SILVAR. How Tax Reform will Affect BA Real Estate


Of course they would adapt. Adapt means long term :laughing: unless you think they can adapt that fast.
Allowing mortgage interest deduction is feeding the monster, even Trump has to give way to the demand of populace.


Only about 30% of returns itemize mortgage interest. It’ll be even less with the increase in standard deduction.

Most countries don’t allow deduction of mortgage interest or SALT on federal taxes. They actually pay pretty close to the rates you see where Americans on average pay half the rate you see. We have a huge delta between tax rates and effective tax rates.


The difference between the posted tax rate and effective tax rate is bad for people’s health. Everyone feels guilty that he is underpaying and scamming other people


Wow. I don’t know anyone that feels guilty about taking tax deductions and keeping more of what they earn.

What it does do is complicate the discussion on taxes to the point the average person has zero chance of understanding it. Most people couldn’t tell you their total paid in taxes or their effective tax rate. They can probably tell you what tax bracket they are in (very different from effective rate). Most people identify their taxes by the net refund or amount owed when they file. That’s a terribly inaccurate way to look at it.


What matters in the short term say 1-2 years is people’s perception. Do they think their taxes will go up or go down? I think most Bay Area potential home buyers will think their taxes will go up. Thus at least in the short term they will think their purchasing power goes down.

Behavior finance teaches us people value their loss much higher than their gains. Bay Area people will feel the pain of the loss of SALT deductions much more than any potential gains from other areas of the tax reform.

All in all the demand side of local RE will be slightly weakened by tax reform. Supply side is not affected much I think.

There are other 2nd order effects like higher stock price and higher stock dividend that helps push up prices, although interests rate may be higher as a result. Not sure if it’s net positive or negative. But anyhow ours is supply constrained and whatever effects from tax reform will be dwarfed by the lack of inventory.


Simply put, you are saying the impact is negligible or minimal. I think you are correct


Even if demand shrinks by 20%, demand will far out pace supply. Prices will go higher. Maybe you go from 20 bidders to 16. 16 bidders are still going to drive prices higher.


So far always face with multiple bids of at least 10 :grinning: even in 2011. In 2007, 30-40 bidders.
That is the situation in Fortress, elsewhere is probably much lower.
Need to guess what would the desperate challengers, usually 1-2, would bid at. Then decide whether is it worth it for you to overbid them. Forget the rest who would bid around market. If you are unwilling to overbid the challengers, don’t bother to put in your bid.


Anyone monitor the sale and rental in BA?

In Austin, many sale and SFH rentals went into pending after the tax brackets is fairly stable and the biggest of all, mortgage interest is deductible for new purchases up to $750k mortgage and for existing purchases up to $1M. Almost everyone would have TAX SAVING, except for my unique case.


This is from when tax reform started and shows how media coverage creates public opinion. It also highlights how little people know about their current taxes. It blows my mind that most people have no idea what they pay in taxes. I’m sure they think that they pay too much and the rich pay too little though.

Based on the poll results for democrats, I have to wonder what news sources they follow. They clearly need to take some classes on basic economics.

“Most people don’t even know what they’re paying in taxes in the first place. And if you ask them to guess their tax bracket, their answer doesn’t match up with reality. Even more strange, our polls found that a lot of people say they haven’t heard of the new tax plan or its details but assume it will hurt them anyway.”

“By a factor of 2-to-1, respondents to both the polls said they don’t know what they pay in federal income tax. Democrats were slightly more likely to admit not knowing, according to Fluent’s poll.”

“A quarter of respondents to Fluent’s poll said the plan would hurt them, with only a fifth saying it would help them. That was largely split on party lines, with 7 percent of Democrats and 41 percent of Republicans saying the plan would help them.”

“The ultimate effects of the tax plan are equally split on party lines: 50 percent of Republicans say the tax plan will stimulate the economy and help the middle class, while only around 10 percent of Democrats agree”


More profits means landlords are less likely to sell.

The bill makes it more profitable to own income-generating property like apartment rentals. Now, instead of paying the regular income tax rate (as much as 37%), a landlord could simply create a limited-liability corporation for their rental and pay the pass-through rate (20%). This also means that landlords are incentivized to hold on to their properties longer. That’s a tough break for housing, which remains starved for inventory, especially in the starter-home segment, where investors have scooped up housing and turned it into rentals. More competition in the rental market might have a silver lining for renters, but could lead to lower demand in the housing market if there’s less incentive to become a buyer.


This author made a factual mistake. “landlord could simply create a limited-liability corporation for their rental and pay the pass-through rate (20%)” is wrong. Landlord still needs to pay at his individual tax rate, only gets a 20% deduction on rental income, which is still good, but different from what the author says. Beware of these amateur comments


A LLC can choose to be taxed as a corporation. Then you’d pay the 21% corporate rate. There’s a couple of forms to make a LLC be taxed as an S-corp.


No new info or insights :neutral_face:


Poor landlords, you know, those still working. Up to you to find out the meaning.

Follow manch’s example, get a real estate license, then you will understand why you are asking dumb questions.


If taxed as a corporation, it would not be a pass through entity and you would be double taxed.

Corporate tax at 21% is pretty high, considering that there will be dividend tax and individual tax applied later.


What individual tax you are thinking about? Dividend is double taxation. Income tax is out of corporate expenses which is not taxed.


@buyinghouse See, you’re saying to sell your home and open as many 401ks as you want. You clearly have no idea what a 401k is.


Wow! Finally you got it, you fool!

Are you a female Marcus? You sound like a little girl, are you still in high school?

I’ve been saying for so long that IULs are not issued for the sake of issuing an IUL, needs analysis need to be done, age, and health are factors to determine if they accept you or not.

Thus, when you wrote that stupid comment and your cohort laughed urging me to sell my home to buy an IUL I replied to you dummies challenging me to do so, to sell your homes to buy 401Ks. Why? Because I know 401ks are not bought nor you open one for the sake of opening one! Ooh, I forgot, limits on contributions, market risks, taxes, SS being compromised when retirement are factors where IULs are much better than 401Ks. Period!

The only reason we help companies to open 401Ks if for the bosses benefit. We know about the vetting process may benefit the employer if the employee quits within certain period of time. Then, we help those needing cash immediately to use the IUL, or an immediate annuity if that’s the case to slowly pay taxes due and start contributing to an IUL. Why am I telling you this, you know that, right?


Again, I don’t debate anything about ROIs and whatnot about real estate, I am an ignorant on that, landlords know their turf, not me, I deal with conservative approach to retirement, so, my word of advise to you is to never, ever, challenge anybody dealing, working, or being not experts but knowledgeable a bit, or a lot, on a product you are so ignorant about.

Then, learn to deliver a God damn spread sheet! :smiley:


What Will The Tax Bill Do To The Housing Market?

The tax bill now becoming law will impact the housing market in a big way via four mechanisms that gut the government’s subsidies of homeownership:

Nearly doubling the standard deduction (but wait…)
Lowering the cap on the mortgage interest deduction for new purchase mortgages
Capping the deduction for state and local taxes at $10,000
Eliminating the deduction for interest on home-equity debt, such as HELOCs.