Get rid of cap gains tax and inventory will go up… otherwise why sell?
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Form sereno guys comparison, Nasdaq could be close to peak in 2018, but housing price could continue its slow and bumpy rise until 2025.
The tax rules for holding rentals are very favorable too. Between deducting depreciation and 1031 exchanges, it encourages people to keep prior homes and become landlords. Isn’t that how most people start as a landlord?
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Exactly. The policy is supposed to increase home ownership, now it is increasing the desirability of being a landlord. May be, the real purpose of the policy is to keep the house price high so can collect more 
property tax?
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Get rid of cap gains tax and depreciation… Solves two problems but will put a few accountants out of work…
Flow of transactions will help the economy and encourage more investment
What are the regulations that increase the desirability of being a landlord?
1031 exchange
Depreciation deduction
Mortgage interest deduction
Low 30 year fixed interest rate
In California, prop 13 applies to rental property
Home equity loans/ cash out refinance (Marcus)
For Bay Area, impossible to overbuild (elt1)
What are the regulations that decrease the desirability to sell?
Capital gain tax (Marcus: mostly irrelevant for RE outside BA)
Low Fed interest rate
Non-recourse loans (Marcus)
Anti-growth regulations make it hard to upgrade (elt1)
What else?
The main reason not to sell is there is nothing to buy… I have a buyer currently that sold and could not find a place to by.
So number one cause of low inventory is the insane amount of regulations designed to stop all growth
I think capital gains increases motivation to sell outside of the bay area. Most homes aren’t worth $500k, so the exemption makes all the gains tax free. The bay area is a different animal.
I think non-recourse purchase loans encourage people to keep the home if they never refinance. It reduces your risk.
Home equity loans (not all countries allow them) increase desirability of being a landlord. You can always tap the equity of a property for more investment capital. Renting may seem less attractive once you have a ton of equity in the property and the return on it could be higher elsewhere.
The BA and California in general is desirable for investors because it is impossible to overbuild… Other states like Texas don’t provide that certainty to investors
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Definitely !
All accountants will be out of work as
- Country files bankruptcy without income
- Companies file bankruptcy without depreciation
- People file bankruptcy without jobs !!
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No, please no!!!
Intuit (Turbo Tax maker)
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Housing depreciation is a joke though. The whole point is for a business to recognize the expense over the life of the asset instead of immediately. Most businesses depreciate assets to zero over the useful life, because at the end they will scrap it. Are you going to scrap a home after 27.5 years? Odds are it’s actually worth more money not less. Plus, a house lasts much longer than 27.5 years. Allowing people to depreciate an appreciating asset is crazy.
Tax reform is going to be proposed soon. The standard deduction will double. If that happens, then <10% of people would itemize their taxes. Even now, people talk about the mortgage interest deduction helping encourage home ownership. Only 20% of people use it. That’s less than 1/3 of home owners. Increasing the standard deduction would benefit 87% of tax payers. It’d benefit all the renters plus all the owners that don’t itemize.
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Don’t think an un-maintained structure would worth more after 27.5 years. We can’t depreciate land right?
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Maintenance is deducted in the year the money is spent. You do get to deduct that cost. Deducting the depreciation of the building on top of that is crazy.
Maintain structure not maintenance e.g. Flooring is depreciated over 27.5 years right?
I’m not sure how you’re differentiating un-maintained vs. maintenance.
There are some rules given by IRAS.
Ok, you’re talking about replacement of items. I was thinking the lawn upkeep, gutter cleaning, etc. It’s still crazy that the IRS allows people to depreciate an appreciating asset. They’ll claim that back when the home is sold unless a 1031 exchange is done. That’s crazy powerful when you combine the depreciation with 1031 exchange. Add in that you can cash out refinance and deduct the interest. It’s pretty amazing.
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IMHO, the culprit is 1031 not depreciation.
Cash out refinance is phony too.
Cap gains tax is mainly a tax on inflated dollars… infact in Mexico you have to pay cap gains on the peso gains on property that has actually lost money in US dollars…
Cap gains are not real…just inflated money… The fair tax in 30 year gains should 0… Maybe there should be a sliding schedule from 30-0 over 30 years
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