What Every Farmland Seller Should Know

farm landSelling your farmland is a tough decision to make. You want to get a fair deal for the property you’ve worked hard on. You also need to make sure that it gets enough exposure to receive the right offers. Overall, you just want to maximize the profits you could make out of this transaction. And to do so would require knowing critical information, like a tax strategy.

For instance, doing a 1031 land exchange would allow you to skip paying tax on the sale, and use the proceeds toward a property you want, according to 1031 Exchange Place.

What is the 1031 Exchange?

When you set up a 1031 exchange before you sell your farm, you may not have to pay the 20 percent to 30 percent federal and state taxes. This would be the difference between the cost of your property and the sale price. So instead of losing much of the sale from your land, 1031 exchange allows you to keep the money and put it to better use.

This option, however, requires a set of criteria. One is that owner-occupied properties don’t count; you should only sell investment properties, like farmlands or offices and not personal residences. Two is that you must exchange your property with the same kind.

In addition, you can’t exchange stock that’s currently in a trade or other properties held for resale. Others include:

  • Interests in a partnership
  • Stocks, notes, or bonds
  • Certificates of trusts or beneficial interests
  • Other securities or evidence of indebtedness or interest

This process comes with deadlines and time frames that you need to follow. It’s best to work with professionals to assist you.

Sell to an Investor

Another factor you may consider when selling your property is your target investor. Selling your farm to an investor could be lucrative, and there is a demand for such a transaction.  Institutional investors coming from various sectors are putting money in farmlands across the US. Investors are looking to own hard assets, and farms offer this opportunity.

You must work closely with your potential investor to make sure that your deal is favorable for both of you.

The process of selling your farmland is crucial. You can seek help from professionals to make an informed decision, and make sure that you get the best deal.

Three 1031 Exchange Details You Should Know

Couple consulting a real estate professional

Couple consulting a real estate professionalMany people who know about Internal Revenue Code Sections never go past the 401(k). However, look a little deeper and you will come across 1031 exchange. A few who can navigate the complexities of the tax codes know that 1031 exchange is a tax deferment loophole associated with real estate investments. However, the scope is broader.

To put it simply, a 1031 exchange swaps investment assets or businesses, for others. Within 1031, you get limited tax or no tax at all. In effect, you change your investment’s form without the IRS recognizing it as cashing out. Nevertheless, there are some things you should bear in mind; companies such as 1031 Exchange Place provide guidance when pursuing a 1031 exchange, so you are not caught on the wrong side of the tax laws.

Considerations include:

Delayed exchanges

A traditional exchange is a simple swap of property between two property owners. However, the chances of finding someone willing to swap whose property is what you are looking are slim. Therefore, you can delay the exchange. Also known as a Starker exchange, a delayed exchange includes a third party who keeps the money after you ‘sell’ and then pays when a replacement property is found.

Designate replacement property

In a Starker exchange, if you receive the money, you spoil your 1031 exchange. The third party receives the money from the sale of your property. Within 45 days of that time, you must designate a property that you want as a replacement, in writing.

You can designate many properties

According to the IRS, you can select many properties, but you must close on one of them in the end. You can also do the same if the properties are a fair market value compared to the property you sold. The properties must not exceed 200% of the total market value of all properties involved in the exchange.

There is no limit to the number of times you can use 1031. You can use it to change real estate investments avoiding taxes until you eventually sell them. However, be careful to use the services of a professional who observes all the rules applicable to property that depreciates.

The 1031 exchange rule is a good way to get around tax commitments, but make sure you have good advice and guidance before you start.

How to Get Your Finances Ready for a Loan

Coins and paper bills

Coins and paper billsMost people have taken out loans at one point in their lives. Some may have managed it well until full payment, while some might have gotten into trouble for it. That’s why good planning is key whenever a loan is needed.

Monroe Funding Corporation believes that applying for loans should be hassle-free. And one way to achieve that is by preparing yourself and your finances even before looking at an application. Here are five steps to get you on the road to a worry-free loan.

1. Review your credits.

While some loans don’t have credit checks, most loans will require you to have good credit standing before you can get approved. Besides, whether it’s required or not, good credit scores are always an advantage.

2. Review your current debts.

How’s your debt-to-income ratio? Making sure that you’re capable of taking out another loan is crucial. Review all your monthly debts against your monthly income and take note of the available funds that’ll be left after deduction.

3. Evaluate your expenses.

Are there monthly expenses you can cut down to ease the burden of your loan payments? Let go of monthly subscriptions or downgrade plans to save up more money for payments.

4. Determine an estimate of payments.

Once you’ve done numbers 1 to 3, you can now determine an amount that can be available for payments once your loan is approved. Be sure still leave funds for emergencies.

5. Organize paperwork.

All types of loans will require some kind of paperwork. Read and understand all the requirements for the loan your applying for and make sure everything is prepared and in one place before filling out the application.

Loans can never be completed overnight. You need to be prepared to answer questions, present documents and talk to financers before you get approved. If you follow these steps, you can ensure a worry-free loan process to fund your needs.

Mortgage Evaluation: What Questions to Ask

Couple reading a document

Couple reading a documentIf you’re like most buyers, you will probably have to borrow money to purchase a home. There are a number of financing alternatives, with mortgages as the common choice. Home loans come are available in different lengths, interest types, and terms.

When shopping for a mortgage, it is deal to check with different sources or lenders. This is because loan availability, down payment requirements, interest rates, and closing costs will vary. It is also important to work with a reliable lender.

What to Check

Primary Residential Mortgage, Inc. and other mortgage companies in Oregon noted that you should watch out for those who use high-pressure sales tactics to encourage you in getting a loan more than what you can afford. You can better evaluate a mortgage by asking the following questions:

  • How much is the required down payment?
  • What are my interest rates going to be? Can they change?
  • How much will my monthly loan payment be?
  • What are terms of the loan?
  • What are the hidden costs?
  • Is there a prepayment penalty?

Comparing Loans

If you’re considering an adjustable-rate loan, you can compare loans better with these questions:

  • What is the cap or the maximum interest rate increase over the life of the mortgage?
  • How do adjustments work? What can happen to my payments?
  • What are the risks? What can I do to prepare for them?
  • Can my loan balance increase?
  • What are the good points? Do they outweigh the risks?

You can use a mortgage calculator to know the estimates of your monthly mortgage payment as well as the amount of house you can afford. It is better, however, to work with a reliable to lender learn more about your options. Getting a pre-approval is also ideal, so you’ll have an edge over other buyers when house hunting or buying.

Every buyer is different, so it’s important to find one that suits you best. Research about different loans, costs, and processes involved to make an informed decision. Note that a bad loan can cost you thousands of the money in the long run.

3 Signs You Have Found the Perfect Property to Buy

a couple buying a homeWhen you are buying a house for the first time, you may find that you have some fears about making the wrong decision. You are not alone. Buying property is a huge decision, one that you cannot afford to make a mistake, because it may cost you.

Here are three signs that a home is perfect for you.

You can afford the total cost

The property broker will usually quote the price of a property, but not include any other charges you may incur in the purchase. It is up to you to find out what these costs are. Much of this information is usually readily accessible.

To find out how much stamp duty you will need to pay, for instance, you can use a stamp duty calculator available online.

The house feels comfortable when you enter

You will know you want to live in a home within the first few seconds of opening the front door. If the house feels warm and inviting, then it is probably the one. A suitable home invites you to explore.

You do not feel funny about walking into the bathroom, but feel nice about opening the shower door and stroking the marble.

You can already see where everything will go

You will have no trouble envisioning the arrangement of your potential home. If you already see how perfectly the bed will fit a certain wall the moment you enter the master bedroom, you may just have found the right home.

Take a look at the living room. Can you already see where the tree will go come Christmas? Then you are hooked.

There something about a house that tells you that it is the right fit for you. By evaluating how you feel about the property as you go through it and being sure you can afford its overall cost, it becomes easy to know whether this is your home or not.