Each candidate means for real estate investors - Posted by ProsperityGroup

Just wondering - Posted by Kenneth Hocking

Posted by Kenneth Hocking on October 22, 2008 at 08:45:32:

Mr Hyre;

I am just wondering if you have seem this at all.

I have seen pressure on the commercial side as many have chosen to liquidate and pay taxes at 15% Cap Gains on the years of rolling the 1031 deprecations forward at least that is what they say in public.

Many of the older more established investors have moved to cash of sorts and have largely reduced their holdings and I have seen a few buying heavily discounted owner carry notes and some enven buying heavily discounted mortgages directly form the bank prior to the foreclosure process.

My question many of these well established investors lived through the dramatic change in the tax reform of 1986 and the effect it had on RE values. Then came the S&L crisis.

This time it looks to be reversed. S&L or credit crisis and now the potential for a Cap Gain increase (Obama is supposedly ahead by 10 points) what impact are you seeing or expect to see in the commercial investments area say Multi-Family and Strip Centers.

You mentioned many will set on assets IS that versus sell them before the change occurs?

It feels like we are seeing heavier than expected selling pressure. Some think it is political concerns but I fear it is mostly 3 and 5 year balloon financing (Typical in Commercial loans) that many are fearing would not be able to refinance so are selling now. Most of the banks I have dealt with have lowered there LTV limits across the board and are requiring equity buy downs for renewals on many properties.

Any opinion?

Re: for real estate investors - Posted by Len

Posted by Len on October 19, 2008 at 22:53:04:

You are correct as far as the loss limitation of $3000 per year.

However, you left out the step of netting losses against any gains, in calculating any loss carryover.

Now would be a good time for people who incurred losses to sell their properties which may have gains, so that they can net their losses against their gains.

Even Europe does not tax cap gains - Posted by Rich-CA

Posted by Rich-CA on October 19, 2008 at 21:11:40:

However, just because the market went down does not mean there are no cap gains. I have one stock I bought after the dot com bust that I have a 500% cap gains liability on whenever I sell. I have properties that, even with the RE price drops, all mean cap gains if I sold TODAY. The big problem with the cap gains tax is that it takes money away from reinvestment and turns it over to the one entity that only takes from and never contributes to GNP - the government. The loss of capital from the economy is why we have a downturn.

what about REAL ESTATE CGs? NT - Posted by Bob

Posted by Bob on October 19, 2008 at 20:18:09:

NT

Re: Sounds like fun (long) - Posted by Joe

Posted by Joe on October 21, 2008 at 12:13:41:

I know why families could afford homes and new cars years ago an cannot now. Then a home was probably 1000 square feet and had one bath. The car had no AC pr power this and that and leather sets. There were no cable bills, cell phone bills, huge phone bills. Kids played in the yard instead of being shuttled off to after school activities in gas guzzling Suvs. Oh, don’t forget that these activities cost a few hundred a month. $100+ sneakers, computers, ipods, 52 inch plasmas Tvs.

If we really take a look at the standard of living that the group that is 10-25 percent up form the bottom lives, you will surely agree that they are living like kings compared to the middle joe was 50 years ago.

Re: Sounds like fun (long) - Posted by Eric in FL

Posted by Eric in FL on October 20, 2008 at 06:27:26:

Tye,

Great points all the way around and I don’t think any of the candidates have even come close to addressing a real solution because politics has become a profession. Our founding fathers wanted it to be a service as Ben Franklin’s writings have always stated but these idiots look at as a power grab and a position for life. You change that mind set and create term limits with no perks or salary and everything changes. When that happens I will probably be long gone but let’s hope. Second, please don’t ever think we don’t have universal healthcare because we do. It’s called Medicaid and Medicare and please don’t forget the VA medical system as a point of a failing government entity. Any person can walk into an emergency room and receive treatment. I spent several years in that industry and understand it through and through. Do you think there was a reason that central and south americans would travel to Maimi and check into Jackson Memorial through the ER? They would get treated, spend days in the hospital, and then someone would do rounds and they were gone. Never paid a dime and got back on their plane and went home. So please don’t ever say there is not accessible healthcare because there is and it’s on the back of the tax payer already. Go check your local or state budget under indigent patient care dollars and you will fall over. The scary thing is that Medicaid / Medicare will bankrupt our country by 2025 in it’s present state. Sorry for the rant but please educate yourself on the medical system as it’s the best on earth, and yes it has its flaws, but fundamentaly it serves everyone. If Obama gets in he will slowly change this system and you will actually see care for the less fortunate deteriorate. Go to European countries where the dirty office in the morning is for the government patients and the beautiful office in the back is for private payers. It’s an alarming site to see for the less fortunate as they now enter into the same ER as I do. In the future under Obama I will have a special card to enter in and the others will simply sit outside and watch. Scary…

As far as real estate investors and the candidate to look at for possible future trends in real estate you only need to look at Ireland for a case study. They slashed their taxes on those big, bad corporations and personal income and their growth has exploded. Wealth has doubled in the past 14 years overall and their tax rates are a third of ours. Their big problem now is immigration and the flood of people coming into the country illegally. Sound familiar. Their prosperity only parallels one country in the past 28 years and that is the US. This guy Reagan started that and here we are today. Tax cuts create capital and capital creates jobs. Wealthy people will start to take their wealth creating devices out of the economy and will put them in things that won’t get taxed. Whether that is off shore or something in the tax code that permits it but it won’t be in job creation. History dictates that. So, anyone who creates tax increases is detrimental to real estate growth and anyone can look through history and see this. Go back and look at any of the blighted areas in your town and it can be directly attributed to government policy.

Tax cuts equal jobs and jobs that can be taxed creates much more revenue than higher taxes on the supposed wealthy. Now if we could get these horrific government schools to teach simple economics and wealth creation what a place it would be. Ignorance should be classified as a disease but unfortunately Obama would create a program for those people. Wait a minute there already is one it’s called liberals.

Best Regards,
Eric in FL

Missed the main point - Posted by Rich-CA

Posted by Rich-CA on October 19, 2008 at 20:44:52:

The small jobs such as you, and even to a smaller extent I, can contribute to the economy are not enough to make the economy as a whole grow. The whole idea of the people who work at jobs is they are employed by others, who in turn need a source of capital to do their business. Its not that they are not contributors. Its that in looking at the economy as a whole, even as small a whole as one MSA (metropolitan statistical area), its not the activity that causes growth. Its the large investments that cause growth. I have worked for others almost all my life and I can tell you that not a single one of these folks were ordinary middle class people spending their own money.

Of course wars did not prop up the economy (unless you happened to olive in San Bernardino county which, prior to the arms buildup was a wasteland of vacant commercial and industrial space and afterward became revitalized - but part of that was based on the cheap money flooding the economy. Which did not last because it was government money - just as all the Great Depression money didn’t budge the economy until WW II hit - and then while employment was more full you can’t really say much about the quality of life, which is why I do not think war is an economically beneficial activity.

The tax cuts did spur on a period of growth after Clinton left office but got whacked by 9/11 - whose downturn was directly responsible for my sudden change of careers as many of us in the financial industry found the need to look for work. The bottom line is that more money available to start and run businesses creates work and there is a threshold before there is enough money in one place to make the jump start happen. This has never happened anywhere in the world by transferring wealth from the top to the bottom except by way of increasing salaries and better paying jobs that result from supply and demand.

The alternative to the so called “trickle down” theory is called Socialism, by the way, and the Socialist countries in Europe are worse off than we are. Socialism has never produced the kind of growth we see here in the US anywhere in the world. Even the Communist China is more Capitalist than we are when it comes to their economics and the people have benefited greatly from that between when I was there in 1994 and again in 2006.

Lenders Workshop was my eye opening - Posted by Kenneth Hocking

Posted by Kenneth Hocking on October 22, 2008 at 08:30:27:

experience into this world of the short amort loan and relationships with local banks is the key

Re: Defining Terms - Posted by JHyre in Ohio

Posted by JHyre in Ohio on October 22, 2008 at 12:16:48:

Sounds like you’ve already defined it for us…“affordable preventive health care”…say, who but some sort of extremist could possibly be against that? Who knew that fact-based scientists were so good at rhetoric. I can only imagine how we might objectively define “man-made” climate change.

To answer your explicit question: I would define socialized health care as a healthcare system predominatly run by govenment or one indirectly run by government via their funding of same, much like our primary & secondary educational system is funded, and as a practical matter, run by government, in all of its glory and success…a success I would expect to see repeated when applied to healthcare.

To answer your barely implicit statements: Words mean things, as you point out. Some words have bad connotations. For example, we no longer have “liberals” because that is a word with a negative stigma. Instead, we have “progressives”, because “liberals” have not managed to savage the reputation of that particular term (they are working on it). Likewise, “socialized” has negative connotations b/c most people do not wish to live in countries with stagnant economies, double-digit unemployment, high taxes, low class mobility, etc. “Scoialized” is a synonym for “government run”, which historically implies expensive, inefficient and poorly done. Technocrats often seem unable to grasp why government tends to produce those results. Here’s my personal take: Governemnt is run by politicians, a breed of human that tends to promise much to all and deliver based on what actually gives them power (via campaign contributions or media adulation, for example), as opposed to what is efficient, effective or even correct. Furtehrmore, politicians are far less accountable than most (or perhaps all) other classes of people. The incentive to maxinize power, added to spending “unlimited” sums of other peoples’ money and low accountability leads to rather poor results, which is why classic American theory of government tended to allocate to government only those things that were absolutely necessary, with a big “N”. I find the following idea amusing in the extreme: “Businessmen (or some other class of people) are doing a bad job, therefore let us give the job to the politicians, who will do a much better job”. In my view, socialized medicine means taking the remenants of the medical private sector and letting the politicians attempt to do a better job…good luck with that! They will fall flat and ignore a cardinal rule of medicine “First, do no harm”. But that won’t matter, we will be able to say “they tried, their intentions were good” - and that’s of course what really matters, right?

Will affordable healthcare bring about the fall of Western Civ? Not that THAT is a loaded or biased question - it’s the wrong one. Will government bring about truly affordable and effective healthcare? Fat chance. How have they done with Medicare & Medicaid? Say, weren’t those programs supposed to solve the very problems we are dicsussing? BTW, how are they doing budget-wise, especially when compared to original political projections of cost - off by several thousand percentage points, perhaps? Why would one think they’d do any better with even more money and control? What kind of rational decision-maker throws good money after bad…probably depends on WHOSE money it is!

Costa Rica…now there’s a germane example. Let’s see, first we could find a country that would defend us so we could have a near-zero military budget to put into healthcare…France perhaps? LET’S look at sonme facts in terms of actual care received and actual costs - including high taxes, high unemployment, slower economic growth, less class mobility (you can’t have your cake and eat it to, LET’S look at Costa Rica’s whole system and not conveniently isolate just the happy facts), and government to decide who lives, who dies, who suffers, who waits…not to mention the effect on innovation and medical tech. The latter is the reason for much of the greater cost of care, cures that did not exist a few years ago do exist now - for a price. Which cures would you un-discover or prevent once government decides - based on politics, as always - what gets funded and what does not?

Preventing birth defects alone is not likely to destroy society, so gee, end of argument. Giving the governemnt the power to do to medicine what it has already done to the school system will cause more suffering overall…but if it doesn’t actually destroy society, let’s go ahead and give it a shot.

Terms defined enough for you, as an obviously very objective scientist? Enough to factor in the subjective, but no less real impact, of letting homo politicus run things? It’s not as if we lack history of how things tend to turn out once that noble class of man is given more power over our lives. Or is it a case of “ignore what cannot be objectively measured”?

And by the way, an honest question as to definition would have been forthrightly answered. But since you had to get all sarcastic, I figured it would be much better to give than to receive…and I really am a giver.

John Hyre
Uncompassionate, Uncaring, Selfish, Afraid that Affordable Healthcare Will End Society, or worse yet, End Cheap Beer

Re: Just wondering - Posted by JHyre in Ohio

Posted by JHyre in Ohio on October 22, 2008 at 12:31:41:

Disclosure: Most of my clients are small-medium REI, as opposed to commercial players. So my knowledge of the latter is limited in the direct sense, with a fair amount of clue in the indirect sense (i.e., I try to stay on top of things). Ray Alcorn - now THERE is someone who is on top of macro-trends, especially as they relate to commercial RE.

I think you are correct overall. I have been making the “if you are going to sell in a taxable sale before you die, now is the time” point to clients for a few years. Otehrwise…1031 until you die! Of course, selling now is not so easy, so it’s probably “hold & weather the storm” for most REI, assuming they can do so. I have no doubt that those nasty balloons are driving some attempts to sell, more likely leading to foreclosures, though I am seeing a high number of workouts by banks desperate to not foreclose & some of the workouts are taking the form of selling the note, or letting a white knight take it over on modified terms, or simply modifying the terms. I agree on bank requirements tightening up, though a banker I just saw speak on the subject basically said that the banks are asking for all kinds of things, but it is a game of chicken, and the banks often blink b/c they do not want to foreclose. He also mentioned that Fannie Mae was the only source of funds on certain types of deals (e.g. some types of MH parks), go figure!

John Hyre

Re: Even Europe does not tax cap gains - Posted by Sailor

Posted by Sailor on October 21, 2008 at 12:52:58:

Just curious–what would happen if you swapped the stock for a dp?

Tye

Re: Sounds like fun (long) - Posted by Sailor

Posted by Sailor on October 21, 2008 at 13:17:02:

I blame HGTV for some of the higher level of expectation in housing. Geez, who really needs more bathrooms than bedrooms. When I was a kid we had to follow the walkway under the grape arbor to find the bathroom. When we moved to a house w/genuine porcelain fixtures, one small bath for 5 people seemed just right.

Of course I’m @ the getting-batty age, but I don’t recall bathroom deprivation having any effect on my childhood. What really cracked me up was when we were shopping for our last boat & discovered that almost all cruising sailboats had 2 heads! I was able to $ave a bunch by getting one w/a single head, which meant a smaller boat was just as comfortable as a large one. Even saved on insurance. I always thought having one less hole in the hull was a distinct advantage.

My life is much more hectic these days because I have to rely on so many previously unnecessary electronic devices. I dislike cell phones, or any phones for that matter, answering machines, FAX machines, & in particular, my ISP. These things make my workload heavier, instead of simplifying my life. We were the last family in So. CA to get a color TV because we waited for Rocket Man to build it from a kit. I fought against getting a microwave until years after all my friends had them. (In the spirit of full disclosure I must confess that I do adore GPS & radar)

I think that the “hunkering down” mode that’s going to become more common now isn’t necessarily all bad. I’m even considering eliminating my final land phone line. Summer’s gone, but next year I probably could be coaxed into an evening game of kick the can. Anyone for stovetop popcorn & a game of dominoes?

Tye

Re: Sounds like fun (long) - Posted by Sailor

Posted by Sailor on October 20, 2008 at 14:05:58:

Oh, Eric, I do know a little about the health care system (in addition to being a Medicare recipient I’ve taught Medical Anthropology at more than one university). I respectfully disagree that we have universal coverage in the U.S. (& the VA is not available to all vets). Though there are certain services available to the indigent, even those w/insurance often are unable to receive appropriate care. Just last week, USA Today reported that 1 in 8 patients diagnosed with advanced cancer do not get treatment because they cannot afford it. Link to article:

Last year a family member sought emergency treatment at a local clinic for what turned out to be a severe case of diabetes. He became so ill waiting for hours that his wife took him to an Urgent Care facility. Because he was in critical condition by that time, they did not treat him, either, instead referring him to a hospital ER 30 minutes away. By the time he was actually treated he was in imminent danger of organ failure. Although he had no income, he was charged the full 7k for doctor & a 2-day hospital stay. Sorry, no coupon or discount for being jobless & without assets.

Each year 35,000 Americans die because they didn’t receive $15 flu shots. I’m not sure this is a situation that should be purely evaluated on ROI, but I think we are shortchanging ourselves. I reside in a state that has recognized that it is far cheaper to provide free prenatal care for all women than to bear the medical expenses & long-term care for those infants who would otherwise have been born with debilitating congenital disabilities. This proactive vision is not shared by all state governments. Should it be more widespread?

Don’t forget that even those w/Medicare pay insurance premiums & co-payments, & that not all health care is covered. Some people were outraged when Michael Moore’s film, “Sicko” came out, not realizing that it was actually a documentary on the problems of folks who HAVE health insurance.

Yes, some folks come to the U.S. for medical care. And some Americans, me included, opt to go abroad for it. This isn’t the forum for an off-topic debate, but I’d like to point out the comparison of the American medical system to those found in various other countries is not a simple matter. I’ve received medical/dental care in several countries, & for some treatments I would fly out of the U.S., not just because it is cheaper, but because I feel the care is better. When my husband was diagnosed w/cancer a few years ago I explored all option & was fully prepared to seek treatment for him anyplace in the world. Luckily, the very best surgeon I could find was only 5 hours away so we didn’t need our passports. We are fortunate to have multiple options, but many Americans don’t have any treatment options, & that bothers me greatly.

Capitalism & socialism are two economic/social models, but remember that the purpose of a model is not pure replication, but for purposes of comparison & contrast. Just as the student learns to measure rates of evolution by comparing reality to the Hardyâ??Weinberg equilibrium model, so does the child learn from playing Monopoly that capitalism unleashed means annihilation for the opponents of the player who manages to place a hotel on Boardwalk. We learn from models, but we must merge them with reality & human compassion. Strident adherence to any model is a failure to understand both context & reality. I’d like us all to be just as passionate about maintaining our minds open to learning as we are about our social, economic & political ideals. I believe we are better when we allow ourselves to grow, as well as to age, w/time. I still hold the same ideals as when I captained 3 precincts for Goldwater in 1964, always believing in the importance of individual responsibilities. However, eventually I learned to recognize that those responsibilities were not just to myself, but to others–some not yet born.

Yes, I’ve noticed the change in Ireland. It wasn’t that many years ago that one of the country’s greatest problems was the mass exodus of the well-educated young who could not find jobs. Eventually, foreign firms came to Ireland because it was financially attractive for them to produce goods & services there. Pendulums do swing, don’t they? That’s the problem when we govern by crisis–responding in the short term when we really should have finally learned that long-term planning provides a far less bumpy ride.

Eric, I love low tax rates, & I am outraged that I pay more taxes in retirement than I did when working. Where, oh where, did all our deductions go?. As I remember it, Congress promised that if we gave them that whopping salary increase, in exchange they’d revise the tax code to be “more fair.” Sure, we lost those deductions like interest on consumer credit & medical expenses below a certain %, but we were supposed to be better off in the long run. We’d bite the bullet once, & they wouldn’t bother us in the future. How well did that work?

I enjoy open discussions, folks, but hope that we can keep them more positive than the political campaigns of recent history. I pledge to use my eyes & ears as much as much as I do my keyboard.

Tye (who is still undecided)

Re: Missed the main point - Posted by Sailor

Posted by Sailor on October 20, 2008 at 15:01:55:

Ah, so they were $pending OPM. . . so, credit is necessary for growth? I know that has been a mantra for many, but I still have a problem w/thinking that what is not-so-good for me is necessary & good for the bigger guys. Or that, in turn, their dependence on credit is going to trickle down as a benefit for me. OK, let me look around the financial landscape–does it impact me if AIG has to be bailed out by the feds? Yup, & my offspring’s offspring & then some.

What if all those guys @ the top DID act like, as you say, “ordinary middle class people spending their own money?” Hmmm, would we still be hocking our great-grandchildren?

Let’s turn the prism over. Say I, in my low position on the totem pole, operate in the black. Does that beneficially seep upward? It means I can pay my suppliers, who in turn have enough money to pay their wholesalers. Won’t the manufacturers then be able to write checks to those who provide their raw materials?

At what point in the line of the food change does credit change from being a negative behavior to a necessary & good behavior? (Yes, you can take that as rhetorical.)

It’s been a qtr of a century since I was in China, but one of the many things that surprised me then was the extent of unemployment under a such a strict Communist Regime.

Humans seem to have a natural need to categorize & label. I’ve always considered myself economically conservative, but I’m no longer sure where I fit in the politcal taxonomy. Are independence, common sense & financial responsibility now radical concepts? Does compassion = socialism? I dunno anymore, & I can’t figure out why the same standards of behavior don’t apply to both big & small. I figure how somebody handles their silver dollars shouldn’t be any different than how I handle my pennies.

Rich, I’m smiling right now because I wasn’t thinking of it when I wrote the analogy above, but I have a literal shoebox full of pennies, nickels, dimes & quarters that I am planning to leverage into a whole lot w/out borrowing a dime!

Tye

Re: Defining Terms - Posted by Sailor

Posted by Sailor on October 22, 2008 at 13:53:48:

Golly, John, I didn’t mean to unleash the beast! Sorry if you thought I was sarcastic when I was really trying to find out what you meant. During this political season I’ve had the term “socialized medicine” thrown @ me several times & I’m still unsure of what you guys are trying to say.

The horrors of Medicare & Medicaid are well-documented, but so are those of private insurance. I’m not advocating gov’t take over anything. I do think all our medical systems could be improved, & I’ve said more than once if I ever come back for another shot @ life it would be as a medical consumer advocate.

John, we don’t we disagree as much as you may think. Having been a fed, I certainly don’t believe gov’t can do a really good job administering health care. I also don’t believe the insurance companies or pharmaceutical companies should be in charge, either. It’s going to take a cooperative effort & a clear vision, along w/the full involvement of informed patients to develop a better system.

My examples were nothing more than an attempt to elicit a definition of your term. And now that I have it, I agree that it would not work. Under your definition we absolutely concur. I submit, though, that there exists a potential for a better system than what we have today. What you perceived as sarcasm was not intended. In my opinion, if a question makes one think, rather than just react, it is a good question.

Yesterday I stopped into a local political headquarters to pick up a yard sign supporting our State Rep. I was asked if I also wanted a sign to support a presidential candidate. When I turned down the offer, saying I was sure of my vote yet since my faborite candidate was no longer running, the reaction was extreme. It must have been quite a sight, I’m sure, w/one old lady yelling at another about who should have a finger on the Red Button! Perhaps we are all a mite sensitive this season. I vote for cooperation & good planning, for rational discussion & good cheer, for fine diplomacy & great intel, for a great tenant in every trailer & wonderful caring friends for everyone. I’d also support a measure that would require margaritas be served before all political discussions. Pax, John?

Tye

Undecided? !! Seriously?? - Posted by Kristine-CA

Posted by Kristine-CA on October 20, 2008 at 20:17:39:

If you are still undecided, David Sedaris has some observations for you. :slight_smile:

http://www.newyorker.com/humor/2008/10/27/081027sh_shouts_sedar
is

Re: Defining Terms - Posted by JHyre in Ohio

Posted by JHyre in Ohio on October 22, 2008 at 14:52:17:

OK, things do not always come off in email as they might in person, so Pax CREOLA works.

We do agree on some things. I do not have a presidential candidate sign in my yard either, just one for Congressman. I may vote against one of presidential candidates, or against both of them, certainly not for either…I have no liking for the one and an intense dislike of the other. Blech! Ptooey!

I agree that our healthcare systems could be improved. I generally view private solutions as less bad than govt solutions, but I’m not blind to the foibles of the former. Well crafted law that carefully curbs private excess can be good (though the slippery slope of Do Something! and More! frightens me). Of course part of the problem with insurance (aside from the games they play to avoid paying what they should pay) involves “minimum coverage” requirements which jack the cost of “basic” insurance to levels where it is not very affordable, all in the name of equality. But I digress, and do agree that probably the biggest issue accross the board is an uninformed populace with regards to everything, not just healthcare. They require a Mommy to look after them, and if Mommy is picking up the bill, Mommy wants to be in charge. I just wish Mommy would leave ME alone! Think Norman Bates Hotel sort of Mommy this happy Halloween season…

Have a Margarita for me as well, tonight is a red wine night in this neck of the woods.

John Hyre

Every candidate represents a new opportunity for real estate investors, offering potential growth and diversification. At ProsperityGroup, we help you capitalize on the best prospects in the market.