY Inc. we are not qualified intermediaries. The benefit goes 100% to our clients. We share our vast knowledge of commercial and investment real estate as good business practices to allow our clients to maximize their reinvestment. Allowing them to use the deferment of the capital gain portion, which is in essence free leverage that can be used towards a new purchase until it is sold again and/or reinvested. Currently, there are no limitation to the number of 1031 exchanges one investor can undertake as long as the replacement property is kept for at least 2 years, although certain exceptions may apply. As with everything, nothing is static and clients should always seek the assistance of their attorney, accountant as well as wealth and estate planners to anticipate new regulations that are in discussion. For instance, the new tax plan law that President Trump is pushing may have repercutions to 1031 exchanges as well as state and local deductions that would be eliminated (SALT tax) or standard loan interest deductions that many homeowners and investors are relying on. This could put a serious damper to the vivacity that the real estate market has seen lately especially since the slow but steady recovery from the subprime crisis of 2008.

We advise our clients to constantly scan the fiscal and legal environment to make the best investment decisions. Also keep in mind that even failed 1031 exchanges can have benefits. If you are not able to identify a like-kind property or meet any of the restrictions rules imposed by the IRS in the allotted time, you simply defer the payment of your capital gain up to 6 months.

For more information on how to purchase income producing or investment properties, please contact us for your complimentary session.

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Article originally published on October 19th, 2017 on KSI Realty New York website at http://www.nyc2buy.com/blog/the-art-of-doing-a-1031-exchange

Florida Homestead Exemption

by Kijner & Sons International Realty


Dear Florida Permanent Homeowners,

Don't forget to take advantage of the $50,000.00 Homestead Exemption offered to all legal Florida residents on their property such as a home or a condominium. 

What's the Florida Homestead Exemption and who can benefit from it?

"Every person who owns and resides on real property in Florida on January 1 and makes the property his or her permanent residence is eligible to receive a homestead exemption up to $50,000. The first $25,000 applies to all property taxes, including school district taxes. The additional exemption up to $25,000, applies to the assessed value between $50,000 and $75,000 and only to non-school taxes". To learn more about the Florida Homestead Exemption, visit the Florida Department of Revenue by clicking here

Deadline: before March 3rd, 2014

Requirements:

  • Proof of ownership as of January 1, 2014
  • Property Folio Number
  • Social  Security Number
  • Date of Birth
  • Marital Status
  • Florida Driver’s license
  • Florida Automobile Registration
  • Florida Voters Registration Information
  • U.S. Permanent Resident Immigration Number

Miami homeowners may apply in person, by mail or on-line at:

1. Property Appraiser, P. O. Box 013140, Miami, FL  33101

2. Property Appraiser’s Downtown Miami Office or South Dade Government Center Office

3. www.miamidade.gov/pa/exemptions.asp

For other cities in Florida and to get local information, contact your county property appraiser.

Taxation and Investment in Thailand 2013

by Kijner & Sons International Realty


Kijner & Sons International Realty
is pleased to share with you Deloitte's lastest report entitled "Taxation and Investment in Thailand 2013". This very complete report covers, among other things, the country's investment climate and how to set up a business and pay taxes in the land of smiles.

To read the full report, click here or on the image below.



Looking to invest in or move to Thailand? Contact us at info@kijner.com

How Big of a Mortgage Can I Afford?

by Kijner & Sons International Realty

Not only does owning a home in Sarasota or Miami, Florida give you a haven for yourself and your family, it also makes great financial sense because of the tax benefits — which you can’t take advantage of when paying rent.

The following calculation assumes a 28 percent income tax bracket. If your bracket is higher, your savings will be, too. Based on your current rent, use this calculation to figure out how much mortgage you can afford.

Rent: _________________________

Multiplier: x 1.32

Mortgage payment: _________________________

Because of tax deductions, you can make a mortgage payment — including taxes and insurance — that is approximately one-third larger than your current rent payment and end up with the same amount of income.

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Source:

For more help, use Fannie Mae’s online mortgage calculators

The National Association of Realtors® (NAR)

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83-85 Boulevard de Charonne, 75011 Paris, France


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