Treasure Coast News & Insights

One program that many people have heard about, but few have much knowledge about, is the 1031 Exchange. In response to the myriad misconceptions I've seen circulating about it, I've decided to shed some light on what the 1031 Exchange is, how it works, and how it can benefit its user. 

As a whole, the 1031 Exchange is a way to defer taxes when a home buyer sells one investment property and rolls the proceeds into another. Normally, you would need to pay capital gains taxes on these proceeds, but in this instance those taxes can be deferred with gains being used into the purchase of a similar investment property. When buying a home on the Treasure Coast, the 1031 Exchange can provide an immediate tax savings, but keep in mind these taxes are deferred, not eliminated.

Who can take advantage of the 1031 Exchange? The IRS defines the owners of investment and business property that may qualify for a Section 1031 deferral as "individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031." This seems vague, of course, but there are also a few rules that are not as loose.

Real Estate Cannot Be Used for Personal Use

The 1031 Exchange solely applies to investment property. It cannot be used by personal residences, second homes, etc.

Must Be a "Like-Kind" Exchange

Most real estate will be "like kind" to other real estate, as quality or grade is not important. One exception would be that real estate in the United States is not "like kind" to foreign property. Certain types of property are specifically excluded from Section 1031: inventory or stock in trade; stocks, bonds, or notes; securities or debt; partnership interests; certificates of trust. The new investment must also be equal or better value, which can be spread out over multiple properties (e.g. you may sell a $500,000 investment home in Stuart and purchase two $250,000 homes for sale in Port St. Lucie).

Timelines to Meet for 1031 Exchange

45 Days: this is the time you have from the closing of your current investment to purchase a new investment. You don't have to close on the new investment within the 45-day window, but you will need to identify it, meaning delivering a written notice or offer to the seller of that next property.

180 Days: Once you have identified your next investment, you have 180 days to close on that next property and have title in your name.

You Can't Access the Proceeds

One very important rule of Section 1031 is that you cannot have access to the proceeds of sale of the previous investment. The money will needs to be handled by a qualified third party, among whom the IRS has excluded: Realtors, accountants, attorneys, investment bankers, anyone who was your employee in the past 2 years.

Remember to get a local market report or check the latest sold homes on the Treasure Coast to determine the activity around you. From there, contact us 24/7 at (772)233-9850 to get a more analytical and precise valuation for your own home.

According to Florida Power and Light (FPL), here are some of the quickest and most effective ways to help you conserve energy, trim costs, and gain control over the energy usage in your treasure coast home. Many of these don't take more than 2 minutes of time, won't cost any money, and can really have an impact with climbing energy costs. If you are on the search for homes on the Treasure Coast, it is important to take your monthly utility/energy cost into account when budgeting. I hope this is interesting to you and those you share it with, and would love any feedback or input!

1. Limit the time you run your pool pump:
   • Summer - six hours a day
   • Winter - four hours a day
2. Cool your home at 78 degrees or higher with the thermostat fan switched to auto. For additional savings, raise your thermostat to 82 degrees or higher when you're away.
3. Heat your home at 68 degrees or lower with the thermostat fan switched to auto. To save even more, lower your thermostat to 65 degrees or lower at night or when you're away from home.
4. Reduce your water heater temperature from 140 degrees to 120 degrees, which is the recommended temperature setting according to the U.S. Department of Energy, to save about $2 a month.
5. Clean or replace the A/C filter regularly to help your unit run more efficiently and trim cooling costs.
6. Turn off your ceiling fan when you leave the room. A fan that runs all the time costs up to $7 a month.
7. Replace old, high-flow showerheads with water-efficient showerheads and save up to $80* a year.
8. Adjust the water level on your washing machine to match the load size, especially when using hot water. Always use a cold rinse.
9. Clean the lint filter in your dryer before every load to dry your clothes faster.
10. Use the auto sensor function on your dryer to conserve energy by not over-drying your clothes.

There are many things that will give you double discounts by giving you energy savings, and also lower homeowners insurance for Treasure Coast homes. If you are buying real estate on the Treasure Coast, or if you already have a home and want to conserve on energy costs, I hope this article was helpful. If you have any thoughts you'd like to share, or if you have questions about the real estate market on the Treasure Coast, give me a call to chat!