[schema type="organization" orgtype="LocalBusiness" url="http://4salebydonna.com" name="Real Estate Agent Donna Baker" description="Real Estate Agent showing homes for sale and available real estate in Monrovia, Pasadena, Arcadia the San Gabriel Valley in Southern California." city="Monrovia" state="Ca" postalcode="91016" email="donna@4salebydonna.com " phone="(626) 408-7766 "]
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The American Dream

Why Pay Rent?

No matter what you’re currently paying for rent, your total cash outlay over a period of several years will probably add up to a much higher total than you have realized. The chart shows how quickly the rent payments you’re making add up figuring in what this money would earn invested at 5% interest.

Rent Per
Month
Rent Payment
10 Years
Rent Payment
20 Years
Rent Payment
30 Years
$600 $93,169 $246,620 $499,355
$700 $108,698 $287,724 $582,581
$800 $124,226 $328,827 $665,807
$900 $139,754 $369,930 $749,033
$1000 $155,282 $411,034 $832,259
$1100 $170,611 $452,137 $915,484
$1200 $186,339 $493,240 $998,710
$1500 $232,923 $616,551 $1,248,388

Homeowner Advantages

When you’re figuring out how much you can afford to commit to monthly mortgage payments, don’t forget the tax advantages of home ownership. Both property taxes and interest payments on a mortgage for an owner occupied home are currently tax-deductible. In the early years of a typical mortgage, all but a small percentage of each monthly payment is used to pay off the interest on the loan.

This means that as a homeowner, your annual taxable income could be substantially reduced by deducting the payments you make on property taxes and yearly mortgage interest. Ask your CPA, attorney, or tax preparer how buying a home now would affect your tax situation.

In addition to tax advantages, you can also benefit from any increase in the value of your home both through appreciation and improvements you add for you own comfort and enjoyment.

Buying a home is probably one of the biggest investments you’ll ever make. And when it is your first home, it is especially important that you seek qualified assistance. Your real estate agent has the experience and expertise to help you find – and purchase – the home of your dreams!

What Qualifies as a Fixture?

Is that chandelier included in the sale?

One aspect of home sales often confuses buyers, sellers, and even some real estate agents. It is called “the law of fixtures.” This law, actually a set of well-established legal rules, determines when personal property is part of the real estate being sold.

A fixture is defined as personal property that has been converted into part of the real property. This transformation usually occurs when the personal property is permanently attached to either the land or a structure built on the land.

To illustrate, pieces of lumber stacked by your house are unattached, easily moveable, personal property. If you sell your residence, your lumber is not included in the sale, and you are entitled to take it with you when you leave. However, after that lumber is used to build a fence around your house, it become a fixture permanently attached to the ground. When you sell your home, that lumber, which is part of the fence, is automatically included in the sales price, even if nothing is said about it in the sales contract.

For some reason, the most troublesome fixture in any house being sold is the dining room chandelier. Sellers feel entitled to take their chandeliers with them.

Legally, these sellers are wrong. Dining room chandeliers that are permanently attached to the ceiling by bolts or screws have been converted from personal property into real property. They are automatically included in the sale.

Inexperienced agents, however, sometimes hang a sign stating, “Chandelier not included in sale.” That is the surest way to get the buyer to insist that the chandelier be included in the sales price.

Most experienced agents advise sellers who want the chandelier to remove it before showing the home. A less-expensive chandelier should be substituted before the first buyer showing.

The major test for determining whether an item has become a fixture is how it is attached to the structure or land. If it is nailed, bolted, glued, wired, built-in or cemented, then the former personal property has become a real property fixture by its method of attachment.

If the item can be easily removed without damage to the structure, however, such as unplugging a refrigerator or disconnecting a gas stove, it remains personal property and the seller can remove it. However, built-in appliances, such as the dishwasher and trash compactor, are automatically included as fixtures.

Window coverings often cause problems. Since drapes can easily be unhooked, they remain personal property, which the seller can remove unless specifically included in the sales contract. But the drapery rods, which are screwed into the walls, must remain because they have become fixture by mean of permanent attachment.

The intent of the parties often becomes important for determining whether an item is a fixture included in the property transfer.

For more information on the law of fixtures, please consult a local real estate attorney.

What is a 1031 Exchange?

Section 1031 of the Internal Revenue Code has been in existence since 1921, providing taxpayers with a mechanism to defer their capital gains tax when selling investment property and acquiring “like-kind” replacement property. Given the great reduction in available tax shelters over the years, this is one of the last great ways investors can minimize taxes while building their investment portfolios. That being said, investors must be mindful of the strict rules and timeframes contained in Section 1031 in order to effectuate a successful tax-deferred exchange.

First of all, the exchange must be set up prior to the close of the relinquished property. In order to accomplish this, the taxpayer will need to designate an Accommodator or Qualified Intermediary (“QI”). The QI will act as a third party to the transaction and participate only to facilitate the transfer of property without actually taking any interest in the property. When the relinquished property is sold, the QI will hold the proceeds from the sale on behalf of the taxpayer in a secure and separate interest-bearing account.

Once the relinquished property closes, the taxpayer has 45 days to identify like-kind replacement property(ies) and 180 days to acquire the replacement property(ies). (The 45 days is part of the 180 day period – you do not have 45 days plus an additional 180 days.) Day one is considered the next day after the relinquished property closes. There are no extensions or exceptions to these timeframes.

Once the taxpayer has the replacement property under contract, the QI will get assigned into the transaction. When the replacement property is ready to close, the QI will fund the transaction with the proceeds from the relinquished property and cause the replacement property to be conveyed to the taxpayer in order to complete the exchange.

Important Concepts:

  • To defer all capital gains tax, the taxpayer will need to find replacement property that has a value that is greater than or equal to in value of the relinquished property.
  • The taxpayer will be considered to be exchanging both the debt and equity associated with the property – not just the equity portion.
  • The taxpayer must acquire like-kind property – property that has the same character or nature.
  • It is important to clearly state your intent from the beginning to the end of the exchange transaction by adding the appropriate verbiage in the purchase and sale agreement (e.g., “Seller to cooperating with Buyer’s 1031 exchange.”)
  • If you are involved in a 1031 exchange, consult with your tax advisor for further information.

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