Top Reasons to 1031 Exchange – The Power of the 1031 Exchange

Commercial and Investment real estate transactions have been moving at a brisk pace and a considerable percentage of those sales have been structured as 1031 Exchanges, allowing sellers to defer taxes otherwise due in the year of sale. Often the taxes deferred are used to repurpose or improve the replacement properties. This helps to create jobs and stimulate the post pandemic economy.

Depending on your circumstances and goals, it may be a good time to re-assess, then reposition your portfolio utilizing a 1031 Tax Deferred Exchange. A 1031 Exchange permits an investor to defer the federal and state capital gains tax, gain due to depreciation, net investment tax and even some state-imposed non-resident withholding taxes. That can be upwards of 25-30% of your gain, equating to thousands of dollars instantly saved and used to reinvest in new investment property through the Tax Deferred Exchange.

We asked our own Patricia Flowers, an industry veteran with over 20 years of experience who consults with hundreds of taxpayers each year ranging from owners of vacation cottages to CFOs of Fortune 500 companies, to explain this year’s surge of interest in 1031 Exchanges. Here are her top 5 reasons to exchange:

APPRECIATION

There is a very good chance your property has appreciated in value, making it a great time to sell. A 1031 Exchange affords you the opportunity to preserve your equity, keep the proceeds you would have set aside to pay taxes and instead deploy the funds to the purchase of new real estate with greater potential. Keep your equity working for you.

CASH FLOW

Your apartment building, shopping center, commercial, industrial building, investment condo, single family rental or other investment property may not be yielding the returns you expected. Rather than taking the time and personal funds to physically improve the property hoping for a small increase in rents, consider selling it now and exchanging into new property which may be in a better location, allow more depreciation, generate higher rents, etc. This may immediately increase your cash flow.

DEPRECIATION

Each year taxpayers are eligible to take depreciation deductions on their commercial/investment property until it is fully depreciated. It is a benefit to you at the time, but 25% of that depreciation is recaptured by the federal government when the property is sold. This tax can be deferred by utilizing a 1031 Exchange to purchase new property.

DIVERSIFICATION

Many think that the IRS “like-kind” requirement forces taxpayers to exchange into the same type of property as they sold. Not true. A taxpayer can mix and match property types, as long as the property is held for productive use in a trade, business or for investment. Therefore, a taxpayer can sell a multi-family and purchase a vacation rental, or sell an apartment building and purchase commercial. Land and buildings, perpetual easements, leaseholds, tenant-in-common (TIC) and Delaware Statutory Trust (DST) interests are all qualified properties for an Exchange.

In fact, you can sell one property and deploy the cash proceeds towards down payments on two or three replacements through a single exchange to grow your real estate portfolio, thereby hedging the investment risk inherent in a single property. Alternatively, you can consolidate funds from the sale of multiple properties and exchange for one larger investment purchase. A 1031 Exchange gives you opportunity to maximize your investments.

ESTATE PLANNING

Rather than sell a property outright, pay the 25-30% in taxes and have only the remaining funds for deposit into your low rate savings account to pass on to your heirs, you could exchange. If you are holding investment property that had been part of a 1031 Exchange, upon your death your heirs get the stepped-up basis. All the built-in gain disappears upon your death. What that means is that the value of the property at the date of death would pass through the estate to your heirs. If they decide to sell for that same appraised value, there would be no capital gain for them to owe tax on and the profits are theirs to do with what they wish, which a great benefit to pass on.

Why a Qualified Intermediary?

The IRS regulations state the taxpayer cannot have actual or constructive receipt of funds in between the sale and the purchase, and still claim tax deferred treatment. The Qualified Intermediary (QI) is the neutral third party to structure the 1031 Exchange on behalf of the taxpayer. As the largest Qualified Intermediary in the country, investment owners and advisors depend on IPX1031 to help them realize the benefits of participating in an IRC Section 1031 Tax Deferred Exchange. Although the QI’s main focus is to actually facilitate the exchange and control funds between the sale and purchase, at IPX1031 much of our role takes place prior to the exchange itself. We work in conjunction with clients, brokers, tax and legal advisors to guide them through the specifics of the Code, then apply a strategy to the taxpayer’s specific scenario.

With the current market moving as it is, an understanding of Section 1031 is essential to creating opportunities for investors looking for options to reposition assets, generate more cash flow and protect estates. Don’t “just pay the tax” because you think it’s the lowest it will ever be. Keep your equity and let it work for you.

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5 Steps To Selling Your Land

No, selling land is not just like selling a house, and if you’ve acquired land that you are ready to sell you will want to follow these steps to maximize your market value and get the land sold.

1. Research

Depending on how you acquired your land you may or may not know all of the aspects affecting the value of your property. Doing the basic research to better understand your property and the factors that may be attractive to buyers is where to start. It is good to know a little about the history of the property you own, and it may even become a selling point if you can connect your property with some noteworthy historical event. You can usually find out public information about previous owners with an online search of the county property assessor’s office. If the land you own has been in your family for generations you may be able to tell potential buyer’s about the usage of the land over time and how your family came to acquire it.

Other aspects that will affect how you price and market your property include zoning, liens and deed restrictions, access to sewer, topography, and the presence of water in the form of creeks, streams, springs, and ponds. Try to have some basic understanding of these factors first and then form a general idea of what uses may be appropriate for your land and why someone might be interested in purchasing your land. The biggest question to answer early on is – What use will bring the highest value to your property?

2. Work With a Land Agent

An agent experienced in land transactions in your local area can be a great asset to your research efforts and should be most knowledgeable about the market conditions affecting your property. A good land agent will be able to help you in understanding the highest and best use of your land, as well as have a list of potential buyers in their database.

Selling land requires unique expertise, so just hiring a residential agent that you know is generally not the best in terms of the experience needed for the competent handling of land marketing and sales. A good land agent will understand local zoning codes and have existing relationships with developers in the area that may very well be your most likely buyers.

The biggest difference between selling homes and selling land is that the land market in general is much less active than the home market. This doesn’t mean that your land won’t sell, it just means that it is expected to take longer to sell land in general than a property that has already been developed for a specific use. Patience is key when selling land.

3. Price

The most important decision to make when bringing your land property to market is the initial listing price. Too high and your property will sit there for months or even years with no action. Too low and obviously you are giving away money if you don’t understand the full value of your property before putting it on the market.

You need to understand your own urgency level when it comes to setting a price for your property. If you are trying to sell quickly then don’t overprice the property. If you have all the time in the world and are looking to only maximize the long-term value of the property then maybe you can be a little more aggressive in setting a higher price.

Understanding the recent history of land values in your local market provides you the most relevant information about the current market value of your property. Be realistic about your price in comparison with the recent sales history in the area. If your listing is competently marketed and still sits on the market for months with no inquiries from potentially buyers then you are probably overpriced.

4. Know Your Buyer

Once you have completed your research and partnered with a local land expert to determine your market value you then want to get a full understanding of the most likely buyers of your property. While it is not bad to cast a wide net when marketing a property it can be much more effective in land real estate to target your marketing efforts to the most likely buyers for the highest value uses of your property.

For example it is key to determine if the best use of your property will be for commercial or residential purposes. Marketing land for commercial use where traffic count is often a big selling point is much different than marketing land for residential use where zoning density would be a key factor.

Buyers will want to know if their intended uses for the property are feasible and profitable. They will need to understand the zoning, deed restrictions, and any liens or easements affecting the property. Of course buyers have to do their own due diligence, but providing all the info you can is best when working with buyers interested in your property. Having a recent survey of the property is always a plus.

5. Market Effectively

These days almost all marketing for land is done with road signage and Internet marketing. The Internet is the dominant marketing tool you have in getting your land sold, and if your property is on a low traffic count road where signs have less of an impact then you will want to focus your efforts even more online. Drone photography is now the standard when it comes to marketing land property online. Have your property looking it’s best and get drone photography to highlight the most alluring aspects of your land.

Always focus your marketing efforts on the highest value uses of your property. You want to attract the buyers that are willing to pay the highest price for your land. Clearly highlight all the aspects of your property that would be of most interest to a developer who specializes in the highest uses that you have identified.

In conclusion, selling land presents unique challenges. Research your property to understand the basic information. Then partner with a local land expert to determine the highest and best use of your land. Based on this information determine the appropriate initial listing price factoring in your own urgency level in selling the property. Then target potential buyers and market your property providing the most relevant information you can to qualified interested parties. By following these steps you can sell your property in the least amount of time and maximize your property’s value.

We Can Help

Whether you’re looking to lease, buy, or sell commercial property, now is still the time to do it in Atlanta. The Meridian Real Estate Group has been assisting commercial clients for well over a decade and would love the privilege of earning your business. Our goal is not just to help our clients with a transaction, but to support the building of financial legacies through real estate. Call us today at 678-631-1723 or visit us online at www.themeridianway.com. We look forward to serving you.

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Sellers: What To Do When You’re Under Contract But Haven’t Found Your New Home Yet

So you’ve decided to list your home knowing the leverage you now have as a seller is the most robust it has ever been (and may ever be) in your lifetime. If you’ve spent a little bit of time and money making your house move in ready, you’re practically guaranteed to sell it within days of it hitting the market.

But there’s a catch. As a seller you hold all the cards. As a buyer, things are a little more challenging. If you haven’t gone under contract on your next home before selling your current one, what do you do? In the past, short term apartment rentals may have been an option, but with tight housing inventory across the board, it’s time to get creative.

If you’re single, your options may be easier. One of our clients sold his home in Buckhead in a couple of days and hadn’t decided where he even wanted to buy yet. He was able to stay with a number of friends for a while as we navigated his home search through different areas of town to ultimately find him the perfect fit.
If you’re married or have kids, family may be an option if they live in town. What better time to have an extended stay with Nana and PawPaw if they have the room? Or maybe siblings who would be willing to let you share their space for a bit.
Facebook is a great resource for reaching out and asking for recommendations of short-term housing options. Be sure to ask on both your personal page as well as any groups you may be a part of as well as Facebook marketplace.
Another possible resource is Air BnB. There are some that are available for longer terms and you may even be able to negotiate the price down due to the extended time period you will require.
Extended stay suites may also offer an alternative. There are some that are quite nice and the ability to pay month-to-month will provide you the luxury of time as you search without feeling like you’re crowding anyone else’s personal space or fear of being asked to vacate.

Although affording you the opportunity to not be rushed into purchasing your next home, all of the above options will require you to move twice essentially. And while there may be room for your furniture and belongings with friends or family, there won’t be with the other choices in which case you will either rent something like PODS or a short term storage facility unit.

But what if the above solutions can’t or won’t work for you? Don’t despair, your real estate agent now gets to step in and do some serious negotiating on your behalf! In this market with a good home, you will have multiple offers and thus leverage to ask for what YOU want and need.

Include the leasebackas a part of the Purchase and Sale Agreement (also known as a sale-leaseback, rent-back or post-closing possession agreement), in which you close the home sale like usual and then become the purchaser’s temporary tenant for a period after closing. Your rent covers the cost of their mortgage payment. This scenario requires a purchaser willing to work with you, but in today’s market this is becoming more common to win the deal.
Include in the special stipulations a flexible closing date which will allow you a longer period of time to close in order for you to find a home. This can be anywhere from 60-90 days or longer depending on your buyer’s situation. We were working with a client who lost out to another buyer not because they offered more money, but because they were extremely flexible on their closing date which allowed the seller to find their new place first.

In normal markets, the above options wouldn’t be as readily available. But we are most certainly NOT in a normal market. The great thing about these is they allow you to look for your new residence from the comfort of your former home. No shacking up with friends, depending on in-laws, storage facility bills or double moving charges.

Hopefully you feel more confident in listing your home as you now have multiple options for doing so without feeling rushed to buy your next one. Happy selling!!

By Holly A. Morris, Realtor

The Meridian Real Estate Group

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Bubble Trouble: The Impending ‘Bubble Burst’ Is Mythical At Best

For those who believe an impending doom is on the horizon, here is some bad news: It’s not going to happen. In this second of two opposing opinion pieces on the housing crash, Matthew Gardner shares why we won’t see any mythical bubble bursting.

This is part five of Inman’s Bubble Trouble series on the U.S. housing market in 2021. Don’t miss yesterday’s counterpoint to this essay: The housing crash will be even worse than I predicted.

On face value, I can certainly see why some are worried about how much home prices have been escalating — not just during the pandemic period, but since housing prices started recovering back in 2012.

Home price growth has been outpacing wage growth for a long time, with median prices up more than 113 percent since January 2012, while wages have only risen by a far more modest 30 percent.

Previous installments in Inman’s Bubble Trouble series:
• Bubble Trouble: Is the market on a collision course with disaster?
• Bubble Trouble: How agents are managing client anxiety amidst bubble talk
• Bubble Trouble: 4 stats that will give you hope (and 4 that won’t)
• Bubble Trouble: The housing crash will be even worse than I predicted

Moreover, in 2020, prices increased by more than 9 percent and were up by a record-breaking 17.2 percent. between March of 2020 and March 2021. As a result, mumblings of the imminent bursting of a new housing “bubble” are now being heard far and wide across the US.

I’d like to start off by addressing those who believe impending doom is on the horizon. I am afraid I have some bad news; it’s not going to happen.

While it’s easy to argue that such a rapid increase in home prices is sure to end badly — as it did in 2008 and 2009 — you would be wrong to conflate these two time periods. Today’s housing market is markedly different from the one we saw back in the 2000s.

Allow me to explain why.

For more than six years, we have suffered from a woeful lack of homes to buy in the U.S., while simultaneously adding almost 10 million new households. Obviously, not every new household translated into a new homeowner, but given demographic growth and the ongoing shortage of inventory, it was enough to tip the scale between supply and demand, resulting in rapidly rising home values.

So, why are there so few homes for sale?

This is probably one of the questions I get asked most. The first reason is that Americans aren’t moving as often as they used to, which limits supply. In the early 2000s, we used to move an average of every four years, but the number today is over eight years. If there is less turnover of homes, supply remains scarce, and prices rise.

Without a doubt, the lack of credit quality is the most significant difference between today’s market and that of the 2000s, but gone are the days of “low-doc” or “no-doc” loans that allowed buyers to essentially make up their income to qualify for a mortgage.

Instead, according to Ellie Mae, what we saw in 2020 was 70 percent of mortgage originations going to borrowers with proven FICO scores above 760, and the average credit score over the past five years was a very high 754.

Although sub-prime borrowing still exists — and there is a rational place for it — the share of borrowers with a credit score below 620 was just 2 percent last year. For comparison purposes, it was 13 percent in 2007.

It’s also worth pointing out that back in 2004, a full 35 percent of mortgages were ARMs, or so-called “teaser loans.” When the rate reverted on these loans, it forced many homeowners into foreclosure because they could no longer afford the monthly payment. Fast forward to today, the share of ARMs in March of 2021 was just 2.4 percent.

Finally, I like to look at mortgage credit availability, and the Mortgage Bankers Association has some very rich data on this. The MBA’s index, which is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.), acts as a very useful bellwether when it comes to the health of the housing market.

Although the index has been rising since last fall (suggesting more freely available credit), it is still 85 percent below where it was in 2006, suggesting that lenders remain cautious.

The bottom line is that credit quality and down payments are far higher today than they were in the pre-bubble days, and mortgage credit supply remains very tight relative to where it was before the collapse of the housing market.

So far, I am not seeing a correlation with the “bad old days” — are you?

It’s irrefutable that home prices have been increasing at well above average rates for several years now, and that is cause for concern, but not because of any impending bubble. Rather, what concerns me is the impact rising prices is having on housing affordability.

Current homeowners are in good shape and, according to the most recent Federal Reserve Financial Accounts of the U.S. report, are currently sitting on over $21 trillion in equity.

Furthermore, the latest data from Attom Data Solutions indicates that over 30 percent of homeowners had at least 50 percent equity in their homes at the end of last year. But this doesn’t help first-time buyers who are so critical to the long-term health of the housing market.

Keep in mind, there is a wave of first-time buyers coming; over the next two years, 9.6 million millennials will turn 30, and Gen Z is close on their heels. Given where prices are today, the question should be: Where will they be able to afford to buy?

This, in my opinion, is a far bigger issue than any mythical bubble bursting.

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Everything You Need To Know About Getting A Land Survey

Before purchasing or selling land, you should have a professional survey the area. A land survey tells you a lot about the property. Without a land survey, you can’t make informed decisions that will help you understand what the property offers and its full value.

The Top Benefits Of A Land Survey

Crucial information that you will learn from a professional land surveyor about a property includes:

A property’s precise boundaries.
The specific locations of structures, additions, and improvements.
Any slopes or other geographic features that could affect the land’s use.
The location of easements and utilities.
Whether any of the land is in a floodplain.

How Land Surveyors Do Their Jobs

Surveying land means taking extremely accurate measurements over long distances. Today’s surveyors use technology to improve accuracy and save time. Surveyors often choose their tools according to the project’s needs. Popular tools include:

Theodolites, optical instruments used to measure angles.
Altimeters that measure slopes.
Total stations, electronic distance measurement devices that also help when leveling surfaces.
Global Positioning Systems (GPS) that can use satellites to take extremely accurate measurements.
3D scanners that can capture changes in elevation.

Modern land surveyors also use software developed to combine information from several devices. The software makes it possible to create detailed land survey reports that are easier for ordinary people to read.

Why You Need The Benefits Of A Land Survey

Some of the benefits of having information from land surveys are pretty obvious. For example, you need to know the precise property lines before you can determine a plot of land’s acreage and value. Some of the benefits, though, aren’t so obvious to people looking to buy or sell land.

Deciding Whether Land Fits Your Intended Use

A property’s features determine what you can do with the land. If you want to start a vineyard, then you may need sloped land that drains well.

Even the direction of the slope can matter. People who want to start orchards, for instance, need to pay close attention to whether sloped land faces north or south. When growing apples during autumn, you want trees to grow on a northern-facing slope if possible. During the spring, your trees will get better light on a southern-facing slope.

Knowing Where You Can Build Structures on Land

Building structures like houses, barns, and sheds can improve the land’s usefulness and value significantly. You can’t, however, just start building a large structure without knowing things like the land’s slope and the location of underground pipes and utility lines. The moment you break ground, water could come gushing from the hole making a costly mess. Suddenly, you have to delay your plans and spend money repairing the broken pipe.

A land survey provides the information that you need to choose the right locations for your structures. What you learn about your land could help you save money and finish your construction project faster.

How To Find A Credible Land Surveyor

You can’t accept anything less than perfection from your land surveys. A survey that doesn’t correctly identify the location of underground electrical wires could have serious consequences when you start adding structures to your property. Inaccurate measurements could also lead to lawsuits with neighbors who want to protect their property lines and leave you short-changed on your acreage.

Don’t take any chances when hiring a local land surveyor. Instead, talk to a qualified land expert who can recommend credible land surveyors in your area.

Qualified land consultants work with qualified land surveyors frequently to ensure the land transactions the handle go smoothly. They know who you can and cannot trust to do a good job. Also, they know enough about land surveying that they can spot the difference between decent and excellent surveyors as well as work with a surveyor to make sure all of your needs are best met.

Find a land consultant in your area to help you hire a professional land surveyor who knows how to provide the detailed, accurate services you deserve for your money.

Credit To Realtors Land Institute

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6 Tips for Buying A Home in a Seller’s Market

Buying a home can already be a challenging experience, but in a seller’s market, it can at times feel hopeless. In addition to the higher prices and the need to make quicker decisions, you’re likely to face some serious competition from other home buyers. Here are some tips to help you navigate through this home buying season:

Get Pre-Approved

By obtaining a pre-approval for a mortgage before you start your home search, you’ll know how much buying power you really have. Not only will a pre-approval give you a good price range to work with, but it can also make seller more likely to choose your offer. In the perspective of the seller, they are faced with multiple bids; but pre-approved offers typically stand out from the rest because it indicates a buyer is prepared and ready to buy.

2. Choose a Sharp Real Estate Agent

While it’s already difficult to navigate a real estate purchase without a real estate agent in the normal markets, it’s going to be extremely difficult to get the house you truly want without a great real estate agent in a seller’s market. You should be looking for an agent that not only has proven their expertise of the local markets, but someone who is highly responsive, efficient, and will work hard for you to get your dream home at the right price.

3. Establish Price Discipline

If and when a competitive bidding war happens, it’s very easy to get carried away. Before you start shopping around for homes, set firm and realistic limits for yourself on how much you’re looking to spend. In this competitive seller’s market, its likely you’ll need to make quick decisions and it’s much easier when you have an agreed-on price in the back of your head before going into these situations, especially if you’re going through negotiations with another person like a spouse.

4. Don’t Be Picky

When the demand for homes is high and the inventory of homes is limited, it’s not the best time to be looking for your “dream home” that checks all of the boxes of your desired features. You will need to prepare yourself to adjust your expectations so you are not disappointed by the reality. Only make exceptions to your criteria for things that can’t be changed. For example, you can renovate the kitchen or add on another room, but you can’t change the home’s location or lot size. These are important things to consider when shopping for a home in a seller’s market.

5. Forget About Lowball Tactics

In a buyer’s market, you could possibly get away with submitting an offer that’s well below the asking price. But in a seller’s market, that tactic will be nothing but a waste of time for you and all parties involved. Competing buyers often bid above the initial asking price to ensure they will get the home, so if you want to stay in the game, your bid should be close to if not higher than what the seller’s asking price is. Talk with your real estate agent about the best bidding and pricing strategy.

6. Consider if New Construction is Right for You

You may start your home search with the intention that you’re looking for an already existing home on the market. But, if you’re not finding the home you want currently in this seller’s market, consider looking into new construction in your area. You may find that the new construction in your area has better pricing or availability. You may need to weigh factors such as your work commute or your children’s school commute if the new construction is farther away than the areas you were looking previously.

By our Preferred Vendor, Choice Home Warranty.

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Rising Lumber Costs Add $36K To New Home Sales Prices

The battle between supply and demand has hit the lumber industry hard, as mills struggle to keep up with demand and homebuilders push the costs to buyers.

Low mortgage rates, booming buyer demand and stifled inventory aren’t the only culprits behind soaring home prices, according to two reports by The Wall Street Journal and CNBC published over the weekend. Sales contracts for two-by-fours reached an all-time high of $1,500.50 per thousand board feet in May, WSJ reported, with on-the-spot costs surging to $1,290.

Outside of causing headaches for homebuilders who are feverishly working to boost inventory, CNBC said the bump in lumber costs has tacked an extra $35,872 onto the price of an average new single-family home — a piece of unwelcome news for buyers already struggling to navigate a red-hot market.

“We have seen, over the last four or five months, what I have never seen in my career before, is lumber to move to the level it has,” Taylor Morrison CEO Sheryl Palmer told CNBC on Friday. “We are very anxious to see full capacity back domestically. I think if we can get the full supply on, we can get lumber to level out a bit.”

National Association of Home Builders Chief Economist Robert Dietz said a dearth of domestic lumber supply, former President Donald Trump’s 24-percent lumber tariff against Canada, and the added pressure to ramp up housing starts have contributed to the rising cost of homebuilding, which is being shouldered by homebuyers.

“Clearly, increasing the cost of imports via tariffs does not help the situation,” Robert Dietz told CNBC. “We need to do everything that we can to increase domestic supply, including producing more domestic lumber, as well as resolving the trade dispute. It is a matter of housing affordability.”

Pricing service Random Lengths said lumber prices are far from their peak, as lumber mill owners report backorders well into June and July. The locked-in price for June lumber deliveries reached $1,376.50 per thousand board feet on Friday, with a slight decline projected for lumber sales contracts not coming until September ($1,235).

“Absent a significant increase in mortgage rates or a Covid resurgence, it is hard to imagine what could cause lumber demand to drop and prices to moderate in the foreseeable future,” PotlatchDeltic Corporation CEO Eric Cremers told WSJ. “Builders are reporting record home sales, and they’re going to need that wood to build those homes.”

Even as lumber producers fight their way back to peak production levels, there are other culprits sneakily raising home prices: the cost of gypsum (a.k.a. drywall) is up 7 percent year over year, and steel costs 18 percent more than it did a year ago.

Copper has experienced an even higher ascent, with prices increasing a record 27 percent annually. Lastly, single lot costs have risen 11 percent as availability dwindles.

“There’s a literal land grab going on as builders are scooping up lots to better match housing supply with demand,” Zonda Chief Economist Ali Wolf told CNBC of the single-lot shortage. “The lot supply shortage is real, and it is causing prices to rise and builders to move further into the suburbs.”

For now, Palmer said ramping up domestic lumber supply is the best avenue for tempering new home costs and providing homebuyers with much-needed relief.

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Inventory Insanity: The Secret Economic Forces Fueling The Housing Shortage

Many consumers may not realize it, but they’re increasingly competing against institutional investors and contending with soaring building costs

Agents are exhausted and consumers are stretched thin. But despite everyone being fed up, the ongoing housing supply shortage drags on with no end in sight.

As Inman has previously reported, the problem is multifaceted. The coronavirus pandemic, for example, has reshuffled job markets. And at the same time, a years-long building shortfall and wave of millennials hitting homebuying age has further exacerbated the problem.

But those aren’t the only issues. In fact, there are multiple other forces that have, perhaps inadvertently, conspired to make housing both more scarce and more expensive — but which are also largely off the radar of most consumers. Despite their lower profile, though, these forces are having a tremendous impact on the housing market right now.

For our purposes here, we’ll focus on two such forces: the soaring cost of building materials, and the spiking interest in housing among investors. Together, these two things are major contributors to today’s housing market, and the lack of inventory that is sweeping so many markets.

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Change of Use: Investing in Commercial Real Estate Post Pandemic

The COVID-19 pandemic has fundamentally changed the commercial real estate market. It has changed how commercial real estate will be developed and used. Certain market segments like warehouse space and distribution centers are actually thriving while other segments like retail and hospitality have seen demand drop drastically. It has been noted that the pandemic didn’t actually create new trends, but acted as the catalyst to quickly accelerate pre-existing market trends.

As most savvy investors know, in times of great uncertainty there is opportunity, and the post pandemic commercial real estate market will exemplify that in much the same way as the economic crash of 2007-2008 did for residential real estate investors. There will be great risk involved, but for those willing to take on the risk there will be the potential for rapid and long lasting growth.

The key phrase for those investors looking to profit from dropping commercial property values will be: change of use. The potential for big profits will be largely found in properties that served one purpose before the pandemic but are now ripe for a change in use to realize their highest and best use going forward. These opportunities will be plentiful as spaces once best used for retail and/or office locations will be re-evaluated to see if a more profitable use is now the wisest course of action. Medical office, industrial, and multifamily housing in the suburbs are all uses that are likely to replace spaces once used primarily for retail and office.

The key to commercial real estate values are businesses that are able to pay rent. Of course, many businesses, especially retail and restaurants, have not survived the last year. Entrepreneurs are not likely to jump right back into the retail and restaurant business in high numbers. Investors in commercial real estate will have to read the tea leaves during the next 18 months, but if they get it right there will be many stories of buying low, rezoning the property, and then selling at a much higher price than the previous property use would have commanded.

Obviously the pandemic has wreaked much pain on our society, spreading death and anxiety for over a year. We are hopefully through the worst of it now. There will be opportunities for those willing to take the risk. The post pandemic commercial real estate market will not be the same as it was before, that much is certain.

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DIY Projects That Add Value to Your Home

Regardless if you are looking to put your home on the market this spring or planning to sell further down the road, there are so many home improvements projects you can do right now on your own to add value to your home. A well-informed and responsible homeowner keeps track of all remodels and updates over the years, and will also be aware of the projects that can provide the best return on their investment.

The average return at resale for home improvement projects is 63.7% of a project’s cost if the home is sold within a year, according to the Remodeling Magazine’s 2020 annual Cost vs. Value Report. Even if you aren’t looking to sell your home anytime soon, according to the National Realtor Association’s 2019 Remodeling Impact Report, after remodeling, 74% of homeowners had a greater desire to be in their home, 65% had increased enjoyment in their home, and 77% felt a major sense of accomplishment when they think about their completed project. Continue reading to learn some easy DIY home improvement projects whether you are selling or staying put this spring.

Deep Clean and Declutter

A good deep clean and declutter of your space is a cheap and easy way to keep your home looking it’s best. If you’re feeling overwhelmed or don’t know which DIY project to start with first, begin with a deep clean. Not only will this help you feel more at peace being in a clean and fresh space, but performing the deep clean will allow you to notice parts of your home you never noticed before; like the outdated popcorn ceilings in your bathroom or that your kitchen cabinets have a lot of chips and scratches in them. Clearing up clutter makes deep cleaning that much easier, so make sure any visible clutter is tucked away in its correct spot or in a closet before starting your deep clean. Start high; ceiling, high light fixtures, ceiling trim, and ceiling fan blades. Then go low; window and door casings, walls, baseboards, window and door glass, doorknobs, and whatever else you feel that you don’t normally clean on a routine basis.

Paint the Interior

A fresh coat of paint, even if it’s the same color as it previously was, brings vibrance to any room and will make it feel like new. Newly painted rooms add value by providing a clean and updated look for potential buyers. Painting your home’s interior is a very cost-effective home improvement project, and can be accomplished by any homeowner willing to take on the task. Make sure that you properly clean and prep surfaces before painting, such as taping edges and doorways down. Apply a couple coats to make the new paint look vibrant and consistent. If you are looking to sell your home, stick with neutral colors when choosing your paint so it will appeal to a larger number of people.

Refresh Your Bathroom

An outdated or boring bathroom can really take away from the room’s overall style and feel. Giving your bathroom a quick refresh doesn’t need to be expensive. Upgrade old or outdated light fixtures, outlets, knobs, and pulls. Usually, you will just need a screwdriver to be able to replace these types of items This simple project won’t require too much of your time but will yield a big difference. If you’re thinking about painting the bathroom or going with another color scheme for your bathroom accent pieces, don’t be so quick to sell or throw out your existing bathroom décor. Spray paint is fairly cheap, and comes in so many colors and textures, too. For example, if you’re looking to change the accent pieces in your bathroom from white to black, don’t waste your money buying a new black mirror frame, instead, take that white mirror frame and spray paint it black for a fraction of the price.

Refinish or Paint Cabinets

If painting your interior walls wasn’t enough of a challenge, consider taking on the project of refinishing or painting your cabinets. This project can be more time consuming, and requires a little bit more skill, but it is a great project to take on that will add value to your home. It’s a fantastic way to completely transform the look and feel of a kitchen. Before putting on a stain or new paint, you’ll need to start sanding the cabinets down to remove any existing finish or paint; this is best done by removing the cabinets from the wall first. It’s also not a bad idea to replace or polish up any worn-out knobs or pulls to your cabinets for that brand new look.

Replace Flooring

Especially if you’re trying to sell your home, it’s a good idea to replace or spruce up your floors if they are outdated or worn out. Homebuyers prefer hard flooring options compared to wall-to-wall carpeting. And while the idea of removing carpeting or refinishing wood floors on your own can seem like a daunting task, this DIY project can be accomplished with the correct tools, budget, and time. Be prepared to dedicate some time to removing the existing carpet or other flooring material, as well as preparing the space and installing the new flooring. New wood floors or even high-quality vinyl or tile floors can deliver a significant return on your investment and is definitely worth the time and money spent.

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Home Staging Tips for This Spring

Spring is the season of change and transformation. Spring brings sunshine, new growth and a fresh outlook on the year ahead. While you can’t change the location of your home, you can change its condition to attract top dollar when putting your home up for sale. If you’re looking to attract buyers for your home this spring, get ready to sell with these Spring home staging tips:

Spruce Up Curb Appeal

Start with the outside of your property – ensure a clean exterior appearance by power washing your siding and sidewalks, washing windows and shutters, clearing winter debris, clearing up the gardens, and pruning the trees and shrubs. To mark the change of season, a fresh coat of paint on the front door can present an inviting and welcoming first impression. When mowing your lawn, consider mowing diagonally to make your yard appear larger. Depending on your location, yard space can be a sought-after perk. So, if you are lucky enough to have any amount of outside space, do your best to maximize it to it’s full potential.

Freshen Up the Interior

Scrub down the inside of your home until it sparkles! Clean the interior by organizing, de-cluttering, and deep cleaning the whole space. It’s also a good time to store away any winter attire and equipment laying around. It’s important to note while doing this to avoid jamming your clutter into your closets. Most buyers are interested in the closest and storage space you have to offer so expect them to be looking in those places. Try to free up as much surface space as you can on shelves, coffee and side tables – especially kitchen countertops. Wicker or rope baskets can be perfect for throwing in items that you need but don’t necessarily want to see or have a place for. Storage units and containers are also another great option should you require more space.

Embrace New Beginnings

Embrace the new beginnings Spring brings by integrating floral prints, bright and pastel colors, and spring flowers in your home. Do this by accenting colorful artwork, decorations, pillows, throws, and displaying glass bowls filled with seasonal fruit. Essentially, any accessory against a neutral backdrop will add warmth and energy into any home. Replace dark winter towels with fresh, colorful towels for the bathrooms and kitchen. If you do nothing else, make sure your home is clean, clutter, and odor free – remember that you are probably used to your pet’s smells, but your buyers are not! Try to let natural light in as much as you can to make the rooms appear larger. Also consider bringing in real plants to add some color and make the home feel closer to nature. It makes your home feel like a true home, not a hotel or museum.

Incorporate Spring’s Aromas

Incorporating the sweet and beautiful smells of spring is one way to ensure that your house smells amazing when buyers visit. Making your home smell like a Spring day provides a pleasant odor that can help boost your buyer’s mood. Some of the best smelling Spring flowers to display in your home are lilies, peonies, and hyacinths. Lemons are also a good natural deodorizer that can add nice splash of color to kitchen. If you prefer non-perishable items, consider using spring-scented candle warmers or diffusing essential oils.

These Spring staging tips will help you create a warm, cheerful, and welcoming environment for all your buyers.

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Common Mistakes to Avoid When Pricing Your Home

Pricing a home is not a simple process, and sellers are not immune to making mistakes that will waste both time and money. Have a stress-free home sale by avoiding these four pricing mistakes that sellers commonly make when pricing their home.

Mistake #1: Foregoing Research

Local market information is freely available online, so be sure to use it to your advantage! Look for homes similar to yours that have been listed in your neighborhood over the past six months to get a rough estimate of what your home would be worth. You’ll want to stay within a ¼ mile to a ½ mile from your home unless there are not many comps in the vicinity or the property is in a rural area. It’s very easy to be fooled looking at a website online where it gives you a very high price on your home, that’s where a listing agent comes in to help you navigate.

Mistake #2: Hiring the Wrong Agent

Now that you’ve done some research, it’s time to find an agent that will keep your best interest in mind. When pricing your home, a listing agent has your back in ways that online property listing sites just can’t compete with. An experienced agent:

Has real world experience and connections in your community.
Knows your neighborhood’s micro-market like the back of their hand.
Can properly assess with their expertise how your home stacks up to similar ones recently sold in your area.
Can personally tour your property to see where your home fits in the real estate landscape.

A good listing agent will consider online market data as well as rely on first-hand knowledge about your home and neighborhood’s unique features to make an informed listing price for you. Listing agents can also help with marketing your home by suggesting certain social media platforms to post on, introduce you to pro stages, inspectors, and contractors who can make any needed changes or repairs.

Mistake #3: Pricing Too High from the Start

Your home can either make a good or bad initial impression to buyers from your first listing price. It’s worth it to make sure you set it at a reasonable price to begin with. According to the National Association of Realtors, in 2020 they reported that sellers typically sold their homes for 99% of the listing price, while 38% reported reducing the asking price at least once. If your home enters the market overpriced, many buyers could overlook your property from the beginning because it will be out of their price range. By the time you are able to react and adjust the price, many potential buyers will have already found something else. Other buyers may be interested in the lowered price, but they’ll also be able to see that your home has been sitting on the market for a while and may wonder if there is something wrong with the home. Avoid this mistake by working with a real estate professional to correctly price your home the first time to gain the attention of serious buyers and sell more quickly.

Mistake #4: Getting Too Emotionally Involved

It’s likely you’ve spent a great amount of time, money, and energy transforming your property into a place you call home. It’s completely normal to be emotionally invested in its sale. On the other hand, buyers won’t have that same warm fuzzy feeling about your home as you do – so what you think your home is worth shouldn’t be a factor in determining your listing price. Try to stay objective during the pricing process and focus on the statistics from your real estate agent’s CMA (Comparative Market Analysis). Similarly, don’t be personally offended by lowball offers. Instead, think of these lowball offers as a starting point of negotiation that could result in a sale.

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