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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Don Green who wrote (14714)	10/30/2003 1:25:24 AM
From: Doughboy	Read Replies (1) \| Respond to of 306849

Interested in your comments on rental props, so hope you don't mind if I add my two cents. I think both you and Tradelite are making wrong assumption that tax laws have changed or worsened the investment in real estate. AMT should not affect tax deductions/benefits for investment property. AMT affects the deductions on schedule A, and not the supplemental income on schedule E. You still get the same deductions, depreciation etc. regardless of whether you pay AMT. As far as I know, there have been no changes to the tax laws or rules that affect rental real estate for the last decade or so. It is true, however, that other tax law changes have made other forms of investment (e.g., dividend tax cut) more favorable, so the inherent tax benefits from real estate investment don't look as juicy. And as Tradelite pointed out, you can always do the musical chairs with your primary residence (perfectly legal), and get a $500k tax free sale every two years. I've got a slight problem in that I have two properties (coincidentally also in the DC area) that both have capital gains more than $500k, so moving back into them is not as good a tax break as I would have had under the old law (rollover a gain into a new property). Finally, I think DC is still a great place to invest in rental real estate; lots of young people with high incomes, shelter from recession, and little land to expand onto. The rental market has been decidedly soft this year, but usually rents are extremely strong so you can get cash flow as well as appreciation. Doughboy

To: Don Green who wrote (14714)	10/30/2003 9:33:13 AM
From: Tradelite	Read Replies (1) \| Respond to of 306849

<<Either your area is very select or very small>> When Doughboy says the DC area has good real estate investment opportunities in terms of buying rentals with decent cash flow potential, he's probably referring to areas other than my immediate stomping ground of McLean, Great Falls, Vienna. You won't find too many transient military people in those areas anymore--do still have some elderly military officer retirees (usually ranked Colonel, Navy Capt, and above) who bought there many years ago. When I was in high school, these were the parents of my friends. That was also my most frequent type of real estate client--a government or military retiree who was sick of rising taxes and decided to move on to sunny Florida or somewhere else. Yet 40 years later, my children attended the same high school, and I don't recall them ever having friends from military families. Now if you were to look in Alexandria, Arlington, and parts of Maryland near military installations, you'll probably find plenty of modest-sized housing and a rental population well-suited for the investor. Maybe one thing I said was passed over as insigificant---that the agents-buying-multiple homes scenario was started by the people I know WAY BACK A FEW OR SEVERAL DECADES AGO. Appreciation during all those years has been swift and enormous. It was easy to pay about $75K for a house in 1969 or thereabouts, and sell it 15/20/25 years later for two or three or four times that much. Today, however, rents have not kept pace with increases in prices and property taxes. A rental ad for a big 3-level colonial house several blocks away from me just this week was asking $3,900 a month. Looks like about the same rent one could get for a house like that 10 years ago. I know the owners have lived there a long time, so this rental income is probably just gravy for them. In fact, if they're original owners, they paid around $50K for the place in the 1960s--it's now worth around $850-900K We do have many people based here with the World Bank, IMF, State Department, CIA and defense contractors and they will rent out their homes while out of town, but I doubt they're accumulating these big homes in quantity with "investing" in mind. They just need a house to come back to. I also notice a home down the street which sold only a few years ago suddenly went up for rent. I assume the owners got transferred somewhere. It has quickly rented to someone with diplomatic license plates on a black limo-sized automobile. We've got plenty of diplomats around here and they make great tenants, due to being able to sign long-term leases and their embassies sometimes willing to pay months of rent in advance. But not many investors are running out to buy $800K-and-up homes just to rent them out to somebody.