1031 Exchange Companies

The easiest method to begin a 1031 Exchange transaction is to contact a good Exchange Company. The information concerning the exchanger, time and place of the closings, and a copy of the contract to sell the relinquished property are the preliminary papers to start the process.

From this information, the company makes exchange documents and forwards them to the attorney or customer. The lowest fee charged on a standard deferred exchange is $600.

A 1031 Exchange, like any real estate transaction, involves balancing competing pressures in speed and quality. Therefore, companies in this line recognize pressures and design their service to satisfy both.

Good companies manage all aspects of the exchange. They provide service that is quick, easy to use and backed by experience. In good companies, experienced attorneys are the managers. The senior staff will be rich in experience with regard to investment property transactions. The specialized team of attorneys mainly deals with more complex reverse and build-to-suit exchanges.

The main parameters that distinguish a good and bad exchange company are speed, service and the security they offer the client. Speed lies in the pace at which the company prepares the document. The documents are then sent to the closing table, allowing the seller to close and proceed with the exchange. Service is the dexterity in preparing all documents required for the exchange, including reminders of 45 and 180-day time limits and extensive complimentary consultations.

Security comes in the form of an unconditional guarantee on exchange funds from Insurance Companies: high value fidelity bond coverage and Professional Liability insurance cover.

These days, banks are working with Exchange Service providers. The Cole Taylor Bank of Chicago is one of the largest independent banks in Chicago, and joined hands with Nationwide Exchange Services (NES) of Cupertino in California in a strategic alliance for handling Cole Taylor's tax-deferred 1031 Exchange business. This Chicago bank specializes in serving the business banking, real estate lending and wealth management of closely-held and family owned small and mid-sized businesses. Cole Taylor Bank is an Equal Housing Lender.

Nationwide Exchange Services is a leading Qualified Intermediary for Tax-Deferred 1031 Exchanges and has conducted thousands of successful 1031 Exchange transactions. It is applying advanced technologies and secure business processes to enhance standards of financial security, visibility and customer service to establish new standards for products and services in 1031 tax-deferred Exchanges.

The alliance enabled the Bank to become part of the NES team and benefited in becoming the primary financial custodian for NES in the Midwest Region. The alliance also helped the bank to offer their customers an expanded set of tax-deferred 1031 Exchange products, such as reverse and build-to-suit exchanges, at the most competitive cost structure.

The systems from NES combined with the bank Cole Taylor's financial security and brand recognition has spurred confidence in the customers. Collaboratively, they bring distinct advantages to all 1031 customer sets, right commercial developers and corporate entities to individual investors.

1031 Exchange

Section 1031 in the Internal Revenue Service is a boon for a prospective investor, selling an investment property and wanting to make a profit by reinvesting in a similar property elsewhere in the country. This wonderful concept works on the principle of gain rolling from the old to the new.

There is widespread ignorance on the modalities about this exchange; as a result, 30-40 percent of property owners end paying tax during the sale. Exchange 1031 not only fructifies into essential tax savings, but also makes possible the swapping of property in the fairest manner at places of choice. No wonder that the 1031 Exchange excites the property market so much.

The new income-generating replacement property gives the investor the double gain of added income and savings from tax that would have otherwise gone to the IRS coffers.

Besides saving the buyer from a huge tax burden coming in the guise of capital gains, the instrument offers maximum immunity and flexibility in reinvesting the money gained from the sale in a replacement property within a given period.

The exchange being time-bound is no kid’s play either. In every exchange of this kind, Qualified Intermediaries (QI) plays a crucial role connecting the buyer and seller. The Federal Tax Code makes service of QI mandatory since 1991 in any exchange.

The federal nature of the 1031 Exchange regulations make the Qualified Intermediary play a wizard in guiding and structuring the exchange, satisfying all parameters and suiting the goals of the clients. It is the QI who does the paperwork required by the IRS to document the exchange. The QI carefully prepares all documents and serves the parties with copies of the exchange agreement, novation agreement and escrow instructions.

The Exchange Agreement reads like a contract between the Exchanger and a Qualified Intermediary. The Exchanger explicitly agrees to transfer his old property to the Intermediary, in lieu of a new property to be supplied by the latter within 180 days. The contract outlines all terms and conditions under which the exchange of properties should take place.

For a 1031 Exchange to take effect, both the old property as well as the new property should be in the category of investment property, capable of generating income. The examples could be rental property, bare land, vacation homes or more.

As soon as the old property is sold, within 45 days the seller has to come out with a list containing two or three probable properties fit for replacement. And the whole process of purchasing the new property or replacement property from the list must be over in a period of 180 days.

The exchange becomes bona-fide only when the title stays intact and whosoever held title to the old relinquished property gets the title of the new property.

In between the sale and purchase of property, the seller of the old property would get no access to the money he accrued from the sale, as the money will be vested with the ‘Qualified Intermediary’ till the exchange gets over.

This 1031 Exchange process has matured and had many names in the past including Like Kind Exchange, Deferred or Delayed Exchange, Simultaneous or Concurrent Exchange, Starker Trust or Exchange, Alderson Exchange, Reverse Exchange, Two, Three, or Four Party Exchange and Baird Exchange.

10 Ways To Find Investment Properties

If you really want the best deals in investment properties, you have to increase your odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources? Here are the ten:

1. Talk. Let people know you are looking and sometimes the properties will come to you. There are a lot of owners out there who want to sell, but haven't yet listed their property.

2. Use the internet. Go to a search engine and enter the type of real estate you are looking for, along with the city you want to invest in. You never know what you might find.

3. Drive around looking for "For Sale By Owner" signs. Owners often don't want to pay to keep the ad in the paper every week, so you won't see all properties there.

4. Find abandoned properties. That's a pretty clear sign that the owner doesn't want to deal with the property. He might sell cheap.

5. Find old "For Rent" ads. Call if they are a few weeks old. Landlords are often ready to sell, especially if the haven't yet rented the units out.

6. Talk to bankers. You might get a foreclosed-on investment property cheaper if you buy it before they list it with a real estate agent.

7. Offer someone a finder's fee. There are people that always seem to hear about the good deals. Have such people coming to you.

8. Eviction notices. If your local papers publish eviction notices, or if you can get the information at the courthouse, it can be useful. A landlord who just went through the procees of evicting tenants is a likely seller.

9. Old FSBO ads. If you call on two-month-old "For sale By Owner" ads, and they haven't sold, they may be ready to deal. Owners often give up the effort, but still would love to sell. Help them out!

10. Put an ad in the paper. "Looking for investment properties to buy," might be sufficient to generate a few calls.

10 Ways to Buy a Home With Little or No Money Down

There are many ways to buy a home, even if you have little or no money to put down. Here are a few of the basics:

1. Sweat Equity

Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down payment or for purchase later. This is a great technique if you are handy with tools, yard-work, and paint.

Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling and the owner is ready for just about any offer. You will find these houses ranging from just needing a little “cosmetic” work like landscaping or painting, to totally trashed out houses in need of some serious renovation. If you are into repairs, this is a great way to get a home for a good deal.

If you are not skilled at repairs and renovation, be careful about fixer-upper homes. They could end up costing you quite a large amount of money to pay others to fix.

I also recommend getting a home inspection so that you know what exactly you are in for before you begin.


2. Seller Carry-Back

Look for a home with an assumable loan. Instead of buying out the owner's equity, ask the seller to carry back a second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, you can get the home for no money down.


3. Offer an Object for the Down Payment

Offer something other than cash (land, a car, a boat, or valuable collectibles) to the seller instead of a cash down payment. This is why it is important to listen to sellers. Find out what they want and need. Maybe you have (or can get) just what they need. For instance maybe they wanted to use the down-payment to buy an RV and it turns out that you just happen to have one you don’t need. Offer that vehicle as a down-payment, and it saves you from coming up with the cash.


4. Offer Services for the Down Payment

Offer your services or expertise to the seller in lieu of a down payment. Some examples include $10,000 worth of auto services if you're a mechanic, dental work if you're a dentist, desktop publishing services if you're a designer, artwork if you're an artist or legal work if you're an attorney.


5. Foreclosures

Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will let you buy a foreclosure with no down payment if your credit is good and they're anxious to have the home occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home's value. Distressed properties - assume with little or no down to save foreclosure.


6. VA or Other No Money Down Loans

Look for conventional loan programs such as VA or FHA that require little or nothing down. VA loans have helps countless veterans get into their homes. There are often programs available to first time buyers or people who are distressed (such as with Hurricane Katrina) that will help people get into a home with little money down. You usually will have to qualify for the loan with the bank, though.


7. Find an Investment Partner for Equity Sharing

Look for an investment partner who'll put up some or all of the cash in an equity-sharing partnership. You make the monthly payments and the two of you split the eventual resale profits.


8. Wrap-Around Financing

Wrap-around financing is where you assume a seller’s VA Loan by doing a new Contract for Deed. Since this contract is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount, but the rest of the purchase price of the house, letting you get in with little or no money down.


9. Rent-to-Own or Lease-Option

This is really is one of the best ways to get into a home of your own when you can’t get a bank loan. Remember that you may still have to get a loan down the line. If you have a lease-option for 5 years, at the end of that time, you will need to purchase the house, so you can use the time to fix your credit, or use one of the other options that are discussed in our book to purchase the house at that time. You can always try to negotiate another 5-year lease-option if you need more time. (For more detailed infomation on lease-options, check out our free ebook, "Buying a Home When You Have Bad Credit" at http://I-can-buy.com.)


10. Government and Community Down-payment Programs

There are many community and non-profit organization programs out there to help people get into homes of their own. Many of these do no require any money down.

There are some organizations and programs that will pay for some or all of the down payment for you. Generally these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan.) If you have been unable to get into a home because you don’t have enough money for a down payment, then maybe one of these programs will be for you.


Below is a list of organizations that have down payment assistant programs:

• AmeriDream Inc.
http://www.ameridream.org

• National Home Foundation
http://www.nationalhomefoundation.org

• GiftAmerica Program (GAP)
http://www.giftamerica.org

• The Nehemiah Program
http://www.nehemiahprogram.org

• New Song Down Payment Assistant Program
http://www.buyers-assistance.com

• Equity Grants
http://www.equitygrants.com

• Realty America
http://www.realtyamerica.org

• Homes For All Program
http://www.ezdownpayment.com


Also check in your local area, because many communities have similar programs of their own.

10 Tips to Buy Real Estate Without Breaking Your Budget

1. Get pre-approved for your home loan. This means, fill out a loan application and go through the process of securing financing. That way, when you’re ready to seriously evaluate real estate, you’ll know exactly how much home you can afford. And you can prove to a seller that your offer is sincere.

2. Explore creative financing options. During the home loan pre-approval process, ask about ways to get creative with your financing. Low down payment options, first and second mortgage combinations and first time buyer programs might help you afford more funding. Many lenders are now offering interest-only home mortgages; just make sure you thoroughly evaluate the terms for this type of home loan. Down payment grants are also available in some instances and might be worth investigating or discussing with your realtor.

3. Sell your existing home first. Although selling your existing home before finding new real estate to buy can be a little nerve wracking, any inconvenience will be offset by your ability to make an offer with cash in hand. Contingent purchases are not the best when negotiating to buy a home. Having your financing in order and your bags packed will give you the advantage in a competitive market.

4. Look for vacant real estate. Perhaps a seller’s job has transferred him out of the area. Or maybe a family purchased a new home before putting their existing one on the market. In any case, a vacant home could be just the deal for a savvy home buyer, so have your realtor look for vacant property in your preferred neighborhoods. And keep in mind, the longer a house stays empty, the greater your negotiating power will be.

5. Consider cosmetic fixers. If you’re handy with a paintbrush, a toolset and gardening equipment, consider buying real estate in need of cosmetic fixing. Property that lacks curb appeal needs minor handiwork or the yard overhauled could end up being the home of your dreams for a price you can afford. You just need to look beyond the ho-hum to see the potential of a cosmetic fixer.

6. Buy a home that’s a major remodel project. If you want to live on Lake Washington, but can’t afford a $2M home mortgage, consider buying a dilapidated cottage on a fabulous lot with western exposure. In time you’ll need to gut the existing home and build from the ground up or contract significant home improvements. But in the end your property value will skyrocket. And if your carpentry and other construction skills are well-developed, you can save even more and accrue “sweat equity” during your remodel by doing much of the work yourself.

7. Don’t discount bank foreclosures. One person’s loss could be your gain if you buy real estate in foreclosure. Although the search for a decent foreclosure may take a while, your realtor should be able help. The U.S. Department of Housing and Urban Development (http://www.hud.gov/) can be an excellent resource for foreclosed properties. Because HUD houses are sold at market value, your best bet will be homes that need cosmetic work or even major repair.

8. Land with a manufactured home. Sometimes, to buy a home on a budget, you need to look beyond convention. Even if your wish is to buy real estate, you may have to settle for a piece of property in an outlying area with a mobile or manufactured home. Discuss this option with your real estate agent and try to keep an open mind about this possibility.

9. An older, smaller home. Older homes are typically priced much less than newer construction and don’t tend to create buyer bidding wars. If you can enjoy life in an older and smaller home in a neighborhood or suburb off the beaten path, this could be your ticket to real estate ownership.

10. The cheapest house in the best neighborhood. You have your heart set on a specific – and expensive – neighborhood. Maybe it’s the schools that you’re interested in. Or perhaps it’s the close proximity to downtown or the waterfront. In any case, a budget-savvy buyer will look for the least expensive home for sale in the neighborhood. If you’re not in a hurry, you can even play the waiting game to see what properties come on the market. Your real estate agent can be a real asset in this case by investigating potential sellers.

Buying real estate without breaking your budget will require research and compromise. On moving day, however, you’ll have the satisfaction of knowing that your homework paid off!

10 Tips for Successful Real Estate Property Investment

Just because real estate prices seem to have hit a temporary ceiling in many countries around the world, that doesn’t mean that profits from property investments are hard to come by.

Even during a real estate market slowdown, stagnation or depression profits can be made locally and overseas. This article shows you the top ten tips that real estate investors apply to their property portfolio building strategy to ensure success from their investments.

1) Research the curve - the concept of a property market cycle existing is not myth it’s a fact and is generally accepted to be based on a price-income relationship. Check the recent historical price data for properties in the area of the country you’re considering purchasing in and try to determine the overall feel in the market for prices currently. Are prices rising, are prices falling or have they reached a peak. You need to know where the curve of the property market cycle is at in your preferred investment area.

2) Get ahead of the curve – as a basic rule of thumb, professional real estate property investors seek to buy ahead of the curve. If a market is rising they will try and target up and coming areas, areas that are close to locations that have peaked, areas close to locations experiencing redevelopment or investment. These areas will most likely become ‘the next big thing’ and those who by in before the trend will stand to make the most gains. As a market is stagnating or falling many successful investors target areas that enjoyed the best levels of growth, yields and profits very early on in the previous cycle because these areas will most likely be the first areas to become profitable as the cycle begins turning towards positive once more.

3) Know your market – who are you buying property for? Are you buying to let to young executives, purchasing for renovation to resell to a family market or purchasing jet to let real estate for short term rental to holiday makers? Think about your market before you make a purchase. Know what they look for in a property and ensure that is what you are going to be offering them

4) Think further afield – there are emerging real estate property markets around the world where countries’ economies are going from strength to strength, where a growing tourism sector is pushing up demand or where constitutional legislation has been or is about to be changed to allow for foreign freehold ownership of property for example. Look further afield than your own back yard for your next property investment and diversify that real estate portfolio for maximum success.

5) Purchase price – set yourself a budget that will realistically allow you to purchase what you’re looking for and profit from that purchase either through capital gains or rental yield.

6) Entry costs – research fees, charges and all expenses you will incur when you buy your property – they differ from country to country and sometimes even from state to state. In Turkey for example you should add on an additional 5% of the purchase price for all fees, in Spain you will need to factor in an average of 10% and in Germany fees and charges can be in excess of 20%. Know how much you will have to incur and factor this amount into your budget to avoid any nasty surprises and to ensure your investment can become profitable.

7) Capital growth potential – what factors point to the potential profitability of your real estate property investment? If you’re looking overseas at an emerging market, which economic or social indicators exist to suggest that property prices will increase? If you’re buying to let out are there any indications to suggest that demand for rental accommodation will remain strong, increase or even decline? Think about what you want to achieve from your investment and then research and find out whether your expectations are realistic.

8) Exit costs – if you will incur substantial capital gains taxation liability if you sell your property investment for profit, will that render the investment profitless? In Spain a foreign buyer can incur up to 35% capital gains tax, in Turkey on the other hand property sales are capital gains tax free if the underlying real estate has been owned for four or more years.

9) Profit margins – what levels of capital growth can you realistically gain on your property investment or how much rental income can you generate? Work out these facts and then work backwards towards your initial budget to work out your potential profit margins. At all times you have to keep the bigger picture in mind to ensure that your real estate investment has good potential for profit.

10) Think long term – unless you’re buying property off plan and intending to flip it for resale and profit before completion you should view real estate investment as a long term investment. Real estate is a slow to liquidate asset, cash tied up in property is not simple to free up. Take a long term approach to your property portfolio and give your assets time to increase in value before cashing them in for profit.

10 Steps to a Successful Urban Redevelopment Project

You’ve got a project with exceptional architecture, you’ve completed months of review and modification, your design team is sure this project will get significant notoriety, yet after hours of going back and forth in City Council meetings, they ask you to cut the project in half, increase the setbacks, or just drop the project altogether.

Does this sound familiar?

Developing commercial and residential projects in urban areas require special care. While some urban areas are on the verge of new developments, misunderstanding and community opposition can block even the best designs.

You can reduce risks by taking a thoughtful approach to the process. Some residents and politicians demand programs be based on trust, openness, and consensus building. This should not mean you compromise your design. Executing these ten important steps can result in strong design and a smooth process.

Consensus doesn’t mean that everyone agrees, it’s more about showing respect for different opinions, developing relationships, and identifying shared goals to establish positive public opinion so the project will gain community and government acceptance. It’s important to nurture supporters and expose the extremists.

The following 10 points should be addressed:

1) Create the vision. It’s about design, not density. Establish a vision early by connecting it to local settings and looking for ways to build partnerships. Good design attracts people.
2) Know your market. Do the homework necessary to understand the competition and the market forces that influence a project.
3) Understand the issues. All communities have a set of unique characteristics and issues that guide their decisions. It’s essential to have a good understanding of the marketplace, environment, regional influences, and financial aspects. There is no single solution.
4) Get the public benefit. Make the benefit for the city & community clear.
5) Pay attention to everyone who has a stake in the project. Have small discussion groups to get their feedback.
6) Establish trust. Do this by sharing knowledge and listening carefully. Be honest, encourage participation from everyone, stay neutral and pursue win-win goals.
7) Inform decision makers. Meet one-on-one and provide solutions to educate decision makers.
8) Use the media. Take the high road and keep the message simple. Talk about helping the community.
9) Use the unique. Incorporate the area’s physical social and historical environment into the design.
10) Be patient . Listen carefully, provide guidance, establish credibility, and let the process grow.

By using these ten points, several revitalization plans have been completed in the face of strong initial community resistance. Guided by strong visions which have been established by working with city programs launched to solicit feedback and educate everyone have had a profound effect in the success of revitalization efforts.

Implementing major public and private improvements can convert old spaces into lively gathering places for community activity.