Have you been hearing about a real estate bubble?  Well, it turns out that the "bubble" is really a "rolling boom" according to Blanch Evans with Realty Times.  Here is an exerpt from her latest article:

"When homes get too pricey, homebuyers start looking elsewhere. At least, that's the theory behind what National Association of Realtors' chief economist David Lereah calls the "rolling boom." Housing booms create higher prices, and when homebuyers find housing too expensive, they start looking for the next, best alternative -- across the road, across the desert, or across the country."

They must  be coming here, because other than the usual seasonal slowdown, our market is doing well here.  During the past 30 days, there have been 28 single family homes closed on St. Simons.  They had an average asking price of $529,028, and an average sold price of $496,780.  That's just under 94% of sales to list price. 

But there are two other local areas that are even hotter.  West Glynn County had 24 closings; average asking price was $228,761; average sales price was $224,702 (98.2%!)  North Glynn County had 42 sales with the average price being $193,817 and the average sale price being $191,478 (98.9%!!!)  Talk about HOT!!!

I just heard that in Key West, there are over 1,000 listings, and only 47 under contract.  It's not like that here.  We have 845 single family residences on MLS, and 270 under contract.  This doesn't include any condos, mobile homes, lots, or commercial properties. 

With spring coming, this is the time to get property listed if you're considering selling.  The market is heating up, and with spring break just around the corner, the hotels are booking up!  One of the things I've noticed is the increase of people looking for 2nd/vacation homes on the Mainland.  With SSI price appreciation, many are now considering old town Brunswick.  And of course it will be interesting to see what Liberty Harbor and Parkwood Village do to change the landscape of downtown Brunswick!

If you have any real estate questions, I'd love to hear from you.   There are probably others who have the same questions... post them here, and I'll either answer or tell you where to find the answers!

I wish you best of luck with your real estate future.

If you own a rental or investment property that will produce a large taxable capital gain when you sell that property and want to avoid paying capital gain tax on your profitable property sale, read on...

Many investors want to know how to avoid paying capital gains tax when selling their investment properties, and see realize that this is a fundamental necessity for wealth building.  One of the first documented examples of how this initially worked can be found in How I Turned $1,000 into $5 Million in My Spare Time, by William Nickerson, who pyramided his way to wealth without allowing tax to erode his profits.

To avoiding capital gain tax when disposing of a rental or investment property, you must trade "equal or up" in both price and equity for one or more qualifying "like-kind" properties without taking out any taxable "boot," such as cash or net mortgage relief as authorized by Internal Revenue Code 1031.

Bob Bruss, a successful real estate investor, states: "I shall never forget my first tax-deferred exchange years ago. I owned a three-unit apartment triplex in which I had a modest capital gain. After reading Nickerson's great book, I had dreams of pyramiding my way to a real estate fortune.

My first step was to make a tax-deferred trade of my three units for a nine-unit "fixer-upper" apartment building worth about three times as much as my old property. But the sellers of that building wanted to retire; they didn't want my triplex.

So my savvy real estate agent found a "stand-by buyer" for my three units after I made my tax-deferred exchange for the nine apartments. I got my tax-deferred exchange, the seller of the nine apartments got a taxable cash sale, the stand-by buyer acquired my three units, and we all lived happily ever after."

TODAY'S TAX-DEFERRED "STARKER EXCHANGES" ARE MUCH EASIER.

Today, investors no longer have to make swap property for property.  Now, a third-party accommodator or intermediary holds the sales proceeds, and then that money is used to purchase the new investment properties. 

However, there are strict Starker-exchange time limits. When the first property in a Starker trade is sold, the sales proceeds must be held by a qualified third party.  The investor has up to 45 days to identify up to 3 properties to his intermediary as the property to be acquired. For this reason, it is wise to have the "up leg" of the exchange lined up before selling the old property.  The investor can take up to 180 days from the sale date to complete the tax-deferred acquisition.

The trades do not have to be equal; for example, an investor can trade a rental home for an apartment building, or an apartment building for a commercial complex.  Vacant land can also be used in 1031 exchanges as long as it is held for investment or for use in a trade or business.

WHY USE A 1031 TAX EXCHANGE?  Obviously, the primary reason to use this tool is to avoid the capital gains tax on the profit. But according to Mr. Bruss, there are at least 10 other reasons to exchange:

• pyramid your investment property equity without tax erosion of your sale profit
• minimize or eliminate the need for new mortgage financing on the property acquired
• acquire more desirable property to replace an undesirable property
• increase your depreciable basis
• acquire a property that better meets your investment or business needs
• partially defer your profit tax while trading down to a smaller property that is easier to manage
• avoid the dreaded 25 percent depreciation recapture tax when selling an investment or business property
• refinance either property before or after (but not during) the exchange to take out tax-free cash 
• accept an unexpected desirable purchase offer to sell a currently-owned property and avoid capital gain tax, and
• completely avoid capital gains tax by still owning the last property in your pyramid chain of tax-deferred trades when you die.

WAIT A MINUTE... CHECK OUT THAT LAST REASON... "COMPLETELY AVOID CAPITAL GAINS TAX BY STILL OWNING THE LAST PROPERTY IN YOUR PYRAMID CHAIN OF TAX-DEFERRED TRADES WHEN YOU DIE"!!!  

Savvy real estate investors have figured out how to make tax-deferred exchanges of their investment or business properties for their ultimate retirement home. However, personal residences don't qualify for the 1031 tax-deferred trades because they are "unlike property," so how does it work?

If you know where you want to retire, you can use this avenue to "trade up" to your dream home!  Since a personal residence won't qualify (it's not being used as a trade or business), if you find your "dream home", you can purchase it as an investment if you offer the property for rent for at least 12 months after the purchase (per most tax advisors.)  Then you can move in, and convert it to your permanent residence!

Beware, to take advantage of the principal residence sale tax exemption of up to $250,000 for a single owner or up to $500,000 for a qualified married couple filing a joint tax return, the home obtained via a 1031 exchange must be owned at least 60 months before sale (rather than the minimum 24 months of ownership ordinarily required). And the owner must occupy at least 24 of those 60 months to qualify for the IRC 121 exemptions.  But if it's your retirement home, that should be no problem.

DEATH: THE ULTIMATE TAX SHELTER! However, if you acquired your ultimate dream home, and maybe even millions of dollars of investment property, in tax-deferred exchanges which you still own at the moment of your death, you will have achieved the ultimate tax shelter of all.   The government will completely forgive any capital gain tax or depreciation recapture tax that would have become due if you sold your real estate the day before your death!  However, the net worth of your real estate (market value minus secured debt) will be included in your estate. For deaths after Jan. 1, 2006, total estate net assets less than $2 million are fully exempt from federal estate tax. Also, assets left to a surviving spouse are free of the federal estate tax.

Even better, your heirs will receive a new "stepped-up basis" market value which will be the value of the property on the date of your death for the assets they inherit. For complete details, please consult your personal tax adviser.

* Thanks to Bob Bruss for inspiring this via his "How Investors Avoid Profit Tax" e-mail!