Tips for a First-Time Homebuyer: An Efficient Way Own Your First Home
Don’t worry. We’ve got you covered with important things to think about on your journey to ownership. Before you even start looking, know what you can both afford, and qualify for. Mortgage calculators are available online, but the best first step is to consult a mortgage lender for a reality check. Tell them you’re a first-time homebuyer, and ask if they can assess your situation first- with a “soft” credit search. They may not need a formal credit pull to evaluate your situation. If you happen to be a first-time buyer with cash, be prepared to explain how you were so fortunate, and how long you’ve had it. Ask the lender for a Pre-Approval letter that would justify your ability to complete a purchase to a seller. It’s usually presented at the time of submitting a purchase offer. Know your “must-haves”, for minimum home features, location, and timing. Find and interview Realtors (we’d of course like to be considered. :0). A quality Realtor will be able to confirm the current market conditions, process, and negotiate on your behalf. That means identifying the appropriate available properties that match your needs, and price range, and schedule showings that match your time requirements. New legislation passed this past August will require you sign an agreement with your Realtor before being shown homes, either in person or virtually. Ask for a complete explanation of your options involving either a “customer”, or “client” relationship, prior to touring homes, and also how your Realtor will be compensated for their services. As soon as you find the best home match, be prepared to submit and offer, as time is of the essence in Real Estate transactions. You are about to enter in to a contract to purchase and should be able to understand the components of the contract. If your agent isn’t able to help you understand, you should always consider consulting a Real Estate Attorney for clarification. Know your contract timelines and deadlines to avoid default. Escrows are typically 30-45 days (but can be more or less), depending on negotiations, for each circumstance. Get a home inspection from an experienced professional. These typically run about $400, and are invaluable compared to the $300k - $400k you are about to finance. Discuss the findings with your Agent- and target the most concerning (if any) in an Inspection Contingency counter-offer. Let’s get started- “YOUR FIRST PROPERTY- RIGHT NOW!” is an achievable goal, with the right representation. Some opportunities justify early lease terminations- and start you on the path to equity and wealth building, while enjoying pride and privilege of doing whatever you want, to your own property. Oh, yah. I guess I should throw out there, to ask your Realtor about CCR’s (Covenants, Conditions, and Restrictions), and HOA’s (Home Owner’s Associations). Take the first step! :0)
Understanding 1031 exchange rules for family living
In a 1031 exchange, a property is sold, and the proceeds are reinvested in a like-kind property to defer capital gains taxes. However, there are rules about personal use of properties involved in a 1031 exchange, including whether family members can live in the exchanged property. Can Family Live in the Exchanged Property? General Rule: Properties in a 1031 exchange must be held for investment or business purposes, not personal use. If the property is used as a residence (including for family), it may violate this requirement. Safe Harbor for Rental Property: To qualify as an investment property, the replacement property should be rented at fair market value for at least 14 days per year and cannot be used personally for more than 14 days or 10% of the rental days per year, whichever is greater. If family members live in the property, they must pay fair market rent to meet these conditions. IRS Scrutiny: If family members live in the home without paying fair market rent, the IRS could argue that the property is not held for investment purposes. This could disqualify the exchange, making the capital gains taxable. Converting to a Personal Residence: After meeting the investment-use requirement (typically at least two years), you may convert the property to a personal residence. This includes letting family members live there rent-free if desired. If you later sell the property, you may qualify for the primary residence exclusion (up to $250,000/$500,000 in capital gains tax-free for single/married filers) after owning and living in it for at least five years (including two as a primary residence). Key Takeaways: Family members can live in the property if they pay fair market rent, and the property is rented primarily as an investment property for at least two years. Avoid personal use or allowing rent-free living for family members during the holding period to ensure compliance with 1031 rules. After the required period, you can convert the property to a personal residence. Always consult a tax advisor or real estate attorney for guidance specific to your situation.
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