Although Summit County real-estate professionals see quite a few 1031 exchanges of second homes and vacation homes in Breckenridge area, it is important to note that the IRS does not allow taxpayers to claim a property as an investment if it is actually used more than 14 days a year for personal use.  The rules are strict.

In March 2008, the IRS issued new guidelines for these “like-kind” or “Starker” exchanges to clear up previous confusion about Section 1031.  Primarily used by real estate investors to defer taxes, if these criteria are not met, the sale will be subject to capital gains taxes.

The way the exchange works is this.  An investor chooses to “relinquish” one investment property (the relinquished property) and to “replace” it with another investment property (the replacement property).  All properties must be investment properties.  The currently owned property, or the “relinquished property,” must be owned by the taxpayer for at least 24 months prior to the exchange (the qualifying use period).  Qualified properties include a house, apartment, condominium, mobile home, boat or any like property that according to Section 1031 “provides basic living accommodations including sleeping space, bathroom and cooking facilities.”

Now is the kicker.  During the qualifying use period, the owner must have rented the property at a fair rental for at least 14 days.  The property owner may not have used the property for personal use for more than ten percent of the number of days that it was rented at fair value or for than 14 days, whichever is greater.  For example, if a resort condo is rented out 100 percent of the time during five months of ski season (150 days), 10 percent of 150 days is 15 days.  The owner cannot have used it for more than 15 days but may be present to check on the property and maintain it.  The same is true for the second property.

All proceeds from the relinquished property must be used for the purchase of the replacement property to defer steep capital gains taxes.  Swap them and the government transfers the basis of the old properties to the new ones.

Timing is also important.  Investors must identify the replacement property within 45 days of closing of the first property and have 180 days to buy the new property.  Section 1031 is a great boon if followed to the nth detail.

For answers to investment-property questions, contact Jonna Beardsley of Breckenridge Associates at 970-390-2533.

The new green code is just the beginning of a substantial effort to change the fact that 40 percent of the Summit County waste stream comes from construction and deconstruction.  This step echoes the new Summit County code and will result in Breckenridge real estate with greater efficiency and lower energy usage.  Our vacation paradise of homes around the Breckenridge Ski Resort and surrounding national forests will not go the way of many municipalities that are beset with grand issues like reducing smog and cleaning out airways and waterways that have already reached dangerously toxic levels.

Some homeowners in Breckenridge have already been using long-life light bulbs and energy saving appliances or recycling, but beginning in the New Year of 2009, a sustainability code impacting new construction.  Single-family homes, multi-family homes, additions, remodels, and the residential areas of mixed-use developments will be affected at that time.  All homeowners will be required to install energy efficient replacement windows during remodels.

Builders must earn a score of zero or better to be in compliance.  Chief building official Glen Morgan, as quoted in the Breckenridge Associates’ e-newsletter, says, “The bigger the house gets, the more green initiatives will be needed.”  Stricter guidelines are in place for homes greater than 3,000 square feet.  The complicated code outlines a series of criteria that will determine how large a home can be and how many amenities are acceptable.  If a home uses more energy, it will be required to offset that usage.   For example, solar panels could be installed to offset the energy required to heat a driveway and outdoor hot tubs. 

The fabulous Rocky Mountains, rivers, and national forests must be guarded for prosperity as a retreat and refuge tucked in the folds of Mother Nature for retirees, skiers, family vacation homes and for those of us to appreciate our pristine wonderland.  Call Jonna Beardsley of Breckenridge Associates at (970) 453-2200 or (800) 774-7970 for friendly and professional real-estate assistance in the resort areas.

Breaking down that increase according to type of real estate, vacant land is seeing the biggest jump in value.  Breckenridge single-family home prices went from an average of $1,079,167 to $1,028,436; duplexes and townhomes climbed from the mid $600,000s to $905,625; and condos and multi-family units evaluated from $395,027 to $509,896.  In the first few months of 2008, average prices of land went from $380,173 to $599,814.  That is a whopping 57.8-percent increase!  Homes increased 4.9 percent, duplexes and townhomes 47.4 percent, and condos and multi-family 29.1 percent.

Looking at the figures since 2005, the trends are similar.  Land sold for an average of $299,000 in 2006, $325,000 in 2006, and $407,000 in 2007.  The average sale price for a single-family home in 2005 was $754,000, in 2006 $871,000, and in 2007 $1,056,000.  Duplexes and townhomes were $550,000 and $496,000, then $632,000 and $651,000, and condos went for $315,000, $383,000, and $410,000.

In the greater Summit County area, the numbers are slightly lower.  Land went up 52.7 percent, homes 4.2 percent, duplexes and townhomes 19 percent, and condos and multi-family dwellings 14.4 percent so far in 2008.  There are only slightly more properties on the market than at this time last year (1,590 versus 1,427).

The truth of the matter is that our resort buyers are primarily investing in second homes and vacation homes.  So, even though the national market is down, this segment of the population does not qualify for the problematic adjustable-arm mortgages.  In addition, most people who buy in our area are financially flush, which adds a stabilizing element to our economy.

This information is taken from the numbers published by the Summit Association of Realtors from MLS transactions that transpired before May 1, 2008 and account for all but 5 percent of the countywide sales.

For more information about land, homes, duplexes, condos, townhomes, fractional, and other real estate possibilities, contact Jonna Beardsley of Breckenridge Associates at (970) 390-2533 or call toll-free to (800) 774-7970.