Own rental property? Your thoughts on how this could impact you:

sgip

Well-known member
Update from earlier post on the subject here:https://www.talkirvine.com/index.php/topic,17901.msg378596.html#msg378596

This tax plan won't pass in its present form, but don't fool yourself: Eventually bits and pieces are going to become law.  Incrementalism is the only way they get these things accomplished.

Consider the long game -

2012: Bernie who?,
2016: Bernie Sanders? Tell me more!
2020: Senator Bernie Sanders -D (VT), Chairman of Senate Budget Committee.

https://www.cnbc.com/2021/05/03/how-bidens-real-estate-tax-plan-may-hit-smaller-property-investors.html
 
Housing is over hyped. Just like how one side blamed Bill Gates for everything. (That party is over lol)
 
Soylent Green Is People said:
Update from earlier post on the subject here:https://www.talkirvine.com/index.php/topic,17901.msg378596.html#msg378596

This tax plan won't pass in its present form, but don't fool yourself: Eventually bits and pieces are going to become law.  Incrementalism is the only way they get these things accomplished.

Consider the long game -

2012: Bernie who?,
2016: Bernie Sanders? Tell me more!
2020: Senator Bernie Sanders -D (VT), Chairman of Senate Budget Committee.

https://www.cnbc.com/2021/05/03/how-bidens-real-estate-tax-plan-may-hit-smaller-property-investors.html

I am not a Bernie supporter (I'm against free college, against federal min wage, public option > M4A etc)

But I think using Bernie to illustrate your point actually misses the mark.

Bernie has been in congress since 1991. He was the longest-serving independent in U.S. congressional history.

Bernie Sander's arc to me is more about the need to seriously look at congressional term limits & a solution to our 2 party duopoly, & creating viable paths for independents / 3rd party candidates. More so than the need to worry about his "swift rise" to power.

As for Biden?s plan to abolish the right to defer taxes on property gains over $500,000, I don't think it's all negative. I own several investment properties and think there are pros to this not just cons.

The big advantage of building inter generational wealth through RE has always been the use of 1031 exchanges. The ability to buy and sell tax-deferred real estate throughout life & the ability to pass it on to heirs tax-free (If the investor holds the property until death) has always been built on exploiting locality.

Is depriving local governments of needed property tax revenue a good thing for local residents who actually live there? Is it fair for the younger generation w/o inheritance to be paying property taxes at market rate?

Also wouldn't the new plan spur more selling? Bringing more inventory to market is a good thing in my mind.
 
We're in agreement about Term Limits "Free" indoctrination College, etc, but the ascendancy of Bernie from small state fringe socialist to elder statesman is the quickest way to show how the mood of the country has changed from self-sufficiency to federal reliance. Taking away tax benefits from aged robber baron landlords sells well to the rising numbers of dependent American's who are beginning to view self earned wealth as theft from the disadvantaged. I'm long pitchforks and torches and expect a measure of Portland type anarchy to spread due to economic disparity and proposals like this are like gasoline to the pyre - but that all is for another thread....

Tax adjustments would be one way to bring plenty of "new" inventory to market without building a single new home. Handled badly, it could also cause massive price deflation - rental property or primary residence. An extreme approach will be painful for many, and I don't think this is just a "suggested tweak" but the beginning of a long term strategy to de-incentivise rental property ownership. There won't be as much push back on 5+ units, so don't expect TIC or other major landlords to fight alongside mom and pop rental property owners to keep the status quo.

I remember when there was wailing and gnashing of teeth over the SALT deduction. Many had wrongly invested their hope in a new administration to change the SALT caps, but so far have been stonewalled. Given how precarious the House and Senate D majority is, I doubt these tax law changes will be successfully deployed until after 2022 assuming their majority holds. It's still a powerful tool that could be used to force prices down by making rental property ownership less lucrative.

It's bad enough when landlords can't get their tenants out due to COVID restrictions. I couldn't imagine having to put up with a bad tenant these days. Now take away some of the tax benefits? Ouch. 
 
Soylent Green Is People said:
We're in agreement about Term Limits "Free" indoctrination College, etc, but the ascendancy of Bernie from small state fringe socialist to elder statesman is the quickest way to show how the mood of the country has changed from self-sufficiency to federal reliance. Taking away tax benefits from aged robber baron landlords sells well to the rising numbers of dependent American's who are beginning to view self earned wealth as theft from the disadvantaged. I'm long pitchforks and torches and expect a measure of Portland type anarchy to spread due to economic disparity and proposals like this are like gasoline to the pyre - but that all is for another thread....

Tax adjustments would be one way to bring plenty of "new" inventory to market without building a single new home. Handled badly, it could also cause massive price deflation - rental property or primary residence. An extreme approach will be painful for many, and I don't think this is just a "suggested tweak" but the beginning of a long term strategy to de-incentivise rental property ownership. There won't be as much push back on 5+ units, so don't expect TIC or other major landlords to fight alongside mom and pop rental property owners to keep the status quo.

I remember when there was wailing and gnashing of teeth over the SALT deduction. Many had wrongly invested their hope in a new administration to change the SALT caps, but so far have been stonewalled. Given how precarious the House and Senate D majority is, I doubt these tax law changes will be successfully deployed until after 2022 assuming their majority holds. It's still a powerful tool that could be used to force prices down by making rental property ownership less lucrative.

It's bad enough when landlords can't get their tenants out due to COVID restrictions. I couldn't imagine having to put up with a bad tenant these days. Now take away some of the tax benefits? Ouch.

But you were okay with trump tax credit to farmers that didn?t sell anything. Double standard.
 
While I do believe in capitalism, I do think that RE investing has contributed towards the homelessness issue that exists in the US. It has also inflated the housing prices to some degree which has led to the amount of homeless in the country. I think people sometimes misunderstand what the purpose of a house is. A house is a place for one to live. The sole purpose of owning a home shouldn't be to make $. While one can use their $ to invest in real estate, I personally think there should be a law to immediately disqualify RE investors from bidding on a home if there are other bidders that are planning to use the property as primary residence. While it may seem like a crazy idea at first, I do think this will help correct the housing market in a healthy way. I find it quite ridiculous how some people own multiple properties and are trying to bid against people that don't even have a home to begin with.

There are plenty of places where one can put their $ in and be able to grow their wealth. Housing shouldn't be one of them unless the property has no offers coming from people that plan to live there.
 
What?s next, preventing people with money from making more money??

Why not limit stock purchases if your wealth exceeds $x??

At some point all capitalists will move to Florida and Texas and then those two states will form their own country.
 
I think if your calves are above a particular circumference, you should be denied the right to purchase equities.  Makes sense.
 
qwerty said:
What?s next, preventing people with money from making more money??

Why not limit stock purchases if your wealth exceeds $x??

At some point all capitalists will move to Florida and Texas and then those two states will form their own country.
There is a difference between making more money and making too much money. Too much is subjective and will be difficult to have agreement.

In regards to your thoughts on limiting stock purchases based off of net worth exceeding $X, that would be difficult to justify. How will you ever be able to determine someone's net worth if they aren't a public figure? Not everyone's net worth is disclosed. And getting that disclosed would be a never ending battle in court. Tons of loop holes. How would you value an art piece? A car? etc. It will be impossible to implement that type of policy. Which is why the wealth tax that Sanders & Warren wants to impose will not be possible.

I think in order to address the issue would be to look into RE as I mentioned and possibly even increasing the capital gains taxes based off of X dollars. No one wants to pay more taxes and I get it. But seeing CEOs not taking salaries and instead pay long term capital gains taxes at 2x% when I myself am paying more than that is quite ridiculous.

On the other hand, I do think most of the tax dollars are wasted/not used properly. For example, why does it take so long to get anything done in DMV? Half of their jobs could be done via an automated system. Renewing IDs, registration, etc can all be done online or through a machine. Why is our infrastructure a piece of crap compared to other 1st world countries? The list goes on... I think if tax dollars are used properly, it wouldn't be as bad paying more taxes. But that is unfortunately not the case in the US.
 
qwerty said:
What%u2019s next, preventing people with money from making more money??

Why not limit stock purchases if your wealth exceeds $x??

At some point all capitalists will move to Florida and Texas and then those two states will form their own country.

We heard that before. But the Morekas is still here. Lol
Trump started the no evictions and foreclosures. Some people say people probably can%u2019t pay back a years worth of rent or pay their mortgage even with a modify loan. PPP loans aka free money was a joke. Tax payers have to eat the cost and not get repaid. Here is free money to pay your employees.

Trump farmer subsidy due to the trade war. Do not talk about giving tax payers money to farms for not selling nothing. I was so close to starting a farm. (The trade war was a joke. Just theater and fake drama.)

Florida back to Spain and Texas back to Mexico?
 
sleepy5136 said:
While I do believe in capitalism, I do think that RE investing has contributed towards the homelessness issue that exists in the US. It has also inflated the housing prices to some degree which has led to the amount of homeless in the country. I think people sometimes misunderstand what the purpose of a house is. A house is a place for one to live. The sole purpose of owning a home shouldn't be to make $. While one can use their $ to invest in real estate, I personally think there should be a law to immediately disqualify RE investors from bidding on a home if there are other bidders that are planning to use the property as primary residence. While it may seem like a crazy idea at first, I do think this will help correct the housing market in a healthy way. I find it quite ridiculous how some people own multiple properties and are trying to bid against people that don't even have a home to begin with.

There are plenty of places where one can put their $ in and be able to grow their wealth. Housing shouldn't be one of them unless the property has no offers coming from people that plan to live there.

I?m not sure how you make the connection between homelessness and RE investing. Most people that are homeless seem to have a mental illness, drug issue, or job loss that leads to them becoming homeless. It?s their inability to pay rent/mortgage, not the lack of homes available. The people to homes ratio will not change for the better if you remove the incentive to invest in real estate.
 
@SGIP We may disagree on policy and differ ideologically, but always appreciate your perspective.

You are on point about pitchforks, torches, and anarchy. I think we are in the midst of a low grade revolution. Not guaranteed to blow, but the amount of kindling is alarming.

@Sleepy - There are several Asian countries with laws that ban hedge funds & corporations from buying Single family residences. So I'd say the concept isn't crazy, but unlikely to happen in the US. You can already tell from previous TI responses that this will be portrayed as freedom infringement and "un-American".

Even if there's enough public support, it isn't something that has political legs. We can't even get laws with 85% + public support passed, like universal background check and red flag laws for guns. More than enough of our legislators are influenced by special interests (like NRA). Common sense reform / laws that are directly against special interests simply won't pass.
 
qwerty said:
At some point all capitalists will move to Florida and Texas and then those two states will form their own country.

Actually might not be a bad idea.

Texas and Florida certainly will have money to pay for a new border wall, unlike Mexico.

It would also make us all safer cuz all the anti-vaxxers would move there.

And when it gets bad, Elon Musk can take the richest ones on a rocket escape to Mars.
 
IN my mind, a fair capitalistic model would incentivize an individual that works hard and makes as much money as possible while positively contributing to society/economy. So, give tax breaks, allow 1031 etc. But then that model should also give equal footing (or at least try) to both kids - a kid born into a Multi$MM family or to a single mom working at MCD. Both kids are just born and drew a lottery. SO, they should get free education and have a fair shot at proving themselves to be successful when they grow up. The RIch kid will still have a leg up, and that's ok. When both kids inherit anything that they have not earned, it should be treated as 'windfall' type of ordinary income and taxed as such. You want better treatment and tax benefit, work hard and make that much money on your own, contributing to the economy and your tax bill on that income will be lower. Your papa and mama already got all the breaks in building up the wealth, now it is not society's job to make it even sweeter for you to inherit the free $.

My kids will cuss me if they read this post in future, but this is what believe.
 
Cornflakes said:
IN my mind, a fair capitalistic model would incentivize an individual that works hard and makes as much money as possible while positively contributing to society/economy. So, give tax breaks, allow 1031 etc. But then that model should also give equal footing (or at least try) to both kids - a kid born into a Multi$MM family or to a single mom working at MCD. Both kids are just born and drew a lottery. SO, they should get free education and have a fair shot at proving themselves to be successful when they grow up. The RIch kid will still have a leg up, and that's ok. When both kids inherit anything that they have not earned, it should be treated as 'windfall' type of ordinary income and taxed as such. You want better treatment and tax benefit, work hard and make that much money on your own, contributing to the economy and your tax bill on that income will be lower. Your papa and mama already got all the breaks in building up the wealth, now it is not society's job to make it even sweeter for you to inherit the free $.

My kids will cuss me if they read this post in future, but this is what believe.

In a way 1031 is a tax break/subsidy.
Can a regular business defer taxes to the far future ? (Not really)
 
qwerty said:
sleepy5136 said:
While I do believe in capitalism, I do think that RE investing has contributed towards the homelessness issue that exists in the US. It has also inflated the housing prices to some degree which has led to the amount of homeless in the country. I think people sometimes misunderstand what the purpose of a house is. A house is a place for one to live. The sole purpose of owning a home shouldn't be to make $. While one can use their $ to invest in real estate, I personally think there should be a law to immediately disqualify RE investors from bidding on a home if there are other bidders that are planning to use the property as primary residence. While it may seem like a crazy idea at first, I do think this will help correct the housing market in a healthy way. I find it quite ridiculous how some people own multiple properties and are trying to bid against people that don't even have a home to begin with.

There are plenty of places where one can put their $ in and be able to grow their wealth. Housing shouldn't be one of them unless the property has no offers coming from people that plan to live there.

I?m not sure how you make the connection between homelessness and RE investing. Most people that are homeless seem to have a mental illness, drug issue, or job loss that leads to them becoming homeless. It?s their inability to pay rent/mortgage, not the lack of homes available. The people to homes ratio will not change for the better if you remove the incentive to invest in real estate.
Not true.https://dupagehomeless.org/research...n-between-housing-affordability-homelessness/
 
If the politicians want to do away with a huge tax loophole for the wealthy, they should eliminate the carried interest tax benefit for high net worth investors/hedge funds/PE firms. Neither side has been willing to do that because of the fear upsetting their biggest political donors.
 
@Aquabliss - looks like with your proposal on stock purchase restrictions I'll never be able to buy...  ;)

@Sleepy5136 - I don't know what your exposure is to the Homeless Population in California, but I'd welcome you to ride along with me and see it up close some time. PM me for details. The homeless problem is in fact a mental illness issue front and center. The secondary issue is high rent costs. Not everyone is owed the opportunity to own a home. They are owed shelter - in this case affordable rent - but a home? That's another story.

@USC. Amen. That said, a .1c to .5c individual stock transaction tax (buy or sell) would take care of most of the governments financing needs quickly - however I don't imagine seeing Satan making snowballs at home just yet.

Tax breaks tend to layer over the years similar to the way sedimentary rocks form, and at some point in time a jackhammer needs to be applied to them. If the Progressives really want to open up "affordable" housing, they have to make bold moves such as:

A) Eliminate 1031 exchange tax deferrals.
B) Eliminate real property depreciation for all 1-4 unit properties.
C) Restrict rent increase percentage to zero over CPI.
D) Highly tax all rental income over PITIHOA + 20% - 20% being a "reasonable profit"

There would be such a rush to the exits out of rental property ownership that all property values would decline rapidly. Inventory would pop higher and the sellers would no longer control the board. It's also "Green" (but not sustainable) since no new development would be needed to create more affordable homes. Tax policy changes would complete the task neatly.

Who cares if FNMA/FHLMC and Banks mortgage holdings would become significantly impacted? Who cares that Mom and Pop real estate owners are being targeted to pay "their fair share"? Who cares that corporate apartment investors wouldn't suffer but rather exponentially gain in value? No one seems to pay close attention to the law of unintended consequence as long as their feel good proposals continue to give off so much warm and fuzzy feels..... Yet this is likely the direction we are eventually headed towards as economic disparity widens.

My .02c
 
Cornflakes said:
IN my mind, a fair capitalistic model would incentivize an individual that works hard and makes as much money as possible while positively contributing to society/economy. So, give tax breaks, allow 1031 etc. But then that model should also give equal footing (or at least try) to both kids - a kid born into a Multi$MM family or to a single mom working at MCD. Both kids are just born and drew a lottery. SO, they should get free education and have a fair shot at proving themselves to be successful when they grow up. The RIch kid will still have a leg up, and that's ok. When both kids inherit anything that they have not earned, it should be treated as 'windfall' type of ordinary income and taxed as such. You want better treatment and tax benefit, work hard and make that much money on your own, contributing to the economy and your tax bill on that income will be lower. Your papa and mama already got all the breaks in building up the wealth, now it is not society's job to make it even sweeter for you to inherit the free $.

My kids will cuss me if they read this post in future, but this is what believe.

Many progressives are for free college education. 

I?m for the spirit of that but think it is the wrong public policy.

44% of recent college graduates are underemployed, doing jobs that didn't require the college degree. 94% of new jobs created are temp jobs. Their paths forward aren?t there.

We should also consider the 6-year college graduation rate is down to 59%. We are already overprescribing college.

Only 32% of Americans graduate from 4-year colleges. Why further subsidize the top third of the population?

Only 6% of US high school students are in a technical track. In Germany it is 59%. We already have 10 million mid-skill job openings.

I think instead of free college, it's better to pass Universal Basic Income. Let people pay for college or technical school or community college or start a business or pursue something independent.
 
I get the subsidizing college argument, but not making college free is creating losers and perpetuates the lack of economic mobility. I feel that when my kids grow up, I'd be in a position to pay for their college. SO, if college is not free, my kids won't suffer, and when they inherit my house, my 401k and all, they will have a further advantage, especially compared to the low-income family kid that got out of college with massive debt and no inheritance.

Make it free education for both and even charge more to my kids on inheritance. They already have a leg up growing up in a family of educated parents, better economic life, and potential inheritance. How much much more favorable treatment they should get?

I think that we have synonymized Capitalism with Greed over time.
 
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