Zionsville and Indianapolis Real Estate

The Duke Anson real estate development has  been making progress over the past few months.  The Duke Anson project currently has several buildings in progress.

In front of the Royal Run subdivision, Duke Anson is building the new CVS Pharmacy, the new Lowes, a Super Target(north side of 334), two new banks, and one new Mexican grill.   

There is also some new luxury apartments being built on the far north side of 334 and some new Ryland condominiums.

I like the brickwork that is being laid on the new Duke Anson propeties.  It looks like the CVS is all brick, as will be all other buildings in this development. 

Photos of the Duke Anson project will be following later on today(if it doesn’t rain today) that I will post as follow-up.

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Here is a link to my “April Real Estate Update”:
http://realtytimes.com/101/CragerBartels
This Newsletter is full of interesting and useful information that I think you will enjoy whether you are a buyer, seller, homeowner, or renter.

This month’s issue includes topics such as:
“Sell Your Home for More Money”;
“10 Ways To Know When The Market Is Up — or Down”;
“Window of Opportunity Opens and Closes with Interest Rates”;
“Six Degrees Of Refinancing”;
“More Housing Starts, Fewer Permits Means Opportunity For Buyers To Buy Bigger”;
Plus a roundup of March real estate activity as well as much more advice and information.
I hope you enjoy this monthly newsletter. If you have any comments, please e-mail them to me. Or, if you would like to see a certain topic covered in future months, let me know that too!
If you do not wish to receive this Newsletter each month, please reply to this e-mail with the word ‘REMOVE’ in the subject line.
Sincerely,
Craig Bartels & Derek Crager

The Anson project Zionsville is moving along nicely.  The store front is being built, the new Lizton State Bank is probably about 50% completed, and the new CVS(or Walgreen?) has the framing up. 

New condo’s built by Ryland Homes are being built across on the north side of 334.  The new Anson Project Zionsville will be a nice addition to the area off of 334 and 65. 

If you are looking to purchase a home in the Zionsville or Anson area, please visit our main website at www.MyIndianapolisHome.com

We are Anson Project Zionsville specialists!

View a new video with information on the new Carmel condo’s and new Carmel luxury homes in the exclusive area of West Village. These are all part of the new Brenwick development in Carmel. The Village of West Clay is stunning. For some additional information on this development, view this video created by Beazer Homes.

For information on Carmel Homes and Carmel Condo’s, please visit the Carmel Home resource with hundreds of buyer and seller reports, MLS listings, and selling advice.

LEBANON — Duke Realty Corp. will pay an estimated $250,000 to relocate utilities lines for an Anson Development road project after two companies balked at moving them at their own cost.

Duke Energy (formerly Cinergy and no relation to Duke Realty) and Vectren refused to pay to relocate their utilities line to accommodate County Road 650 East being widened from two to four lanes. The project falls within a Tax Increment Finance district established for phase one of the three-part, 1,700-acre Anson Development.

According to Boone County attorney Eileen Sims, the companies cited case law that says utilities do not have pay for moving utilities if a project benefits private industry. Duke counters that the road work is need for progress that benefits all of Boone County.

Sims told the Boone County Commissioners at their meeting Monday that she proposed both sides pay half, but Duke Energy and Vectren refused.

“It was as if they thought they could hold the road hostage,” she said.

The road is slated to be closed starting June 12 and re-open Aug. 15 before the Zionsville school year resumes.

Boone REMC, TDS Telecom and CountryMark Co-op all agreed to move their lines at their own cost.

Moving the utilities is necessary because the new road falls within current rights-of-way where utility lines located now. Duke Energy’s cost to move their lines is estimated at $140,000 while Vectren’s cost would have been $110,000.

Commissioner Charles Eaton chided Duke Energy’s position, saying it’s a public company worth $26 billion and they’re quibbling over less than $150,000. “It’s absurd,” he said.

Under the agreement between Duke Realty and the utilities, Duke did not waive its right to pursue legal action, Sims said. A Duke legal representative told the commissioners Monday that the company will research cases to see if it has grounds to recoup the money.

If Duke Realty goes go to court and wins, the money should revert to the TIF district for future projects, said Commissioner Huck Lewis.

A few years ago, Duke Energy — then Cinergy — moved utility lines along C.R. 650 East, Sims said. At that time, Duke officials told Cinergy it might want to wait, since there was a good chance a road might coming through there. Cinergy wanted to know where the road would be, ultimately decided to move the lines instead of waiting for Duke’s answer.

In moving the lines, Duke Energy also is requesting an exclusive right-of-way, meaning no other utility can be located in that area. Whitestown Utilities currently has lines where Duke Energy is slated to move.

Exclusive rights-of-way are a bad idea, cautioned county Highway Supervisor Tom Kouns, because utility companies may push costs on to the county for future moves.

Also, Vectren informed Boone County and Duke Realty that the delay in working out right-of-way has pushed back their scheduled by 30 days before their engineers can move the lines, which would put the start of their work in July. Duke Realty told the county they still expect the work to be done by Aug. 15.

County Road 650 East will be closed between C.R. 550 South and State Road 334 During that time, C.R. 650 East will become a four-lane road with two roundabouts.

Technorati Tags: IN, real

By George Piper/For the Times Sentinel

&#9&#9&#9&#9&#9&#9&#9&#9&#9LEBANON — A large retailer offering groceries and other products may be anchoring Duke’s Marketplace at Anson at State Road 334 near the Interstate 65 interchange.

Craig Anderson, vice president of Indiana property operations for Duke Realty Co., told the Boone County Commissioners on Monday the client is not Wal-Mart, although he did not identify the potential tenant.

Anderson, who attended Monday’s meeting to ask about engineering for Phase II, said the potential client is bigger than just a grocery store, which was the initial target.

Commissioner Charles Eaton asked if it was a store like Meijer, the Michigan-based superstore, which sells both grocery and department store products. Anderson replied, “It’s one that has everything. It’s not a Wal-Mart.”

The company contacted both Kroger and Marsh about the site, Anderson said. After nine months and completing a demographic study, Kroger declined interest at this time. Marsh, which may be sold, never got back with Duke.

Anderson expects Duke to appear before the Area Plan Commission in February or March to discuss retail shops as part of a 40,000-square-feet retail development. “We’ll have multiple projects to bring forward this year,” he said.

Outside the meeting room, Anderson said the large retail client is someone Duke has worked with before. While the company doesn’t want to be sound too confident, Anderson said negotiations were going well. One possibility, he said, is Duke gets a commitment for the site, with a store to follow in late 2007 or early 2008.

On the smaller retail shops, Anderson described the potential tenants as entrepreneurs — including three restaurants — instead of established national clients. With a project like Anson, which is moving just ahead of the growth curve, it’s not uncommon for the major retail stores to wait, he said. That will change, he believes, as infrastructure is in place and construction occurs.

“Then it will go from, ‘Will it happen?’ to ‘It’s a reality. I want to be there,’” Anderson said.

Commissioners President Huck Lewis believes a superstore would be a plus for Boone County. “It all fits into the plan for Anson being a mixed use development,” he said.

On the Phase II development, Duke is offering to pay upfront for engineering fees and be reimbursed for that investment after tax increment financing is established. Duke has moved ahead with design work and is anxious to start Anson’s next phase.

“There are things that can be reviewed now so that we can move on,” Anderson said.

Components of Phase II include construction of 400E from County Road 400S through the development, plus Anson Boulevard and Progress Drive, which are two main streets within Anson.

Anderson has been working with Boone County Economic Development Corp. on attracting clients. While interest is there, the main stumbling block is lack of infrastructure, he said.

The county and Duke are “real close” on Phase II TIF negotiations, Lewis said.

The commissioners accepted Duke’s offer, with a stipulation that if TIF funds fail to materialize, Duke — not the county — bear the financial burden.

How the county will choose an engineer is undecided.

Eaton wants the commissioners to get bids for the project, saying the county has a fiduciary responsibility to the taxpayers. In the past, he has raised the issue that the commissioners employed the Phase I engineering firm - Beam, Longest and Neff - without seeking competitive bids. The decision to award that $700,000-plus contract came before Eaton took office in January 2005.

Lewis said the county followed procedures similar to the Indiana Department of Transportation on awarding contracts.

State statute does not require that counties seek bids for projects that fall under professional services, but a county may request proposals.

Technorati Tags: IN, real

By George Piper/For the Times Sentinel

&#9&#9&#9&#9&#9&#9&#9&#9&#9Lebanon — Boone County Redevelopment Commission gave its blessing Friday to the second phase of its Anson development clearing the way for two keys to Duke Realty Corp.’s project.

The RDC approved tax abatement for 10 years on property improvements for a 600,000 square-foot, $14 million building located between the proposed Anson Drive and County Road 500E. Duke is constructing the office and distribution structure on a spec basis, which means no tenant is chosen for the site.

Tom Dickey, vice president for Duke, said Friday, March 10, the company is not even in discussions with anyone for the site, expected for completion by December. But he added that in the distribution business, some companies make decisions quickly on where to locate. “They look to be in a building as fast as possible,” he said.

The building will face Anson Drive, which is an extension of County Road 450 East. Whitestown has annexed the land, but the RDC must first give its approval on certain decisions impacting taxes within Anson. The Whitestown Town Council wass expected to discuss the item at its 7 p.m. meeting Monday, March 13 (after press time).

Duke, which is backing more than $35 million of tax increment financing bonds, anticipated abatement within Anson. Even with abatement, property taxes — which are expected to increase significantly — and personal property taxes will still be coming in, noted Kent Frandsen, the attorney representing Duke.

“(Other taxes) pay a significant amount of taxes early on, even with abatement,” he said.

The RDC also approved up to $30 million in TIF bonds to develop much of the infrastructure in Anson’s northern half in phase II. The Boone County Commissioners must give their OK, and that decision is expected at their meeting at 9 a.m. today.

The first bids on phase II projects — which are expected to total $30 million with TIF funding of about $19.2 million — should come in late spring or early summer.

In other RDC business, the commission also approved up to $3 million in TIF bonds for Anson’s phase I. The added bonds are needed partly because of higher-than-expected costs and to fund a $1 million commitment for an adult learning center.

Technorati Tags: IN, real

By George Piper/For the Times Sentinel

&#9&#9&#9&#9&#9&#9&#9&#9&#9LEBANON — Looking to further entice developers for its Anson project, Duke Realty Corp. is working with Boone County to designate part of the plan under a state pilot program designed to draw businesses looking to start operations quickly in Indiana.

The Shovel Ready program identifies sites in Indiana that can be developed quickly and give Indiana an edge on new business growth, according to the program’s guidelines.

“This is more of a marketing tool than anything,” said David Boncosky of Duke.

Because a government entity must apply for the program, Boone County will be the applicant while Duke will be the co-applicant. On Monday, Boncosky approached the commissioners, who approved the idea.

Duke is seeking the status for Anson’s Phase II development on the north end of the 1,700-acre project stretching roughly from State Road 267 to S.R. 334 just east of Interstate 65.

Shovel Ready is a program of the Indiana Finance Authority with a review team representing eight Indiana agencies involving in various permitting requirements for businesses. Up to 10 sites may be included in the pilot round.

Technorati Tags: IN, real

This is a rendering of what the first industrial building at Anson will look like. Construction is set to begin in June.

Would you like to know the value of your home for free? Just go to http://ZionsvilleHomesOnline.com and click on “FREE CMA” at the top of the page. You will receive a free CMA via email, no obligation to you!

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The groundwork and infrastructure has already started in Anson, and construction of the development’s first industrial building is set to start next month.

Construction is scheduled to begin in mid-June on a 630,000-square-foot building on about 32 acres featuring 36-foot high ceilings and 80 dock doors. The building should be completed near the end of the year, said Tom Dickey, senior attorney for Duke Realty Corp.

“It is being built on a speculative basis,” he said. “We don’t have any tenants yet, but we hope to some, or at least good leads, by December.”

He said the building is being built for bulk warehouse use, and is the start of the development of the Anson’s industrial portion.

The $300 million industrial portion of Anson is 600 acres, which is approximately the northern one-third of the 1,700 acre development, he said.

Anson’s industrial development was renamed AllPoints at Anson after a joint venture was announced Thursday, May 4, between Duke and competitor Browning Investments Inc.

Dickey said the venture provides a marketing advantage to the two companies.

Browning is developing a 900-acre, $446 million industrial park in Plainfield, and the partnership allows the two companies to work together to attract businesses to the developments, Dickey said.

“It (the partnership) gives us more opportunities,” he said. “Businesses will see one entity with the two best sites in central Indiana.”

Boone County Commissioner Huck Lewis said the partnership doesn’t change the industrial component of the Anson development, but it will allow the two companies to pool their resources and help each other out.

“It sounds like marketing, and working together instead of fighting,” he said.

Dickey said Duke will remain in charge of the development plan for Anson.

“Importantly for Boone County, Duke remains the master developer,” he said. “With respect to the TIF bonds, Duke Realty remains the guarantor on those.”

Technorati Tags: IN, real

Since I live close to the Anson development, I received a certified letter today from Duke Development for another public hearing on the Anson development. It looks like they will be starting the first phase of Anson the fall of 2006. I will get some updated photos of what the area looks like in the next few days.

Would you like to know the value of your home for free? Just go to http://MyIndianapolisHome.com and fill out the simple form. You will receive a free CMA via email, no obligation to you!

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Something I have been wanting to do for several months now, something I am going to try to make happen now…

There is no information available in one spot on the different areas of Zionsville, what the downtown has to offer, what different subdivisions are here, price ranges, etc.  I am going to create some categories that will list each subdivision or area of Zionsville, I will then take multiple pictures of the area to give people a “feel” for what that area has to offer, as well as an idea of pricing, etc.  I hope this to be of value to new homebuyers in the Zionsville area.

(March 24, 2006) — The hottest business for real estate flippers these days isn’t starter homes — it’s hotel rooms.

Investors buy individual hotel rooms with a relatively modest capital outlays. The least expensive opportunities are in yet-to-be-built hotels. There’s no upkeep for the finished unit. In addition to being able to stay in their rooms whenever they want, investors make money by leasing out the units to others.

Most hotel operators run services that will match rooms with customers and send a healthy fee to the room owner. James Dubois, a hotel-condo investor in London, says he made a solid 6.7 percent return in the past year on his $410,000 purchase of a room by renting it out through the building’s developer, GuestInvest.

The larger payoff can come by investing in rooms in hot locations and hoping they rise in value. Joel Greene, president of Condo Hotel Center, says the big bet is that condo-hotel rooms can be resold to affluent buyers looking for prestigious, no-hassle second or even third residences.

Source: Business 2.0, Elizabeth Esfahani, (04/01/06)

Would you like to know the value of your home for free? Just go to http://ZionsvilleHomesOnline.com and click on “FREE CMA” at the top of the page. You will receive a free CMA via email, no obligation to you!

Technorati Tags: IN, real, estate, homes

Many of the richest people in the world have earned their wealth through real estate. That’s why real estate investing is touted as the avenue to riches, but while it is estimated that 80 percent of the world’s wealth is held in real estate it is owned by a very small percentage of the population — less than 20 percent, according to a new book on real estate.

Lisa Vander is founder of Pacific Blue Investments, a real estate investment advising company, and author of The Real Guide to Making Millions through Real Estate: Start Your Own Portfolio With as Little as $3000.

Her nearly 300-page book details how to begin the investing process. Filled with tangible information, worksheets, and hot tips — you have a wealth of knowledge in one resource book.

Here are some tips from the book on what investors need.

Have an understanding of the timing of the market.

“You’ve got to understand how the market cycles so that you’re not disappointed or having unmet expectations when the market is going to do what it is naturally going to do, which is go up and down,” says Vander.

Have an understanding of how to analyze real estate numbers.

There are four parts of understanding the numbers of real estate: appreciation, cash flow, loan reduction and tax benefits and how they work together to produce a rate of return on equity that you have in a property.

“You’re shifting your mentality from an ‘Oh, the property is gaining in value’ which is appreciation to how hard is the money, that I have in the property, working for me,” explains Vander.

Have an understanding of the economic environment where you hold real estate.

“How diverse is the economy that I am putting my money/capital into and what’s the likelihood of my investment being there today, tomorrow and into the future,” says Vander. She says there are six economic indicators to consider that help to determine the health and viability of a market where you plan to invest in real estate. They are: mortgage interest rates; affordability indices; supply and demand; demographic information; commercial real estate; and health of the job market.

Vander also points out that, savvy investors take time to research both macro and micro economics when purchasing real estate.

“Macro economics is the study of how large economic forces impact the health and stability of an economy,” writes Vander. She says things such as: recessions/depressions; nationally based loan interest rates; wartime; and demographics of the nation are areas that investors should research.

Micro economics is a look at individual sectors of the economy, concentrating on local and regional areas. Vander names the following as factors that will affect real estate: local and regional recessions/depressions; local or regional disasters; age; seniors; youth; diversification of the job market; unemployment rates; affordability indices; supply and demand; new housing starts; existing housing for sale; permits being pulled; commercial real estate; types of vacancies.

Making millions through real estate is possible and with the help of Vander’s new book — how to do it is no longer knowledge just for the wealthy.

Technorati Tags: IN, real, estate, commercial, real estate investing

The nation’s three major credit data reporting agencies have joined to create a single system for calculating credit scores.

VantageScore information is initially sketchy — the current leading credit score system (FICO) provider, Fair Isaac has had years to develop vast reams of consumer information — but consumers can look forward to purchasing their new uniform score by year’s end and more details in the weeks to come.

Credit information reporting agencies, Equifax, Experian and TransUnion have created the single system in a move designed, they say, to make it easier to apply for a loan.

A credit score, used by the vast majority of lenders to approve or deny a mortgage application, is a statistical analysis of a consumers’ creditworthiness generated, in part, from information on a credit report. A credit report tracks credit consumers’ payment records on individual credit accounts and reveals how well or how poorly each account is being paid.

Today, three different credit scores, one from each agency, are based on three different scoring models. Under the new VantageScore system, you could still get three different scores, but they’ll all be based on the same system which the partnership says will make scoring less confusing.

The system uses a numerical score, like previous systems, but also a letter grading system scoring consumers from A to F.

* 901-990 is an A

* 801-900 is a B

* 701-800 is a C

* 601-700 is a D

* 501-600 is an F

The dominant FICO score ranges from 350 to 850 with no letter grading system.

In both cases, generally, the higher the score the more likely you are to qualify for a home loan and the lower the interest rate and better the terms.

It’s not yet clear what this will mean for FICO and other scores. The new system is being marketed to lenders, but it’s up to them to buy in or not. That could leave some of the confusion the new score is designed to eliminate.

“This score provides a new and unique option to the marketplace. There will continue to be multiple scoring solutions in the market that meet business needs. VantageScore will compete on the merits of its consistent, predictive power,” the Big Three said in a prepared statement.

The three also said the same VantageScore model will be used across all three companies, but differences in scores can occur when one agency has underlying data that is different from another agency.

VantageScore was developed from a national sample of approximately 15 million anonymous consumer credit profiles pulled from across the three major credit reporting companies (five million from each source).

The big three claim the new score predicts the likelihood of future serious delinquencies of 90 days late or greater, based on a 24-month performance period.

Technorati Tags: IN

Depending how severe it is and how long it lasts, winter tends to reduce regular contact with your neighbors.

Even the kids won’t go out in very cold weather. The fact that the days are short and it’s already dark before people begin arriving home from work limits general socializing.

Springtime, with its warmer temperatures and lengthening days, reverses that trend, and already neighbors are beginning to congregate on the street to share news and to keep an eye on the little ones at play.

It’s during the more pleasant times of the year that things can get really unpleasant between neighbors. Cars parked in front of driveways. Noisy kids using the yard as a transit way. Stray cats and dogs. Stuff from dogs never cleaned up. Unmowed lawns or, what’s worse, lawns being mowed at 7 a.m. on a Saturday.

And let’s not forget construction work. The carpenter’s truck parked on the street, even if it isn’t blocking anything, is often considered an inconvenience even by neighbors whose lives aren’t being affected by the work being done on your house.

People who seem perfectly normal and friendly often behave in the most unexpected ways.

About 10 years ago, in my old neighborhood, we experienced what I could best describe as a well-focused tornado. The damage was limited to a narrow path running parallel to the telephone lines at the bottom of our backyards. The lion’s share of the damage was restricted to fallen trees and branches, although a couple of houses close to the path lost shingles and roof gutters.

The tree from one person’s yard fell on the adjacent neighbor’s deck, doing perhaps $500 worth of damage but delaying the planned party for the neighbor’s daughter’s graduation.

When the deck owner approached the tree owner about homeowner’s insurance compensation, the tree owner told him to take care of the damage himself.

“I’ve got my own problems,” the tree owner said.

The deck owner considered suing, but instead took care of the problem himself, and the graduation went on as scheduled.

About three weeks later, the tree owner was served with a summons by the city, at midnight, no less. It seems the deck the tree owner had built had been done without a permit. This was not unusual, since no one liked dealing with the city. The fact that the summons followed the dispute between the two neighbors so closely wasn’t lost on anyone.

In the same neighborhood, one homeowner’s yard was littered with trees that had fallen from the adjacent neighbor’s property. The homeowner assumed the removal costs herself, realizing that the tree owners were elderly and on a fixed income.

It takes all kinds to make a neighborhood. By the way, I was only an observer in both cases, but I was touched by the woman’s generosity as I was secretly glad the first tree owner got his comeuppance.

From the e-mails I receive, it’s clear to me that few homeowners know their rights when it comes to their relationships with their neighbors. If your neighbor’s tree doesn’t fall, but its branches are hanging over the fence and over your property, do you have the right to cut the branches, or should you ask your neighbor? What if the neighbor says no, and threatens you if you touch it? Do you have any legal recourse if talking doesn’t work?

It depends on where you live, says lawyer Cora Jordan in the fifth edition of Nolo’s Neighbor Law: Fences, Trees, Boundaries and Noise. Under something called “the right of self-help,” the neighbor can trim the dangerous branches up to the property line. If the tree owner decks the trimmer in response, then we get into more serious and criminal issues, such as assault.

The trimmer cannot go on to the neighbor’s property to trim the tree, however, unless it is necessary to avert danger; nor can he cut down the tree or do anything that will result in the death of the tree.

How the neighbors handle the branches issue probably are governed by the municipality. That’s why you should call the city or town before you act. You and your neighbor may be doing the right thing as far as the two of your are concerned, but the city can be that fly in the ointment.

Remember, when you buy a house, you buy a neighborhood, and your happiness is only as certain as the relationship you develop between you and your neighbors. Jordan’s observation about neighbors — “they wouldn’t be so bad if they didn’t live next door” — should not be your experience.

Technorati Tags: IN, real, houses

( February 7, 2006) — Home sales this year are expected to stay below the peak levels in 2005 but will remain historically strong, according to the NATIONAL ASSOCIATION OF REALTORS®.

David Lereah, NAR’s chief economist, says the sales slowdown has already occurred. “Right now, home sales are a little lower than projected, but they can be sustained around current levels,” Lereah says. “Sometimes people lose sight of the fact that real estate is cyclical. Even so, sales will continue at a historically high pace with modestly higher interest rates as the year progresses, and 2006 is forecast to be the third-strongest year on record.”

Existing-home sales are likely to decline 4.7 percent to 6.74 million this year, down from a record 7.07 million units in 2005, while new-home sales are expected to fall 8.5 percent to 1.17 million from a record 1.28 million in 2005; both sectors would see their third-best year after the totals for 2005 and 2004. Housing starts are seen at 1.87 million units in 2006, down 9.3 percent from 2.06 million last year.

The 30-year fixed-rate mortgage should rise to 6.9 percent by the end of the year. NAR President Thomas M. Stevens from Vienna, Va., says home sellers are making some adjustments. “It’s easy to understand that sellers have taken it for granted that it would be fairly easy to sell without much compromise during the recent sales boom,” says Stevens, senior vice president of NRT Inc. “Now that buyers have more choices, it’s even more important for sellers to seek advice from real estate professionals. Pros can recommend the right mix of improvements to maximize return, as well as bridge the differences between buyers and sellers that often arise in the negotiation process. Consumers should keep in mind that not all real estate professionals are REALTORS®, who subscribe to a strict Code of Ethics.”

The national median existing-home price for all housing types is expected to increase 5.0 percent this year to $219,200. At the same time, the median new-home price is projected to rise 5.7 percent to $250,900.

Inflation as measured by the Consumer Price Index is forecast at 3.1 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.9 percent this year. Growth in the U.S. gross domestic product is seen at 3.4 percent in 2006. The unemployment rate should average 4.8 percent this year.

NOTE: Minor revisions to monthly seasonally adjusted annual sales rates for 2002 through 2004 will be made when the January existing-home sales report is released on Feb. 28. Each February, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data for the past three years based on the most recent findings.

Additionally, within the next two months, NAR will revise national and regional median existing-home price data back to 1999. The fixed reporting sample of representative multiple listing services has been updated to reflect geographic changes over time so that the monthly samples for regional price measurements are as accurate as possible. The changes in price patterns will be consistent with previously reported data.

Technorati Tags: IN, real, estate, realtors

Question: I have rented a house in Texas for more than 10 years and would like to sell it as part of a 1031 Starker tax-free exchange. I plan to sell my house and purchase a rental unit near Virginia Beach. I have never occupied or used the Texas property and have exclusively rented it to various tenants over the years. My gross income has substantially increased over the years, thereby reducing the tax benefits of owning this rental property. I intend to rent the replacement property “beach” house during the summer months and also use it for 14 days or less during the rest of the year.

Am I permitted under the 1031 exchange laws to swap a rental unit for a “vacation home”? In other words, is this considered a “like-kind” exchange?

Answer: The specific answer depends on the use which you plan for the vacation home.

But first, I want to correct a misstatement in your question. Section 1031 of the Internal Revenue Code is the operative section which permits the so-called “Starker exchange.” You referred to it as a “tax free” exchange. This is not accurate. As has often been said, “Death and taxes are the only certainty in life”.

A Starker - 1031 exchange is not tax-free. It is best described as a “tax-deferred” transaction. When you sell your Texas house — which is called the “relinquished property” — the profit which you have made will be taxed at the Federal capital gains tax rate, which currently is 15 percent. You may also have to pay the applicable State or local tax. However, if you arrange to “exchange” the Texas property, and comply with all of the legal requirements for a 1031 exchange, the tax which you would have paid is deferred.

Let’s look at this example. You purchased the Texas property for $50,000. You will sell it for $350,000. For purposes of this example, we will ignore depreciation and any improvements which you have made. Your profit is $300,000. If you do not do a 1031 exchange transaction, you will have to pay the IRS $45,000 in capital gains tax.

However, if you exchange the property, and purchase a replacement property for $400,000, you will not have to pay the tax at this time. But the law does not give you a complete break. Even though you will pay $400,000 for the new property, the basis of the relinquished property becomes the basis of the replacement property — i.e. $50,000. Basis is defined as the original cost of the property, plus any improvements which you have made during the period of ownership.

Thus, when you go to sell the replacement property later, unless you engage in yet another 1031 exchange, you will ultimately have to pay the capital gains tax on all of the profit you have made. In our example, if you sell the replacement property for $550,000, your profit is $500,000 ($550,000 - 50,000), even though you paid $400,000 for that real estate.

Now back to your question. There is no statutory definition of “like-kind.” However, the IRS and the Tax Court have made it clear that the replacement property has to be real estate. This means that you can swap your Texas single family home for another such property, or any other kind of real estate. A house can be exchanged for an office building; a condominium unit can be exchanged for a vacant lot. A shopping mall can be exchanged for a farm. So long as the replacement property is real estate, it will pass muster with the IRS.

But a vacation home creates potential problems. In order to have a successful 1031 exchange, the law requires that both the relinquished and the replacement property be “held for productive use in a trade or business or for investment.”

Another section of the tax code (Section280A) creates special rules dealing with such properties. If the vacation home is not used by the taxpayer for personal purposes for the greater of (a) more than 14 days during the tax year or (b) more than 10 percent of the number of days during the year in which the property is rented out, it is considered investment property. Accordingly, you may be able to acquire the Virginia Beach property as the replacement property in your 1031 exchange.

However, it is my understanding that there are no reported court cases dealing with this issue. Thus, it is possible that some IRS auditor may consider that your personal use of the property — albeit less than 14 days and in compliance with Section 280A — defeats the investment purpose and would not honor the exchange.

Your best bet: at least for two years, do not use the Virginia beach property at all, so it truly will be rental property.

Keep in mind that when you sell the relinquished property, you must identify the replacement property within 45 days from the date of its sale, and you must actually take title to that property at the earlier of 180 days from the sale date, or when your income tax return for the year in which the property is sold is due. These are mandatory deadlines spelled out in the law, and cannot be waived.

A 1031 exchange is a valuable tool for any investment property, but must be done properly. Consult your tax and legal advisors before you make any commitments or sign any real estate contracts.

As the owner of over $5 million worth of quality real estate investments in the Indianapolis and the surrounding area, the Crager-Bartels Real Estate Team knows what it takes to own, rehab, purchase, and sell investment properties. Looking to invest in something other then the stock market? Let us sit down with you and discuss your real estate investing options. Check out pictures of some of the real estate we own at http://pictures.zionsvillehomesonline.com

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