According to Dan Hartman, Senior Mortgage Advisor, Province Mortgage Associates, Inc. located in Providence, Rhode Island, the FHA will issue new guidelines affecting condo lending.  The new guidelines will be more favorable to allowing commercial space in the development, will reduce the minimum number of units required to just 2, and will permit phasing.  These and other changes will have a positive impact of those seeking to do 1031 exchanges.  Click here to read Dan’s full article.

While dealer property will not qualify for 1031 exchanges, many people own single condos that have been used to produce investment income, some people convert their primary residence to rental, and some people convert a vacation condo to rental.  Remember that pure vacation homes, and second homes, do not qualify for 1031 exchange treatment.  When buyers have more options for financing, they can more easily close on the condo of their choice.  Alexandra Hart and I see many situations where a seller and a buyer want to close a deal, but the buyer is unable to secure financing.  These new FHA guidelines could help condo buyers obtain financing more easily and close more deals.

Furthermore, the new lending guidelines may help finance a reverse or construction exchange.  Reverse exchanges are increasingly popular in the current market when it takes an exchanger longer than expected to close on the sale of their relinquished property.  In the meantime, the exchanger may need to act quickly to buy a replacement property that has just been reduced to a great price.  Another great tool in the current market is the construction or improvement exchange.  With a large inventory of short sale and foreclosure properties available, an exchanger may want to acquire a “rehab project” that is of a lesser value than their relinquished property.  Instead of paying tax on the “buy down” difference, they can put that money towards improvements to their replacement property tax-free.  Construction exchanges can also be used for demolition or if the exchanger wants to raw land and build a new structure.

If you are interested in learning more about these new FHA guidelines, or if you have any financing questions, please contact Dan Hartman directly at 401-263-8655 or by e-mail at DHartman@provincemai.com.

For more information about forward, reverse or construction 1031 exchanges or the types of property that qualify, please contact Alexandra L. Hart at 877-395-1031 ext. 217 or by e-mail at AHart@AllStates1031.com.