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Breaking Down the Steps to Buying a House

What is an assumable mortgage?

With the unforeseen mortgage interest rate hikes, many buyers of both residential and commercial real estate cannot afford what they could afford last year. For residential buyers, their buying power has diminished as their monthly payments increased substantially and home prices have not dropped enough. For investors looking to find a deal, it is almost impossible to achieve. Interest rates are as high as cap rates, leaving little to no cash flow, and in some instances even negative cash flow. 

A solution for this dilemma is an assumable mortgage. An assumable mortgage is a mortgage that has an assumption clause in the contract stating that another party can take over the same terms as the initial buyer did. This means that if your mortgage is 3.5% for 30 years the new buyer can take over that exact same mortgage amount, interest rate, and term years.  If someone locked in a great rate, they can now sell their property and let the new buyer assume the mortgage with the same interest rate. However, they can only assume the balance of the existing loan. If you are selling the property above the loan amount for a profit, the new buyer will either have to come up with the cash difference or get a second mortgage. 

You will have to look through your mortgage documents to make sure your loan is assumable and the new buyer will have to be approved by the lender to assume the mortgage just like a regular mortgage transaction. These assumable mortgages function both in residential and commercial loans as long as the clause is in the contract.

Ready to begin your home buying journey? Get started with DV Real Estate Group today.

Stephanie
Author: Stephanie

Have you thought about what will happen to your property once you die? 

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Did you know there are only four options?   Today we will discuss these options and how they can affect you. 

1. The property is passed on to your inheritors. 

PROS

This option is a great way to build generational wealth and avoid taxation. The property benefits of step-up basis making the capital gains taxes less once the property is sold. 

CONS

The property must be maintained for the life ownership making it a liability unless it is producing income. Also, not all children want to maintain or inherit property, some see it as a burden and want nothing to do with it. 

2. You sell the property. 

PROS

This option is beneficial to unlock the equity in the property. It can be used as a retirement fund or to pay for college or other debts. By selling a property you can use part of the proceeds to buy a smaller house/apartment and invest/save the rest. There are many possibilities once a property is sold. 

CONS 

The taxes are due at the time of the sale unless it is an investment property and you use a 1031 exchange and move the capital into another property. 

3. The property is donated to a charity. 

PROS

You are supporting a cause that is dear to your heart and your donation will continue to impact people in a positive way for many years to come. 

CONS 

You have to make sure you have very specific language in your testament about how the property is to be used and how (if ever) it can be sold. Otherwise the property can be mismanaged. 

4. The state takes possession of your property. 

PROS

We do not see any pros with this option. It is called escheat. This occurs if the person dies without a living will and no heirs. 

CONS 

This option is the worst option. The state takes possession of your property. We highly recommend having a will so that this cannot happen. 

We at DV Real Estate Group pride ourselves in our professional network.  Our friend Maurice Giro is an elderly law and estate planning lawyer. He is an excellent resource when it comes to protecting all your assets. 

www.girolaw.com

If you have any questions on how to protect your property, sell your property, or simply need a property evaluation please give us a call at 201-277-0044.

What is a 1031 Exchange?

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Like Kind Exchanges, also known as tax deferred exchanges, are defined by Internal Revenue Code (IRC) section 1031.

A 1031 Tax Deferred Exchange offers taxpayers the opportunity to build wealth and save taxes. By completing a 1031 Exchange, the Taxpayer can dispose of investment properties, acquire replacement property, and defer the tax that would ordinarily be due upon the sale.

This permits taxpayer to exchange business use or investment assets for other like-kind business use or investment assets without recognizing taxable gain on the sale of the old assets. The taxes which otherwise would have been due from the sale are thus deferred.

A 1031 Exchange allows investors to defer Federal capital gains tax, state ordinary income tax, net investment income tax, and depreciation recapture on the sale of Investment property if certain criteria are met including:

  • Buy replacement property for equal or greater than sold for and reinvest all proceeds
  • Identify replacement property within 45 days of close of sale
  • Purchase replacement property within 180 days of close of sale
  • Must Sell and Buy property that is considered “like-kind” to each other

Meaning if the asset you sold was real estate, your LIKE-KIND buy must also be real estate. You cannot jump from real estate to gold or stocks. However, you can go from a multifamily property to a hotel, or from an industrial property to an office building. It is all real estate; therefore, it is a LIKE-KIND exchange.

  • Process must be handled by a Qualified Intermediary (QI)

Reasons to Exchange

There are many reasons to exchange, such as:

  • Defer Taxes: Federal, State & Depreciation Recapture
  • Diversify or Consolidate a Real Estate Portfolio
  • Increase Cash Flow
  • Switch Property Types (Land, Industrial, Multi-Family, Office, Retail, Residential, Easements)
  • Get Into Other Real Estate Markets (Exchange anywhere within the U.S. & Territories)
  • Build & Preserve Wealth
  • Set up Heirs for the Future (Estate Planning: Stepped Up Basis)
  • Increase Purchasing Power 

Don’t hesitate to contact us to get started on your real estate investing journey, and don’t forget the highest form of a compliment is a referral!

Commercial Tenants

For the tenant there are many factors that have to be taken into consideration when opening a business. What kind of financial commitment does your venture require? What kind of demographic will appeal to your product? What kind of foot traffic is required and how long will it take until your business is able to sustain itself and be productive? Finding the right space is imperative for a business to thrive and grow.

Many business owners believe that being located in a “hip” established area will guarantee success, but it is not always the case. It takes accurate market research, evaluation of the latest trends, and an understanding of the neighborhood and its needs to yield lucrative results. With an accumulation of this knowledge and a strong connection to local communities, I can bring wisdom to your search for the best location. If you are considering opening, relocating or expanding a retail business, Jersey City is an ideal location and a fraction of NYC rents.

We have amazing neighborhoods that will embrace and welcome talented business owners that want to become part of the neighborhood. Give us a call at 201-277-0044 or send us an email at info@dvrealestategroup.com so we can find your next commercial space.

Commercial Landlords

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If you are the landlord of commercial retail in Jersey City or northern New Jersey and are having problems leasing your property or wishing that you had a better tenant, it’s time we speak. There are times when spaces go empty for months or even years because landlords are not properly advised on market conditions. Putting a “For Rent” sign up at your property is simply not enough and will not attract the most suitable or qualified tenants.

As a landlord you must understand tenancy mix, what kind of tenant improvements/allowances you should provide and/or are necessary for tenants to be attracted to the property. In some cases none are necessary, but this must be discussed and understood. It is helpful to know if you are willing to accept the risks of doing business with a start-up company or if a more established company with a proven track record makes more sense for your property. Completing a fruitful transaction is more likely when both parties have a clear understanding of their needs and expectations.

Let the team at DV Real Estate Group help you with your real estate needs.

What is Probate in Real Estate?

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Real estate can be one of the most important purchases that a person can make, which is why the process by which real estate is handled when someone dies, becomes just as important. Upon someone’s death, real estate has to be handled based on what they’ve indicated on their will. In most cases, this happens through what is known as probate. 

Probate is known as the official legal process taken to ensure that real estate is handled based on the deceased person’s wishes. At the DV Real Estate Group, our team of dedicated Jersey City real estate agents are well versed in handling real estate probate cases. When real estate is handled in probate, the courts oversee the sale of any property. Depending on the wishes of the deceased, the property at hand can either be transferred to a living heir or if no instructions have been set, the property can be put up for sale, therefore creating opportunities for investors to buy properties in probate. 

In order to buy or sell real estate in probate, an executor must be appointed to oversee the transaction. The executor has to be approved by the courts. The real estate in question must be then appraised and eventually put on the market by an experienced real estate agent. Once an offer is made and accepted, a notice is sent to all heirs with a deadline to accept the terms of the deal. In most cases, the courts may also need to approve the offer. After the sale is completed, the monies may be used to pay debts or where applicable can be distributed to any heirs of the estate.

If you are on the seller’s side and are looking to sell probate property, it is recommended that you work with a real estate agent with experience in probate properties or one who is certified to work probate properties. Our team at DV Real Estate Group has a qualified team of experts ready to help you.

Contact us today.

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