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Category Archive: ‘Real Estate Investing’

Capital-Gains Tax on Real Estate

tax

Last night we heard a proposal to raise the capital-gains tax.  Can we cut to the chase and dive into reforming the tax code instead?

I don’t want to get into the politics of it, let’s leave that for other bloggers.  Everyone can agree that some sort of tax reform is wanted and needed – and hopefully somebody will pull it off someday.

Realtors hear about it all the time, especially from the long-time owners of rental properties.  The thought of paying a huge tax bill makes them immediately dismiss the idea of selling, because they know if their leave it to their heirs, the stepped-up basis will apply.

We shouldn’t have a tax code that influences real estate decisions. Tax reform should include a neutral stance on when you sell real estate – it should be taxed the same, whether you are dead or alive.

What about the MID, the mortgage-interest deduction?  Let’s get rid of that too, and create a pure marketplace where people buy homes to live in, and raise a family, and not because they get a tax break.

If you have any other reason to buy a house – investment, etc. – then great, but tax benefits shouldn’t be one of those motivators, because they won’t apply to all citizens.

‘Oh Jim, now you’re asking for it. The NAR is going to punch your ticket and throw you out of the club for that kind of crazy talk.’

Yeah?  The National Association of Realtors needs to play a bigger game.  The millions they spend on lobbying could help champion tax reform, instead of sounding like a broken record on the MID.

Here are two articles discussing the topic:

1.  This guys says that something has to give:

http://www.forbes.com/sites/anthonynitti/2015/01/20/why-republicans-should-embrace-a-28-tax-on-capital-gains/

2.  This guy points out how small the MID benefit really is:

http://www.latimes.com/business/hiltzik/la-fi-mh-capital-gains-20150119-column.html

Posted by on Jan 21, 2015 in Ideas/Solutions, Jim's Take on the Market, Real Estate Investing, This Is America | 8 comments

Vacation Rentals

short term rentals

The coastal markets are for the affluent, and the supply is shaping itself to the demand.  We are seeing wholesale changes in places like downtown Carlsbad, where the quaint older homes and businesses are being bulldozed for redevelopment, mostly for higher-end condos.

Another change is how Airbnb and VRBO.com has fueled a cottage industry of short-term rentals.  Properties that made no sense as monthly rentals are now catering to tourists and other short-termers to pick up more income.

There will be some turbulence along the way, but vacation rentals are here to stay.  There aren’t enough hotels to satisfy the demand (LINK), and if you don’t mind the additional hassles, the short-term rentals can be very lucrative.  Now a city councilman in Los Angeles thinks he needs to regulate it (H/T daytrip):

http://www.latimes.com/business/la-fi-regulating-short-term-home-rentals-20141202-story.html

An excerpt:

“Commercial ventures have purchased large numbers of rental units or even entire apartment buildings and converted them into de facto hotels, reducing and threatening the city’s stock of rental housing and affordable housing, and that is wrong,” Bonin said.

Posted by on Dec 3, 2014 in Jim's Take on the Market, Local Flavor, Real Estate Investing | 7 comments

Investors Going Further Out

Housing recovery pushes investors into more remote areas to find deals, with more looking to flip properties, C.A.R. survey finds

LOS ANGELES (Aug. 20) – Given the depletion of distressed homes on the market, investors are changing their strategy and are moving away from purchasing homes in more popular, urban areas in favor of more rural areas of the state where better deals can be found, according to a CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) investor survey.

In 2014, nearly half (45 percent) of investors said they purchased properties in such counties as Sacramento, San Joaquin, Fresno, Kern, Merced, and Tulare, up from 27 percent in 2013, C.A.R.’s “2014 Investor Survey” found.  Fifteen percent of investors purchased properties in Northern California in 2014, down from 27 percent in 2013, and 40 percent purchased properties in Southern California in 2014, down from 50 percent last year.

Additionally, with home prices on the rise, more investors are flipping properties instead of renting them.  In 2014, 28 percent of investors flipped the property, up from 20 percent last year. Fifty-eight percent of investors rented their properties in 2014, down from 73 percent in 2013.

More than eight out of 10 investors (83 percent) own other investment properties, with 7 percent owning more than 10 properties, 17 percent owning 6-10 properties, 47 percent owning 2-5 properties, and 12 percent owning one other property.

Among the reasons investors cited for buying now include profit potential (cited by 58 percent), good price (43 percent), location (26 percent), personal (21 percent), and low interest rates (14 percent).

The median sales price of an investment property in 2014 was $320,000, up 9.6 percent from $292,000 in 2013, reflecting increasing home prices and fewer available distressed properties over the past year.

Additional findings from C.A.R.’s “2014 Investor Survey” include:

• Reflecting the recovering housing market, the majority of investment properties purchased (70 percent) were equity sales, while 18 percent were short sales, and 12 percent were foreclosures. • More than two-thirds (67 percent) of investors paid cash • One-third of investors were foreign investors, with China, Mexico, Taiwan, and India being the top countries of origin. • While most investors made minor or no repairs to the properties, the percentage of those who did major remodeling nearly doubled from 9 percent in 2013 to 17 percent this year. • Investors spent more on remodeling costs in 2014, putting a median of $15,000 into the investment property, up 50 percent from $10,000 in 2013. • Investors own an average of 8.3 properties in 2014, up from 6.5 properties last year. • More than half of investors (55 percent) intend to keep the property less than six years.

California Investor Survey Slides (click links to open):

More investors are buying in remote areasMedian price of investment propertiesTwo-thirds of investors paid cashIntended use of property Top five reasons for buying

C.A.R.’s “2014 California Investor Survey” was conducted in May 2014 in an effort to learn more about the role of investors in the California housing market.  The survey was emailed to a random sample of REALTORS® throughout California who had worked with investors within the 12 months prior to May 2014.

For complete survey results, visit www.car.org/marketdata.

Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 165,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Posted by on Aug 20, 2014 in Real Estate Investing | 2 comments

More Real Estate Crowdfunding

sharestates

Once crowdfunding for real estate catches on, we could see a whole new type of bubble – one that is less personal and investors can shrug off – From BI:

In the current environment of low interest rates, investors are scrambling for  yield, and many have turned to real estate.

Typically investors buy and flip homes, or they invest in real estate  investment trusts (REITs), which own different types of properties.

But Sharestates is offering both accredited investors and the public a real  estate crowdfunding platform that lets them dip as little as $100 into a  project. The idea is to bring real estate to the masses.

Read more:  http://www.businessinsider.com/sharestates-the-e-trade-of-real-estate-2014-8

This is the company they featured:

https://www.sharestates.com/

Posted by on Aug 9, 2014 in Real Estate Investing | 4 comments

‘Anti-Speculation Tax’

The attack on Prop 13 should be next….from the sfgate.com:

http://www.sfgate.com/politics/article/Tax-to-brake-S-F-real-estate-speculation-headed-5558857.php

Supervisor Eric Mar and tenant activists unveiled a ballot measure Tuesday that would impose a steep tax on investors who sell an apartment building within five years of buying it, a proposal they said is aimed at reigning in real estate speculators who are helping to drive up housing prices by flipping rental properties.

The “anti-speculation” tax, which would apply solely to smaller, rent-controlled, multi-unit buildings, will join several other housing measures on an already-crowded November ballot. It asks voters to approve a graduated tax that decreases the longer an owner holds onto a property – starting at 24 percent of the selling price if a building is sold within a year of purchase, falling to 14 percent at five years and disappearing in the sixth year.

The measure exempts single-family homes, condos, owner-occupied tenancies in common, properties not being sold at a profit, new construction, properties being turned into affordable housing, and buildings with more than 30 units.

“This is a serious situation we are in – the unstable housing costs in the city, even the average cost of a rental unit is so out of whack right now and it’s driven … by wealthy, powerful interests who are flipping apartment buildings and making a lot of money quickly,” said Mar. “This will slow down or stop the flipping by greedy speculators, help ensure more of a balance of housing in the city, and hopefully address the out-of-whack, super increase in apartment rental prices right now.”

http://www.sfgate.com/politics/article/Tax-to-brake-S-F-real-estate-speculation-headed-5558857.php

Posted by on Jun 17, 2014 in Prop 13, Real Estate Investing | 2 comments

Happy Easter

sunriseHT – Daytrip, Happy Easter to you and your family!  A story about buy-and-hold, which is highly recommended (buy as many houses as you have kids, in case prices get way out of hand).

http://www.latimes.com/business/la-fi-first-time-landlords-20140405,0,5071734,full.story#axzz2zOvSJDIv

An excerpt:

Buyers who bought at the bottom of the market in 2009 got a bargain. Then  came years of opportunity to refinance into record-low interest rates. That  means many owners can rent out their home for more than it costs them each  month, even with taxes and other ownership costs figured in.

With the tenant covering the note, they can build equity — especially if home prices continue to rise.

“It’s a market-based decision,” Henson said. “They know they can get really  high rents right now. If I’m locked in on a 30-year fixed [mortgage] at 4%, and  if home values are going up, it can make a lot of sense.”

It did for Brian Darcy. The 36-year-old and his wife recently moved to North  Carolina to be closer to her family. Instead of listing their three-bedroom in  Manhattan Beach for sale, they signed with First Light and put it up for rent.  Within a week they had a tenant and a lease that paid more than enough to cover  the mortgage, Darcy said.

“The confluence of events kind of blew my mind,” he said.

Darcy and his wife bought the house in 2010 and always planned to move to  something bigger. With two growing children and regular visits from relatives,  it was getting to be that time. But the houses they were eyeing in Manhattan  Beach were going up in price just as fast as theirs was.

They had enough savings for a down payment in North Carolina, and he could  work from there as easily as in California. So off they went. They’re looking  for houses now and finding that their money will go a lot farther in their new  home.

The timing, Darcy said, couldn’t have been better. He estimates that his  house in Manhattan Beach is worth one-third more than he paid for it four years  ago, and he refinanced into lower interest rates. Now rents are rising.

“We bought at a good time,” Darcy said. “That’s what makes the mechanics  work.”

Many of the new landlords are affluent and financially savvy, Haberle said.  They’re not necessarily in it for the long haul, but they see a chance to profit  right now.

“These amateur landlords aren’t people who are doing this for a living,” she  said. “They just kind of happened into this opportunity.”

If this trend holds, it could mean even fewer homes for sale in an already tight market.

Read full story here:

http://www.latimes.com/business/la-fi-first-time-landlords-20140405,0,5071734,full.story#axzz2zOvSJDIv

Posted by on Apr 20, 2014 in Real Estate Investing | 2 comments

Dear Frustrated Buyer

Buyers are grabbing up everything in sight – what do you do?

dealing with insanityBe patient, commit to a price point, subtract up to $100,000 for repairs/improvements, know what/where you are willing to compromise, and buy the next good one!

It’s only sticks and stucco, you’re the one who makes it a home.

Let me help you!

Posted by on Mar 24, 2014 in Bubbleinfo TV, Encinitas, Frenzy, Jim's Take on the Market, Klinge Realty, Real Estate Investing, Why You Should Hire Jim as your Buyer's Agent | 4 comments

UTC 2br/2ba Condo

Here’s a great buy for those looking for an attractive top-floor condo with gleaming hardwood floors, vaulted ceilings, 2 garages, plus new carpet and paint – all for only $395,000!

The last sale of this model was $418,000 in December.

Conveniently located between La Jolla and the UTC mall, similar units have been advertised recently for $2,000 to $2,200 per month in Craigslist:

Across the street from this complex is a Vons shopping center that also has a Starbucks, Sushi, Shanghai Cafe, Leucadia Pizzeria, yoga, dentist, Tapioca Express and more!

https://maps.google.com/maps?f=q&source=s_q&hl=en&geocode=&q=76

Posted by on Mar 19, 2014 in Bubbleinfo TV, Real Estate Investing | 2 comments