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10/26/21 Wall Street Journal article saying Democrats will sink real estate is overly pessimistic

Posted by John Reed on

Today’s WSJ has an op-ed titled “Democrats’ Tax Plan Would Sink Real Estate”
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Since I am a real estate investment expert, that is a pretty big statement. The authors cite the 1986 Tax Reform Act and S&L Debacle.
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That was bad. I lost $750,0000. However, it did not “sink real estate.” It ended using real estate for tax shelter. And it destroyed the S&L industry.
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But If I had owned just single-family houses, instead of apartment buildings, I would have lost little or no money. Thus my most recent book which says to only buy principal residences and only own one at a time.
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I also wrote a book titled Distressed Real Estate Times.
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That book describes the 1980s and other real estate hard times in great detail.
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I started real estate investing in 1969. I have been through recessions, wars, the Tax Reform Act of 1986, the S&L Debacle and the Sub-Prime Crisis, rent control. None of them sank real estate.
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These two authors assume the worst proposed laws will be enacted. My impression is that stepped-up basis was already removed from the proposed law. It has been repealed twice before and immediately put back in. It is horrifically hated by the public once they have to start paying it.
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They also assume capital gains rate will go up. Well, they were up when I got into the business back in 1969. That did not sink real estate. Now, we have IRC §121 which shelters $250K per spouse on sale of primary residence. That did not exist back then.
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I think these guys are exaggerating. They are assuming the worst new tax laws which are unlikely. Also, when a new law has negative consequences that were not anticipated, the Congress generally passed ameliorating laws. My book Best Practices for the Intelligent Investor has a chapter on real estate history events and sections on real estate tax laws, mortgage interest rates, inflation, home appreciation rates, booms and recessions, business cycles, financial doomsday forecasts, major natural disasters. To understand real estate investment, you need to know all that history. I suspect the authors of this op-ed do NOT know all this history.
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Their logic is incorrect and incomplete. Their assumptions are worst case and unlikely. They do not acknowledge the fact that Congress will correct laws that have such dire negative consequences.
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They also treat anti-LANDLORD laws as if they were anti-ALL real estate laws. In fact, principal residences are greatly protected from all sorts of things including anti-landlord tax laws.
Distressed Real Estate Times, 3rd ed.
JOHNTREED.COM
Distressed Real Estate Times, 3rd ed.
Distressed Real Estate Times 3rd Ed. by John T. Reed Real estate values have tanked... now what? How to profit from opportunities which arise during distressed real estate markets. Also, how to minimize the distress you may suffer during those same markets. Important tax ramifications of various for...

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