5 ms·

I may be biased (I'm a Real Estate Investor) but Investors aren't the vultures that some people make them out to be. We are putting beautiful homes back out on

I may be biased (I'm a Real Estate Investor) but Investors aren't the vultures that some people make them out to be. We are putting beautiful homes back out on the market. Sure, this is pricing out people who would have been keen on making improvements over time instead of realizing payments on this all at once - but the end result is if people are willing to pay, there will continue to be a market.

Spooky23 7y ago
It’s more about the ridiculously favorable tax treatment which is the subsidy that makes your business possible.
- driverdan 7y ago
  There is no "ridiculously favorable tax treatment" for flipping, only long term ownership.
  - gnicholas 7y ago
    There is section 1031, which allows the deferral of gains for years or decades if the investor purchases a qualifying replacement property.
    - djrogers 7y ago
      Generally speaking, flippers don't qualify for 1031 exchanges. "In Barker v. U.S., a property purchased solely to exchange for other property was determined to not meet the “held for” requirement. Accordingly, if it is clear the intent was resale and not investment, then the transaction is ineligible for a 1031 tax deferred exchange." - https://www.sundincpa.com/1031-exchange-flipping-houses/ https://www.sundincpa.com/1031-exchange-flipping-houses/
      - gnicholas 7y ago
        The linked source indicates the complexity of this test. I'm sure plenty of flippers take advantage of 1031, even if they sometimes are challenged by the IRS.
      - Spooky23 7y ago
        Flippers don’t, but you can fix it up, rent for a reasonable period of time and then sell.
- instaheat 7y ago
  I assure you tax treatment/subsidies are not what make my business possible. The retail prices (comps) for the neighborhood the product exists in, drives profits. Yes a house is just a product (other than my own home) You have to live in a house for two years before you can avoid capital gains tax. Otherwise, as an Investor, I am paying capital gains unless I do a 1031 exchange (meaning I am just delaying the inevitable)
  - cronix 7y ago
    Yes, but you can pass those houses onto your children (and they can pass to theirs, etc.), and keep avoiding taxes until it actually sells (that's when there actually is a gain). So, just never sell it and keep it in the family and never pay capital gains.
    - human20190310 7y ago
      That's a lot of capital to keep locked up in an investment that doesn't pay off until one or more generations later.
      - meestaahjoshee 7y ago
        some people buy homes to live in, not just as an investment
      - cronix 7y ago
        They're bringing in a nice cash flow with tenants, and appreciating. You just put 30% down, so not much "tied up"
  - Spooky23 7y ago
    Gotcha, I was envisioning commercial development, as the article talked about private equity buying thousands of homes. A friend runs syndicates for commercial properties like hotels and apartment complexes. His product is essentially depreciation credits, and buildings are like a byproduct.
- instaheat 7y ago
  The "problem" as a whole is beautification. Capitalism. If not for the nice parks, nice schools, restaurants, job growth, etc, etc.... you don't see a lot of Investor activity in areas that are stifled. Atleast not in the form we see today. My grandmother and mom owned properties in extremely poor areas, I remember visiting properties with each of them as a child. Rent would be something like $300-$400 per month and they could charge this because they owned the property for decades, the loan(s) were paid off. I --could-- take a similar line with the home I am living in now, my primary residence, and rent it out below market..but why should I? I'm most certainly not a millionaire yet, and missing out on $300 per month that I could/should be saving should a repair come up is not ideal.
- chrisBob 7y ago
  Do things like the "pass through tax deduction" support this kind of investment. I don't understand the tax implications enough to know what causes the current issues.
chrisBob 7y ago
I am not a Real Estate Investor, but I am a little confused who the bad-guy is in this situation. Why is it the investor and not the person who ends up paying top dollar for the flipped "move in ready" home? It seems like the consensus here is usually that "the market" is a good thing, and I am not sure why this case is different.

Spooky23 7y ago

It’s more about the ridiculously favorable tax treatment which is the subsidy that makes your business possible.

driverdan 7y ago
There is no "ridiculously favorable tax treatment" for flipping, only long term ownership.
- gnicholas 7y ago
  There is section 1031, which allows the deferral of gains for years or decades if the investor purchases a qualifying replacement property.
  - djrogers 7y ago
    Generally speaking, flippers don't qualify for 1031 exchanges. "In Barker v. U.S., a property purchased solely to exchange for other property was determined to not meet the “held for” requirement. Accordingly, if it is clear the intent was resale and not investment, then the transaction is ineligible for a 1031 tax deferred exchange." - https://www.sundincpa.com/1031-exchange-flipping-houses/ https://www.sundincpa.com/1031-exchange-flipping-houses/
    - gnicholas 7y ago
      The linked source indicates the complexity of this test. I'm sure plenty of flippers take advantage of 1031, even if they sometimes are challenged by the IRS.
    - Spooky23 7y ago
      Flippers don’t, but you can fix it up, rent for a reasonable period of time and then sell.
instaheat 7y ago
I assure you tax treatment/subsidies are not what make my business possible. The retail prices (comps) for the neighborhood the product exists in, drives profits. Yes a house is just a product (other than my own home) You have to live in a house for two years before you can avoid capital gains tax. Otherwise, as an Investor, I am paying capital gains unless I do a 1031 exchange (meaning I am just delaying the inevitable)
- cronix 7y ago
  Yes, but you can pass those houses onto your children (and they can pass to theirs, etc.), and keep avoiding taxes until it actually sells (that's when there actually is a gain). So, just never sell it and keep it in the family and never pay capital gains.
  - human20190310 7y ago
    That's a lot of capital to keep locked up in an investment that doesn't pay off until one or more generations later.
    - meestaahjoshee 7y ago
      some people buy homes to live in, not just as an investment
    - cronix 7y ago
      They're bringing in a nice cash flow with tenants, and appreciating. You just put 30% down, so not much "tied up"
- Spooky23 7y ago
  Gotcha, I was envisioning commercial development, as the article talked about private equity buying thousands of homes. A friend runs syndicates for commercial properties like hotels and apartment complexes. His product is essentially depreciation credits, and buildings are like a byproduct.
instaheat 7y ago
The "problem" as a whole is beautification. Capitalism. If not for the nice parks, nice schools, restaurants, job growth, etc, etc.... you don't see a lot of Investor activity in areas that are stifled. Atleast not in the form we see today. My grandmother and mom owned properties in extremely poor areas, I remember visiting properties with each of them as a child. Rent would be something like $300-$400 per month and they could charge this because they owned the property for decades, the loan(s) were paid off. I --could-- take a similar line with the home I am living in now, my primary residence, and rent it out below market..but why should I? I'm most certainly not a millionaire yet, and missing out on $300 per month that I could/should be saving should a repair come up is not ideal.
chrisBob 7y ago
Do things like the "pass through tax deduction" support this kind of investment. I don't understand the tax implications enough to know what causes the current issues.

chrisBob 7y ago

I am not a Real Estate Investor, but I am a little confused who the bad-guy is in this situation. Why is it the investor and not the person who ends up paying top dollar for the flipped "move in ready" home? It seems like the consensus here is usually that "the market" is a good thing, and I am not sure why this case is different.