Unlike primary personal residences, where single folks get up to $250,000 gain tax free and married couples get up to $500,000 gain tax free upon sale.

When one sells a rental property and receives the cash proceeds of sale; the gain on that property is taxed. In order to defer taxation on this gain, which allows the investor to use the entire proceeds of sale towards the purchase price of the new property, a 1031 exchange needs to be executed. Please note I use the word defer and not tax free. Executing a 1031 exchange allows the investor to defer paying taxes on that gain but does not forever eliminate the tax due on that gain.

Most 1031 exchanges are executed through the use of an exchange intermediary.

Under this scenario, the investor puts his property up for sale and tries to find a buyer just like any other sale. No difference. This contract will include an addendum indicating the seller wants to complete sale via a 1031 exchange and that the buyer will co-operate with seller in doing same. No additonal cost to buyer, just a few additional documents to sign at close.

At close, instead of a check being sent to the investor, the proceeds are sent to a 3rd party intermediary to hold until the new purchase  property is located. The investor can not touch that money or a taxable event will be created.

The investor then attempts to locate the purchase property. The investor typically has 45 days from close of the sale property to locate the purchase property. A property is located, contract negotiated and included a clause indicating that the investor now the buyer wants to do an exchange ansd that seller agrees to co-operate in doing so.

The rules governing exchange are quite complicated and legal and tax advice should be obtained. That being said, a real estate broker experienced with investment property and exchanges can guide the investor client in the right direction. An investor still needs to find a buyer for his property and then still find a property to purchase. All of that is the same as ay other purchase or sale. The paperwork in contract and closing is different.

If you have owned a small rental house, duplex, triplex, or 4plex for many years, chances are the property has gone up in value and you have paid down loan – both increasng your equity in property. Using this equity to buy a bigger larger higher income property may prove to be a good thing.

So if you own rental property and want to know what your investment options are, please let me know. I have clients looking for investments in the SF Bay Area as well as in Texas and North Carolina. Some of the investment opportunities that can be found out of state can be very attractive. I am looking at new duplexes in Dallas Fort Worth area that cost around $250,000 and rent for $2,500 per month. The cash flow from the property will pay off the mortgage in 15 to 20 years.

Here are some guides to 1031 exchange. Just let me know if you have questions.

1031 JUST THE BASICS 06 08

1031 Exchange Identification Requirements 06 08

1031 CLOSING COSTS in a 1031 Exchange 08 08

1031 Restrictions on Receiving Cash in a 1031 Exchange 06 08

Some real estate agents always say “the market is great” or “great time to buy” or “great time to sell”. Informed consumers of real estate understand all proclamations of this type must be taken with a grain of salt. Altos Research tracks real estate markets across the country. They do not sell real estate, they provide real estate data.

For detailed information on Altos Research’s methodology: what market statistics they track and how they analyze the data.

altos-stats-data-sheet   altos-future-price-research-review   altos-leading-indicators white paper

The Market Action Index (MAI) measures the strength of a local market by looking at the number of home sales versus inventory or number of homes for sale.

30 is considered a balanced market.

Above 30, seller’s market. Below 30, buyers’ market.

One can see that from June 2010 to March 2011, MAI was 22 to 24 – buyers’ market.

Since March 2011, MAI has gone from 23 to 36.

This is a significant move towards a sellers’ market after buyers’ market from January 2008 to March 2011.

For a longer term view of the Market Action Index in Palo Alto, please review the chart below.

What segment of the market is the strongest?

Here is median MAI for Palo Alto broken down into 4 price ranges.

The four price quartiles have average prices of $4.0M, $1.8M, $1.3M, and $1M.

The highest price quartile in Palo Alto was the weakest in 2010 while the two lowest quartiles were the strongest in Palo Alto. Since January 2011, the highest price range has gotten much stronger like the other price ranges in Palo Alto.

This data indicates that Palo Alto is now a seller’s market. Buyers looking for homes in Palo Alto will face stiff competition.

Here is an early look at some of the tour properties in Menlo Park, I will take a look on Tuesday.

To see more information or to schedule a showing of any of these listings, just click on address header.

Looking for a fix up or site for new construction in Allied Arts?

Check out 155 Yale Road – 3/2 – $1,250,000

We're sorry, but we couldn't find MLS # 81121628 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

Search for other homes in Allied Arts, click here.

To review sales data in Allied Arts, click here.

Looking for an affordable updated home with Menlo Park Schools?

Check out 956 Timothy Lane – 3/1 – $898,000

We're sorry, but we couldn't find MLS # 81121659 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

Search for other homes in the Flood Park area of Menlo Park, click here.

To review sales data in Flood Park area, click here.

Another option is 530 Central Avenue – 2/1.5 – $848,500

We're sorry, but we couldn't find MLS # 81121642 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

Search for other homes in the Willows, click here.

To review sales data in the Willows, click here.

 More and more investors are using their retirement funds from a 401K, IRA, Roth IRA, and SEP IRAs to invest in real estate.

The stock market has done well over the past few years but self-directed IRAs allow you to diversify and invest in many other types of assets including real estate not available through traditional avenues.

The rules which govern real estate investments purchased through the use of retirement funds are detailed and somewhat complicated. Before embarking on any purchase with self-directed retirement funds, an investor should consult appropriate legal and accounting professional as well as working with a qualified intermediary and a real estate broker familiar with these purchases.

Top 50 Questions about Self-Directed Investment

ABCs of Self-Directed Investment

The Flood Park neighborhood of Menlo Park runs between Bay Road and HWY 101, north of Willow Road and South of Marsh Road. Property values in this neighborhood are similar to those in the Willows.

Showing properties 1 - 3 of 3. See more Flood Park Area *.
(all data current as of 2/5/2012)

1. $778,000 : 1055 Berkeley Av, Menlo Park
   
   2 beds, 1 full bath

   Home size: 1,517 sq ft

   Lot size: 10,018 sq ft
   
2. $959,000 : 12 Heritage Pl, Menlo Park
   
   3 beds, 3 full baths

   Home size: 1,868 sq ft

   Lot size: 3,017 sq ft
   
3. $749,000 : 311 Sheridan Dr,
   
   3 beds, 2 full baths

   Home size: 2,360 sq ft

   Lot size: 5,940 sq ft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

For closed sales data in the Flood Park area of Menlo Park, click here.

The Willows neighborhood offers some of the most affordable housing in Menlo Park.

Older small homes in the Willows start in the $700,000 to $800,000 range and newer larger and updated homes are available $1,200,000 to $1,500,000

Showing properties 1 - 5 of 8. See more Willows / O'Conner Area *.
(all data current as of 2/5/2012)

1. $1,515,000 : 225 Lexington Dr, Menlo Park
   
   4 beds, 3 full baths

   Home size: 1,850 sq ft

   Lot size: 6,256 sq ft
   
2. $895,000 : 227 Elliott Dr, Menlo Park
   
   3 beds, 2 full baths

   Home size: 1,350 sq ft

   Lot size: 7,455 sq ft
   
3. $1,350,000 : 374 Oconnor St, Menlo Park
   
   0 beds, 0 baths

   Lot size: 19,635 sq ft
   
4. $1,470,000 : 269 Oconnor St, Menlo Park
   
   5 beds, 5 full baths

   Home size: 2,615 sq ft

   Lot size: 10,822 sq ft
   
5. $1,049,900 : 369 Oconnor St, Menlo Park
   
   3 beds, 2 full baths

   Home size: 1,620 sq ft

   Lot size: 7,360 sq ft
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.

For closed sales data in the Willows neighborhood in Menlo Park, click here.

If you believe your home’s value is below the assessment provided by San Mateo County, you may petition the County to reduce your assessment and thereby reduce your property taxes.

If you have purchased a home within the past 3 or 4 years, its value may very well be below your purchase price.

If this is the case, please go to: http://smcare.org/assessor/homeownerresources/form_declineapp.asp

I need to be clear – just because your home’s value has dropped, you are not automatically entitled to a property tax reduction. So if you bought your home 10 years ago for $800,000 and at the peak it was worth $1,100,000 and now is worth $950,000, you WILL NOT be entitled to a reduction.

One is only entitled to a property tax reduction if the San Mateo County assessment is above what you believe the current market value is.

The request can be made over the web and if you need any comparable sales to bolster your case, just let me know.

I have reviewed previously reviewed the 2010 real estate market for the following neighborhoods in Menlo Park:
Allied Arts/Downtown Menlo Park
West Menlo
West “County” area along Alameda also known as University Heights
Sharon Heights and Stanford Hills

In this post, I will review the Civic Center area of Menlo Park located near Burgess Park and City Hall and the Willows neighborhood of Menlo Park.

Civic Center area Menlo Park near City Hall and Burgess Park

 Click here to view the embedded video.

The average and median price in the Civic Center area of Menlo Park was approximately $1.3M in 2010.

Average days on market in this neighborhood of Menlo Park decreased slightly from 54 in 2009 to 51 in 2010.

The number of homes sold near the Menlo Park Civic Center decreased in 2010 to 20 from 19.

The sale price to list price ratio remain fairly stable: 96.6% in 2010 and 96.8% in 2009.

To search for homes near the Civic Center and Burgess Park in Menlo Park, click here.

The Willows neighborhood of Menlo Park

 Click here to view the embedded video.

The average and median price in the Willows Menlo Park was approximately $1.05M.

Average days on market dropped big time from 71 in 2009 to 20 in 2010.

The numbers of homes sold in the Willows Menlo Park was steady: 37 in 2010 and 38 in 2009.

The sale price to list price ratio was 101.5% in 2010 up from 96.8% in 2009.

To search for homes in the Willows, just click here.

Yesterday, I wrote a post about two neighborhoods in Menlo Park: Allied Arts/Downtown Menlo Park and West Menlo Park. Just click here to see that post.

For a map showing all mls areas in Menlo Park, click here.

Today, I would like to review the 2010 real estate market in the “County” area of Menlo Park along the Alameda and in Sharon Hieghts.

“County” area along Alameda – University Heights

The average and median sales price in the County area of west Menlo Park located along the Alameda was between $1.4M and $1.45M in 2010.

Average days on market increased to 46 from 39 in 2009.

The number of homes sold in 2010 in this Menlo Park neighborhood was 39 down from 49 in 2009.

The sales price to list price ratio increased in 2010 to 99.1% from 97.4% in 2009.

Unlike Allied Arts, downtown Menlo Park, and west Menlo Park, where all market metrics indicated a stronger market in 2010, the data for the County area in west Menlo is mixed.

To search for homes in the County area along Alameda – Las Lomitas schools, just click here.

Sharon Heights

The average and median price in Sharon Heights and Stanford Hills was between $1.65M and $2.0M in 2010.

Average days on market decreased to 44 days in 2010 from 65 days on market in 2009.

The number of homes sold in 2010 was 15, an increase of 1 from the 14 sold in 2009.

The sales to list price ratio increased to 99.5% in 2010 from 97.6% in 2009.

To search for homes in Sharon Heights and Stanford Hills, please click here.

Menlo Park contains 11 different geographic mls neighborhoods.

To see a map showing these Menlo Park neighborhoods, click here.

From this map, you can search for current listings or obtain sales data for each neighborhood by clicking on the particular neighborhood of interest.

Let’s look at how several of these Menlo Park neighborhoods did during 2010.
You may run your cursor over the charts to obtain numerical data.

Allied Arts/Downtown Menlo Park

Average and median price in Allied/Arts Downtown ranged from $1.3M to $1.45M.

Days on market in Allied Arts/Downtown decreased from 60 days to 56 days.

36 homes sold in 2010 in Allied Arts/Dowtown up from 26 in 2009.

Homes in Allied Arts/Dowtown sold for 97.0% of list price in 2010 up from 94.2% in 2009.

To see current listings in Allied Arts and downtown Menlo Park, click here.

Central Menlo Park aka West Menlo

 Click here to view the embedded video.

Average and median price in west Menlo Park ranged from $2.0M to $2.3M.

Days on market in west Menlo Park decreased from 61 days to 45 days.

60 homes sold in 2010 in west Menlo Park up from 45 in 2009.

Homes in west Menlo Park sold for 97.4% of list price in 2010 up from 96.6% in 2009.

To see current listings in west Menlo Park, click here.

Should you have any questions on the Menlo Park real estate market, do not hesitate to call me at 650 566-5329.