SZ Connect: Helping Community Singles Split the Sea

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THE 1031 EXCHANGE: TIPS FOR INVESTORS

By: Karen Behfar



The 1031 Exchange:
Tips for Investors

The 1031 exchange is the name given for a process of deferring taxes in exchange for certain types of property, made legal under the Internal Revenue section 1031. For example, if someone sells their property to purchase a similar property, they could defer certain taxes and recognition of capital gain.

The purchase of the second property is contingent upon the buyer’s commitment to using the money from the property they sold and the properties must be “like-kind.”

There are a few kinds of exchanges that fall under section 1031. Two of those are:

1)  A simultaneous exchange is a transaction where the investor relinquished ownership of his original property and immediately sends the money from that sale to the seller of the new
property purchased.

2)  A delayed exchange is a transaction that is most common today and requires the exchanger to relinquish the original property before the replacement property is acquired.

A common misconception when it comes to a 1031 exchange is the belief that you could exchange a primary residence for another. The 1031 exchange is only applicable for investment or business properties, not for personal residences. It is therefore an option for prospective investors to look into.

Market Updates

If I got a dollar for every time someone asked me how the market is, I wouldn’t need to sell any more houses! Jokes aside, since late winter, the market has been very strong.  Of course, there are areas that have always been strong, but in general the Syrian Sephardic community doesn’t seem to be moving out of Flatbush in this current atmosphere of exodus out of Brooklyn, like what we see in other communities. On certain blocks and in certain areas the market is as strong as ever, and was not affected when the market dipped last summer.

The interest rates are better than they were months ago and buyers’ confidence in the market is definitely up, as we have seen more showings, more calls, more offers,and quicker closings. The average amount of time that houses stay on the market has certainly decreased since the end of 2018. The last quarter of 2018 was pretty dry and “eerily quiet” as some brokers have put it, as homes came on to the market and no movement followed. Now the inventory is high, the market is healthy, and many people ask why the market is like this. While that is hard to answer, the facts speak for themselves. The high confidence in the market, the great interest rates, and the inventoryshow how the market has shifted from a sellers’ to a buyers’ market despite the fact that there are certain radius of blocks that repeatedly prove unchanged and unaffected by market changes.

The Community Speaks:
Real Experiences

When you were first looking to buy a house, what forums did you turn to?

S.W:“I went straight to an agent because I knew that would get me the most direct guidance and I used Zillow a lot as well.”

M.A: “I first turned to agents and houses that I saw around or on social media platforms.”

What is one tip you would give to someone beginning the process now?

S.W: “Get all your financials in order before you start looking.”

M.A:“Don’t judge a house from the outside. Give it a chance and take a look inside before you automatically veto it.”

How long did the whole process take you?

S.W:“It took us less than a year, from beginning to end!”

M.A: “The whole process, from start to finish, took us about six months.”