Latest News & Blog

1031 Exchange, Market Trends, & Tax Reform


By Jeff Cornelius - June 24, 2019

On Tuesday, June 18th, we welcomed Paul Holloway from First American Exchange Company to another successful and informative THINKtank to talk about 1031 exchanges. 1031 Exchanges can be an amazing tool for maximizing returns on your real estate investments, but, as we learned from Paul, there are lots of rules to follow in order for the IRS to bless your 1031. Below are some of the highlights of his course.     
 

Due to the strict regulations and timelines involved, we recommend working with a 1031 specialist and Intermediary to help guide you through the process and handle the financial requirements involved. You should also check Section 1031 of the IRS tax code before buying or selling a property you would like involved in a 1031 exchange.

Top 5 Things to Know:
  1. Real Property: Anything that is deemed to be “real property” is eligible for a 1031 exchange: residential, commercial, industrial, even water rights attached to property. Percentages vary by city and region, but overall, about 33% of all residential property in Colorado is non-owner-occupied and therefore a potential for a 1031 exchange. Urban centers like Denver and Boulder are at 50% or higher, while suburbs like Highland Ranch and Centennial only have 17% of their residential inventory listed as non-owner-occupied.
  2. Investment vs. For-Sale: Property must be held for investment vs. held for sale. In general, builders or home flippers cannot execute 1031s on properties they are actively buying and selling. Also, your primary residence cannot be part of a 1031 exchange. Paul explained that you may convert a 1031 purchased property into a primary residence, but you must follow specific guidelines.
  3. Equal To or Greater Value: The property you intend to buy must be of equal or greater value to the property, or properties, you plan on selling as part of the 1031 exchange. Additionally, you must reinvest all equity gains from your sold properties into your purchased property - you cannot take any cash out if you want all of your proceeds to remain tax-deferred.
  4. Timing and Identification: Within 45 days of selling your property, you must identify up to 3 properties you are considering purchasing as part of the 1031 exchange. The IRS is very strict about timing and their deadlines include weekends and all holidays. So, 45 days is 45 days, not 45 business days. In a hot market where properties can go under contract in days or hours of being listed, its best to be under contract on the properties you intend on purchasing. On the 46th day from your sale closing, you cannot amend your list of potential 1031 properties to purchase. Special rules apply if you are attempting to purchase 4 or more properties as part of your 1031. And finally, you must close on your purchased property within 180 days of the closing date of your sold property. There are exceptions here, too. If you sold your property late in the year – say November – you must complete your 1031 by the tax filing deadline of April 15th of the following year. Most investors would file for an extension in this case, but again, it pays to work with an expert who can guide you through these exceptions.
  5. Same Taxpayer Rule. If John Smith sells Property A, John Smith must also buy Property B. But…guess what…surprise, there are exceptions. Generally, you cannot add a spouse or partner to your purchased property if they were not a party to the sold property.

Planning your exchange:
  1. Specific language needs to be in your sale and purchase contracts, so check the IRS site or your intermediary before executing either contract.
  2. You must leave all of your proceeds in the intermediary’s account during the 1031 process. If you remove even $1 from this account, you are putting your entire 1031 exchange in jeopardy of being denied by the IRS.
  3. Transaction costs – inspection fees, credit reports, appraisal fees, etc cannot be paid from sale proceeds.

Reverse Exchanges. Is it possible to buy your intended “equal-to or greater value” property before you’ve sold your current property? Yes, but it is more complicated and more expensive than standard 1031s. Intermediaries in Colorado typically charge $800-1,500 to help execute a standard 1031 exchange, but those costs can jump to $5,000 to $10,000 on reverse exchanges depending on the size of the property being purchased and complexity of the transaction. In a reverse exchange, its critical to make sure your purchase contract is assignable so you can assign it to your Intermediary and a to-be-named LLC to take possession of the purchased property while you sell your equal value or less expensive property. You are still held to the 180-day timeframe to complete the entire process.

Improvement Exchanges.  It is also possible to use your tax-deffered dollars to make improvements on the replacement property.  This can allow you to truly customize your investment property or build something better than what is currently on the market.  The replacement property will be held by an intermediary while the improvements are made and must be of equal or greater value when deeded back to you.  This is definetely one of the more complex exchanges, but it is gaining in popularity.

As you can see, while 1031s can be extremely useful in maximizing your real estate returns, there are many opportunities that missteps could jeopardize your exchange in the eyes of the IRS. It pays to do your homework and engage your intermediary before you buy or sell your exchange properties.

Invalesco hosts THINKtank events throughout the year to keep our Advisors, Investors and Development partners informed and connected to the Colorado real estate market. Our next THINKtank will cover budgeting for new builds and critical line items and is tobe held in August. To be notified of future THINKtank events, please join our mailing list by emailing info@invalescoRE.com

   


 
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Energy Efficient Home Design & Construction

An Expert Panel Q&A

By Jeff Cornelius - March 28, 2019

This month, we hosted our second THINKtank event of 2019 at the beautiful new Roth Living showroom near the Design Center in Denver. This THINKtank was a Q&A format focusing on energy efficient home design and construction. We were thrilled to have Casey Van-Iten of Cornerstone Homes, Zeke Freeman of Root Interiors and Enrico Bonilauiri of EMU Systems as our panel of experts. Gilda Zaragoza was our moderator.
              
There were many great questions and a healthy discussion from our audience members. Below, we’ve attributed answers with the initials of each panelist who addressed the question and summarized their answers for purposes of this post.

Q. What are some major considerations when designing an energy efficient home?
    
ZF. From a design perspective, it’s important to focus on lot siting, orienting views to take advantage of passive heating during the winter and being conscious of the materials we use. Energy efficiency is one of the reasons we build in cities. Being close to light-rail and mass transit and alternative forms of transportation all help lessen the energy impact of the inhabitants of that home.

EB. I agree with Zeke that the climate is a big consideration, including what kind of systems are designed into and installed in the home. We have weather extremes here in Colorado, along with the high altitude – this all affects how energy efficient the home will be.

CVI. There are three main areas we focus on when building our new homes. One – The design. Using passive solar design and having the correct glazing on the windows are key. Two – The thermal envelope of the home. Air infiltration and lack of proper insulation will kill a home’s efficiency. Three – the systems. You can retrofit an existing home with a more efficient HVAC system or water heater, but for something like geothermal, it’s much easier to do on a new build.

Q. Does the square footage of the home matter?

EB. More than the square footage, it’s the shape and siting of the building.

ZF. I agree with Enrico. Interestingly, we have been seeing a trend towards higher quality vs. higher square footage. Obviously the smaller the square footage, the less environmental impact there will be in the construction of it, all other things being equal.

Q. Cassie, can you speak to a home’s NetZero rating and how you are achieving that?

CVI. Sure. We focus on the HERS score. That’s a rating that considers the structure and how it’s built. Other ratings like LEED consider things like what was the property used as previously, proximity to walking and bike paths, etc. In addition to a tight building envelope and lots of insulation, we don’t use natural gas – for water heating, fireplaces or the stove in the kitchen. Using 100% electricity for our systems and appliances allows PV solar to help us achieve that NetZero rating – basically that a home produces as much energy as it uses on an annual basis.
         
Q. How does energy efficiency affect the budget?

ZF. You have to look at it in terms of a long-term investment. There is a slight premium up front, but those costs are recouped over time in the form of energy cost savings.

CVI. Engineering, windows, insulation and systems are all more expensive than average, but it is a long-term calculation. And, the government keeps extending tax incentives, so that helps make things more affordable up front.

EB. Yes, the incentives that are in place are really helping multi-unit developers because at that scales, they are reaching almost parity to non-efficient construction and systems.

Q. What products give you the most bang for your buck?

EB. I would say high-performance windows. I especially like Alpen windows, which is a Colorado-based company.

ZF. We compared a 2x4 studded wall with 2” of exterior insulation vs. a SIP vs. a 2x6” studded wall with interior insulation and the 2x4 was most cost-efficient in terms of R value in our test. That may not always be the case for some projects, but my point is that it pays to look at things on a project-by-project basis and not just assume a SIP will be the most efficient for a wall.

CVI. We can get the same R values with stud and insulation vs. SIPs. Smart window shades and thermostats can help. Solar batteries are improving, too.

Q. Are there any products we should stay away from?

EB. Poorly installed ones. (lots of laughs). Yes, it’s funny I say that, but its true. There are lots of great products on the market, but they need to be installed properly to achieve your energy savings goals. It gets more and more critical as you approach NetZero.


Q. How do you incorporate landscaping into energy efficient design?

ZF. You can do this by planting deciduous trees in front of south-facing windows. This provides shade in the summer and sun in the winter. Xeriscaping can drastically reduce water usage as well.

CVI. You can design drainage the feeds landscaping vs. draining on an impervious surface. Also, have goats! They are great lawnmowers!

Q. What is the difference between passive solar and a passive house?

EB. Passive solar helps reduce the need for heating whereas passive house is a construction standard for air leakage and energy consumption.

CVI. Another standard that is growing in popularity is the Living Building Standard – it takes into consideration the overall wellness of the occupants, not just energy efficiency. As in “do these lights make you happy?”

Q. Do you have any Colorado-specific considerations?

CVI. We see dramatic temperature swings here, so a tight building envelope is key. Also, water conservation is particularly important for us in Colorado.

ZF. As we’ve discussed, house siting is really important here in Colorado to account for the movement of the sun through the seasons, snow gathering, etc.

EB. High-performance windows can really help.

Q. What information sources do you like to stay current on energy efficiency?

CVI. I get the USGBC newsletter – they have an office in Denver. Also, check out the LEED website – lots of good info there.

EB. Check out PassivePedia – it’s like Wikipedia, but for energy efficient construction.

ZF. Hammer & Hand out of Washington. Building Science is an online magazine. The Zero Energy Project. Also, the US Passive House website is a great resource.

        

END…..

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Featured New Homes

The Townhomes at Pine Bluffs

By Angie Sudberry - February 26, 2019

For years, the Town of Parker was viewed as a small rural town and a place for residents to escape from city life.  With Denver's rapid population growth, the Town of Parker is booming with new community developments, restaurants, retail shops, and offices.  Even with its rapid growth, Parker has been able to maintain it's small town feel.  From it's historic downtown, parks, trails, open spaces to it's community events like Parker Days and the Christmas Carriage Parade, residents still experience a sense of community.  

Invalesco Real Estate had the opportunity to tour The Townhomes at Pine Bluffs, a unique community by Ascent Builders located in this wonderful town.  The Townhomes at Pine Bluffs is a fast-growing community with a lot to offer.  This neighborhood is uniquely positioned with easy access to I-25 and E-470. Just north of Pine Bluffs you make your way into downtown parker where you will be met with a wide range of activities from cultural arts, recreation center, pools, parks, trails, & open space.  Just South, you will find Frank Town where you can visit Castlewood Canyon State park with beautiful rock formations and plenty of trails.


       


Kim Brown, head of sales, led us on our tour. The Townhomes at Pine Bluffs have professionally designed exteriors with beautiful stone accents. Each home features a front porch entrance and an oversized two car garage that gives you plenty of room for parking and storage. Lush landscaping surrounds the community. The Homeowners’ association provides all exterior maintenance, snow removal, and lawn care. There is a gorgeous club house and pool within walking distance.

We started our tour with the Spruce model, a 2 bedroom 2 bath ranch home with the option for a 3rd bedroom or a study. Upon entering, you are greeted with abundant natural light and an open concept kitchen, dining, and living area. Ten-foot ceilings throughout this home add a spacious feeling and provide abundant natural light. The gas fireplace with limestone surround is perfect for entertaining and getting cozy on those chilly winter nights. Gather at the kitchen island with your guests while you prepare appetizers for the evening. Stainless steel appliances and granite counter tops make for an easy clean up after meals. The master suite has a spacious 4-piece master bath which allows for easy transition into your walk-in closet with a custom closet system making organization easy.   
 


Other options to choose from at the Pine Bluffs townhome community include The Evergreen, a two story 4-bedroom 3.5 bath townhome, and The Conifer, a two story 3-bedroom 3.5 bath townhome. All floor plans have a variety of options to choose from to customize and make it truly your home! Not all options listed here are standard features.

Ascent Builders is leading the industry in quality construction and quality customer service. They were founded in 2005 by Jason Brown & Jeff Proctor. Jason and Jeff felt the industry needed a company dedicated to providing high-quality customer service along with high-quality craftsmanship and they have successfully been able to provide this to the consumers today. Ascent has been busy finishing their other communities that include Cornerstone Townhomes in Thornton, Colorado.   This community has three luxurious floor plans to choose from.  All of them include attached garages, walk-in closets, and private porches. Within the community you can visit the 5,000 square foot private club house that boasts an outdoor heated swimming pool & spa, full kitchen, business center, two playgrounds, sand volleyball court, and a fitness center. 

Keep your eye out for Ascent Builders as they continue to amaze us with unique communities & quality homes!




 
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Giving Back

Invalesco Partners with Sun Valley Youth Center

By Angela Olthoff - January 16, 2019

Giving back to our community is one of Invalesco’s passions and we are excited to announce our partnership with Sun Valley Youth Center.  When looking for a non-profit to partner with, we focused on finding a local charity with similar cores values, that impacts children in a positive way, has education as the main focus and where we can not only give financially but where each of us at Invalesco can personally volunteer our time.  After much research and various meetings with local charities, we were lucky to find Sun Valley Youth Center.  Their focus on our community's youth and their empowerment, perfectly aligns with our vision. 

Located in central Denver, Sun Valley sits just south of Bronco’s Stadium at Mile High and is home to about 1500 residents.  It is historically known for its low-density and low-income (median annual income is $9,874) housing with  94% of the housing market being subsidized.  Since 1999, Sun Valley Youth Center has been committed to giving back to one of Denver’s poorest and oldest neighborhoods.  Their focus is transforming the lives of at-risk youth living in this low-income neighborhood, providing hope for the community and teaching every child they serve.   Sun Valley Youth Center offers a variety of enrichment Programs, Karate, Flag Football, Cycling, Mindfulness, Yoga, Aqua Fitness, Healthy Living, Life skills, Cooking, Baking, Dance, Public Achievement, MMA, Equine Assisted Learning Programs, Photography, Art, STEM, overcoming obstacles as well as Literacy (iready) and homework help.  Every child selects the programs they are interested in , which in turn teaches them important life skills that will help them navigate through their day to day lives.  The hope is that each child will begin to see their purpose in the world they live in and will feel empowered to know they can overcome the obstacles they may face daily.  Many of these children are yearning for stability in their life and Sun Valley has given them this stability.
                                                                         
                        

                                              “Wherever there is a human being, there is an opportunity for a kindness.” – Seneca 

Along with providing enrichment programs, before and after school care, mentoring and life essential skills to the youth of Sun Valley neighborhood, Sun Valley Youth Center has partnered with Sun Valley Kitchen to offer healthy food options and a variety of culinary classes for the kids.  Sun Valley Kitchen provides a healthy breakfast and afternoon snack for those children who enroll at Sun Valley Youth Center.  They learn how to select and prepare healthy meals in their cooking classes.  When we met with Sun Valley Youth Center’s Director, Kris Rollerson, we had the opportunity to eat at Sun Valley Kitchen and see first-hand how the Kitchen has not only impacted the youth at the center, but also the community as a whole.  People who live and work in the community can purchase a fresh cooked meal, not pay the high prices they would pay at another local chain restaurant and enjoy eating their meal while catching up with other Sun Valley locals.  If these reasons alone are not enough to entice someone to eat at Sun Valley the Kitchen, every Thursday a local community member is the chef for the day and makes one of their special dishes that represents their culture.  It just so happened we were there on a Thursday and had the honor to eat the Local Chef's Special Dish of the Day.  This Local Chef Series is an entrepreneurial program in partnership with Mi Casa Resource Center.   

                                                     
         

Invalesco believes that giving back to the community is essential and we are thrilled to start this partnership with Sun Valley Youth Center.  Our first interaction with Sun Valley was impactful and we can't wait to see what future volunteer and financial interactions bring to each all of us participating in this venture.  Our hope is that our service will not only help empower the youth at Sun Valley, but it will impact our own lives in an unforgettable way.  
                                                           


 
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Featured New Homes

Adamo Homes

By Angie Sudberry - December 20, 2018

Invalesco recently had the opportunity to tour a custom designed, paired home by Adamo Homes. Greg Schwartz, an Adamo Homes Business Development Specialist, led us through this tour.  Adamo is proud to be " America’s First Small Batch Builder", building in smaller quantities which allows them to provide a higher quality product with a higher level of customer interaction.  The Adamo team spends time getting to know their customers personally and aims to meet their lifestyle and design needs when building their homes. Adamo strives for quality over quantity, carefully handpicking their homesite locations and taking time to perfect the desired home for each customer.



                  

FIrst stop on our tour was 5170 Le Duc Drive.  This perfectly positioned paired home sits on a private lake in the gated community of Castle Pines Village. This beautiful deisgned custom 2-story home features 4 bedrooms, 2.5 baths and a 2-car attached garage with 3,833 finished sq. ft. When you first walk into 5170 Le DucDrive,  you are greated by the beautiful, up-close view of the lake which gleams from the great room window.   While enjoying the lake view, you can snuggle up to the stone surround gas fireplace, enjoy the natural light shining throughout the home and appreciate all the finishing touches selected just for this home.  This thoughfully designed home features an open floor plan with main level living, engineered hardwoods floors in the kitchen and great room and 4 bedrooms.

The master bedroom contains vibrant natural light, a striking, large 5-piece master bathroom, large walk in closet and easy access to the laundry room.  Then head upstairs to your 2 bedrooms for guest or family, an extra sitting area for an office or playroom, and another full bath. The basement is unfinished which allows you to decide how you want to use the space. The basement has pre-plumbing done for a bathroom.
   When you are not resting in one of the 4 bedroom, enjoy cooking in your open kitchen featuring, a large beautiful Carrera Quartz island with custom maple cabinets, soft close drawers and Bosch appliances. 

Along with your beautiful new home, enjoy the amble amenities in the covenant controlled gated community at The Village at Castle Pines.  Spend your summer days at The Canyon Club swimming pool, BBQ'ing on the Viking steel gas grills, playing sand volleyball, challening someone to a tennis match on one of the 5 championship tennis courts or gather a group of neighbors to play a friendly game of soccer on the multi-use field.  If The Canyon Club isn't appealing, go to The Summit Club located on the north side featuring another swimming pool with interactive water features, a pavilion and a multipurpose playing field.  In the colder months,  you can enjoy the heated outdoor lap pool, outdoor spa, both located at the Village Lake Fitness Center.  Here you can also exercise,  take a class in the yoga studio and/or train in the TRX training room. . The trails & Members Only golf courses are just an added bonus!

                              



This is not all Adamo has to offer. They are gearing up for the new year with some amazing projects, which include the Rooftops at the Meadows, our team's favorite. Modern meets the suburbs situated on the hillside in the popular Meadows neighborhood in Castle Rock. These beautiful homes also contain open floor plans, a large master suite containing it's huge master bath, complete with free standing tub and dual entry walk-in shower.   And one of the best features of these homes, your private roof top deck, ideal for entertaining. These homes are close to completion with few remaining. Stay tuned for what Adamo is bringing in 2019!!!

                                                                                                                                              



 
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