Will Obama Destroy the Real Estate Business?

Random Ramblings
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I’ve owned several businesses during my adult life. One of the traits that successful people must have is the ability to see and adapt to a changing environment. Here are 3 examples of a changing environment that may affect the real estate business.

  1. The healthcare bill contains a new 3.9% Medicare tax on unearned income over $250K - i.e. rental income. Worse yet, the bill doesn’t specify whether that 3.9% is based on gross income or net income and NO-ONE knows how it will be interpreted (I’m betting gross). This will be bad enough if the answer is net income, but if the tax is on gross income, it will be very bad for the rental business.

  2. The EPA just instituted (in the last few days) strict new lead paint regulations that will GREATLY INCREASE THE COST of working on any property that contains lead based paint. In many locations, almost every rental property was built before 1978 and therefore is affected by this regulation. This regulation affects any repair that involves more than 6 square feet of painted surfaces on the interior of the house and 10 square feet outside and will add HUNDREDS OR THOUSANDS OF DOLLARS to these repairs.

  3. The proposed cap and trade plan includes new regulations that will require any home being sold to be licensed. You’ll have to hire an EPA approved contractor to do an energy audit of your house and it will have to pass whatever the government energy efficiency standards are!!! The audit will identify things you need to upgrade to bring you up to energy standards. Once the upgrades are done, you’ll pay for a second energy audit to ensure that you house passes. Price estimated at $200 MINIMUM for each audit ($400 total) PLUS THE COST OF WHATEVER ENERGY UPGRADES YOU ARE REQUIRED TO INSTALL (cost unlimited)!

These are just 3 of the MANY new socialist intrusions into the real estate business. While it’s probably not time to start thinking of changing businesses yet, that time may be rapidly approaching. Is there a business that will be more profitable than real estate under the new socialism?

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Good questions Mike…and ALL of them are things we’ll need to WATCH closely.

But let’s step back into RECENT history and REALLY look at this…

Is there ANYTHING in this that will DESTROY the Real estate business???

Years ago you could sell a house without a HOME INSPECTOR even looking at it…As a matter of FACT…There were NO HOME INSPECTORS…Smart people called a friend in construction and had HIM look at a house prior to signing…But not everyone has a friend in construction…so when enough people got SCREWED on their home purchases…New LAWS were written. Purchase agreements came with INSPECTION sections where interested buyers would check off the INSPECTIONS they wanted done on the property and HOME INSPECTORS became a new niche business in real estate.
It’s now done everyday…And INVESTORS SCREAMED BLOODY MURDER when it was inacted…They said that it would KILL the Real Estate business for investors…IT DIDN’T.

Now we have TITLE 5 laws in Massachusetts that require any home with a septic system to be TESTED PRIOR to the sale…Older homes ALWAYS fail…and I mean ALWAYS…Has it STOPPED me from buying and selling houses in Massachusetts???..NOT FOR A SECOND…What HAS it done??? It has created TREMENDOUS OPPORTUNITY for me!!! You could not BELIEVE the HORROR stories that were predicted when this law was passed…It was like the END of the WORLD was at hand…NO ONE would EVER buy another HOME in Massachusetts…

Instead it created INVESTOR OPPORTUNITY!!!

HOW??? Joe Homeowner has his septic system tested because he HAS TO, IT FAILS, then ONE of TWO things happen…Either HE pays for a completely NEW system OUT OF POCKET (not likely) and that new system now makes the house EASIER for me to sell, or I beat him up on his price and have MY CONTRACTOR do the work for HALF what the homeowner would pay!!

EITHER WAY…I MAKE MONEY!!!

Now about LEAD PAINT…Remember when you didn’t need SMOKE DETECTOR INSPECTIONS done in order to sell a home???
I just spent $800 having 8 smokes, 8 CO’s and 2 heat detectors put into a home I have SOLD…$800 is a LOT of money right???

IT’s NOT…because my NET PROFIT on this house is $110,000!!!
It took an electrician ONE DAY to place the detectors where the Fire Marshall wanted them…and it was DONE…To code…To spec…To the CLOSING TABLE!!! THEN TO THE BANK for a nice 6 FIGURE DEPOSIT…and the best part??? I’ve owned this house for 62 DAYS!!!

Medicare tax…The TAX rate in the 1970’s was MUCH HIGHER than it is today…ANYONE that purchased Commercial REAL ESTATE (or even residential) in the 1970’s for PENNIES on todays dollars, and had the FORESIGHT to HOLD IT…Is now, in all likelyhood… a MILLIONAIRE!!!

Cap & Trade…See Massachusetts TITLE 5 laws above…Same circus, different clowns.

You’ll buy your houses AS IS and THEN do the energy audit AFTER rehab (because it would be PHYSICALLY IMPOSSIBLE to do one PRIOR to rehab with HOLES in the roof and no working heating system!)…Just as I currently do with my AS IS properties that have NO SMOKE DETECTORS…There is NO LAW saying I CAN NOT buy these homes…ESPECIALLY if I am paying CASH!!..I just have to INSTALL smoke detectors PRIOR to the home being sold to someone that intends to LIVE THERE.

In the end while these regulations are a pain in the @ss…they actually MAKE ME MONEY!!

Mike…You know better than anyone here how LAZY people are…As far as I’m concerned…Let the GOVERMENT create all the hoops they can for people to jump through…They end up JUMPING RIGHT INTO MY ARMS!!! I pay CASH…regardless of PROBLEMS, CONDITION or whatever…All this does is add another ITEM to my advertising…

“House can’t pass ENERGY AUDIT???”

I’ll buy it AS IS for C A S H !!!

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Years ago you could sell a house without a HOME INSPECTOR even looking at it

Here in flyover country, you still can.

Remember when you didn't need SMOKE DETECTOR INSPECTIONS done in order to sell a home?????

Here in flyover country, there are still no smoke detector inspections.

None of these things by themselves will destroy the real estate business. However, the cumulative effect of all the new regulations and taxes could very well do so. Right now, the real estate market has leveled off at a very low, government subsidized level. The subsidies MAY be over. Right now, the market doesn’t include HUNDREDS OF THOUSANDS OR MILLIONS of foreclosed homes that are being kept off the market. Right now, hundreds of thousands of foreclosures are on hold. All these things will end and combined with the myriad of new socialist taxes, fees, and new regulations - this could very well effectively destroy the real estate business. Real estate prices are going a LOT lower. Demand for real estate is going a LOT lower.

Real inflation will soon be running rampant. Last month had the highest food price inflation in 26 YEARS! Oil prices are up and going higher! Add that pressure on the working class along with higher taxes and they won’t be able to afford their homes. The socialists are putting us in a vicious circle of lowering living standards in this country and that WILL affect the real estate business.

4

The key to real estate is jobs. If people have jobs and can afford to pay rent you will have a market. There are rules for investors and there will always be rules. We will just adapt to the new rules. If you are a flipper the rules adjustment may need to be quicker because your horizon between buying and selling is so short 1 month, but investors will usually have time to adjust over a longer period.

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Here are my thoughts…

  1. If you are making over 250K in unearned income then you can afford to either pay more taxes or hire a better accountant. Either way I don’t feel sorry for you.

  2. Oh no more strict lead paint guidelines!!! If it keeps one person from getting LEAD POISONING then I am fine with it. Another side effect of this is that it will force the small RE investors out leaving more properties for the professional investors to choose from.

  3. The biggest thing about this third one is the word PROPOSED. Once again this will just keep the little guys out and allow the pros to just get richer. You are wasting away your golden years worrying about this stuff.

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Mike,

Come to the NORTHEAST for a while then you can tell me how these “CHANGES” will kill the Real Estate Business…We’ve been dealing with this stuff FOR YEARS HERE…YOU HAVEN’T!

You ADAPT or YOU die…Not the entire REAL ESTATE BUSINESS…YOU!

You are 100% right in saying that there are a lot of foreclosures being HELD off the market by the banks…The STRATEGY is WORKING for them…They are NOT as DUMB as you think they are…They are TRICKLING this inventory onto the market inorder to limit the effects. It’s WORKING here in the Northeast…These homes are being ABSORBED by the market place and PRICES are not only stabilized but RISING here…Not by CRAZY percentages but by small amounts that show things ARE improving.

People who have JOBS and have some savings are LITERALLY getting the best deals in DECADES on HOMES…They know it and the MARKET is showing us this with INCREASES in prices.

And don’t tell me PRICES ARE NOT HIGHER in the Northeast…I’m BUYING and SELLING these homes…I know to the DOLLAR that prices ARE higher than a year ago and the DAYS ON MARKET are MUCH LOWER!!!

And as far as your prediction that Real Estate PRICES are going a LOT LOWER???

MIKE…When I can buy a HOUSE, on a piece of LAND, for LESS than the MATERIAL COST to build just the FRAME of that house???

PRICES are NOT going “A LOT LOWER!!!”

THAT’S NOT HAPPENING.

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Christopher - RIDICULOUS!

1. If you are making over 250K in unearned income then you can afford to either pay more taxes or hire a better accountant. Either way I don't feel sorry for you.

If a person isn’t making over $250K in unearned income, then a person can’t be running a serious rental business. Do you really think $250K is a lot of money for a small business? C’MON!!!

Can afford to pay more in taxes? Now I understand you Chris…“To each, according to his needs, from each according to his abilities.” Hmmmm, seems like I’ve heard that somewhere…

2. Oh no more strict lead paint guidelines!!! If it keeps one person from getting LEAD POISONING then I am fine with it. Another side effect of this is that it will force the small RE investors out leaving more properties for the professional investors to choose from.

That’s right from the socialist playbook! If one child chokes to death on a hotdog, we should ban all hotdogs. If one person is killed in a car accident, we should ban all cars. If one person is killed with a gun, we should ban all guns! RIDICULOUS!

3. The biggest thing about this third one is the word PROPOSED. Once again this will just keep the little guys out and allow the pros to just get richer.

RIDICULOUS! This will significantly increase the costs for every buyer and every seller and may even affect the “little guy” like you Christopher! You just can’t get enough of big government - can you Chris?

And for FDJake - we’ll see! I’m predicting that real estate prices will be going a LOT LOWER! We’ll see who’s right!

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I am probably the biggest liberal here but I have to agree with PM on this. Because of my lifestyle I can probably afford to pay most any tax they want to put on me, but I shouldn’t have to. I would have no concern if they would size the tax burden to the need and control the need but they seem to just spend more and more with no regard to the revenues available. It is like having a wife that has to shop everyday with no regard to the size of your paycheck. One day something has got to give…ask Ed McMahon.

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PM,

  1. This does not affect small business owners because that is earned income. What you are talking about is unearned income. This will hit only the highest end earners so while it may cause you to lose sleep I’m sure most people could care less about this. To give you an example of what it would take to trigger this tax look at it like this. Even if it is gross income someone could own 20 properties making $1000 on each property and not hit this threshhold and that is once again taking into account that it is gross income and not net income.

  2. Are you really comparing choking on a hot dog to lead paint? Seriously? Lead paint has been linked to all kinds of crippling conditions in the human body. As I said all this will do is make it miore expensive to get into the business for newbies which in turn makes it easier for you as a professional to make more money. If it makes the world a safer place for children then I am all for it. Eventually all the lead paint will be fixed or gone and this will be a non-factor.

  3. It has nothing to do with me wanting big government and everything to do with the fact that you are going to give yourself a heart attack with all the worrying you are doing over stuff that has not even happened yet. There are companies here in Texas that will do a FREE energy audit of your home if it was built prior to 2002. Termite inspections were required on all FHA loans prior to 2008 and that did not cause the end of the REI business and that was $175 dollars. There are going to be costs associated with any purchase or sale of a home this will just get lumped in. It has nothing to do with taxes.

According to you the entire country will be gone up in flames by next year so why are you worrying about cap and trade?

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This does not affect small business owners because that is earned income.

It certainly DOES affect small RENTAL business owners, because what we generate is UNEARNED INCOME!

This will hit only the highest end earners so while it may cause you to lose sleep I'm sure most people could care less about this
.

“Highest end earners” make only $250,000? C’mon!

Even if it is gross income someone could own 20 properties making $1000 on each property and not hit this threshhold and that is once again taking into account that it is gross income and not net income.

Owning 20 rentals isn’t a business, it’s a HOBBY!!!

Are you really comparing choking on a hot dog to lead paint?

You’re right. If you choke on a hot dog - you’re dead. If you eat the walls, you’re parents are deadbeat losers and the kid will be a deadbeat loser too. Of course this all comes down to PERSONAL RESPONSIBILITY - something the socialists don’t want any part of.

If it makes the world a safer place for children then I am all for it.

Exactly why we need to get rid of hot dogs, cars, and guns. Hot dogs, cars, and guns ALL kill more children than lead paint!

According to you the entire country will be gone up in flames by next year so why are you worrying about cap and trade?

First of all, I haven’t predicted that the country will collapse by next year. In fact, I’ve said my best guess is 2012. However, to answer your question, I’m fighting the socialists because I would like to prevent the disaster we are facing and get our country back on the right track.

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Sure feels like a business when I’m putting as many hours into rehabbing and making our houses better as I am…

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This is just another dose of" MIKES WORLD." Where just SAYING IT makes it so…“I’M RIGHT, I’M RIGHT, I’M RIGHT.”

“If you eat the WALLS your parents are dead beat losers.”

What a MORONIC STATEMENT!!

That LEAD is in the GROUND those kids play on from years of flaking paint on the exterior of houses…The kids play on that ground, their hands get dirty, their toys get dirty, and kids put both hands and toys in their MOUTHS!! REGARDLESS OF PARENTING SKILLS!!!

Maybe MIKE should sprinkle a little ASBESTOS on his corn flakes in the morning since THAT TOO was probably just OVER REGULATION by BIG GOVERMENT. :banghead :banghead :banghead

Unfortunately Mike is fast becoming a laughing stock on this site…His daily BOWEL MOVEMENT of USELESS posts now get almost NO RESPONSES and people here openly question his sanity. Just on THIS PAGE he currently has MULTIPLE POSTS with ZERO or just ONE response!!!
That should be TELLING him something…NO ONE is INTERESTED!

Nice work Mike. :beer

From respected CONTRIBUTOR…To GARBAGE MAN!

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fdjake - It seems to me you are the typical liberal. Which is expected from Mass. were big government makes the best decisions. Where the lowly citizen isn’t
capable of making those decisions or the lowly investor and property owner hate their tenants. And would rather see their children get lead poisoning than to repair & repaint. Because cash flow isn’t that important to an owner, they would rather have poisoned tenants because poisoned tenants give good referrals.

When was the last time you have heard of a child getting lead poisoning from paint? I grew up with it I have never meet anyone it effected? I’m willing to bet you never have either.

I believe that the costs out weight the benefits. I believe that you disclose the lead paint. After that it is the renters duty to notify the owner or manager that its chipping. Let’s face it there are probably 15 coats of paint on top of the lead based paint.

This government juggernaut is a waste of money…

In fdjake’s mind government makes him money… Thats a crock of :flush

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Uhh ohh…

(Sits back and waits for Jakes reply… should be a good one…) lolz :bobble

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Unfortunately Mike is fast becoming a laughing stock on this site....

Back to the third grade insults FDJake? Please take some time off and relax. You’re working too hard and the stress is starting to show.

His daily BOWEL MOVEMENT of USELESS posts now get almost NO RESPONSES and people here openly question his sanity.

That’s interesting! YOU have posted responses several times yourself just in this thread!!! LOL! Furthermore, I see that you did read the book that I posted about Saul Alinsky. As Sean said, you’re a typical liberal. When you’re not right, you simply attack your opponent - typical Alinsky/socialist tactic!

When was the last time you have heard of a child getting lead poisoning from paint?

Never! Most of the people on this forum grew up in houses that contained lead paint. Of course, my parents (being responsible adults) certainly never let their kids eat the walls! Has anyone here been poisoned by lead? Could that be the reason that FDJake is so upset all the time - too much lead? Too bad that he didn’t grow up in the midwest where people know not to eat the paint or lick the walls WITHOUT EVEN BEING TOLD BY THE GOVERNMENT!

I believe that the costs out weight the benefits.

C’mon Sean. ANY cost is worth it if even one child is protected. :rolleyes We certainly can’t hold the parents responsible for their children - that just wouldn’t be right, especially if the parent is a lazy deadbeat that serves Obama’s socialist agenda.

Seriously Sean, why is it that you have common sense and the liberals need the government to control every aspect of their lives.

Maybe MIKE should sprinkle a little ASBESTOS on his corn flakes in the morning since THAT TOO was probably just OVER REGULATION by BIG GOVERMENT.

No, no asbestos for me. Pretty impressive, huh? I knew that I didn’t want asbestos on my corn flakes without Obama or any of his socialist comrades telling me so. Here in the midwest, we can function without big government. And yes, FDJake, I agree with you 100% that both lead based paint and asbestos are over-regulated by big government. :beer

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Sean…Your CLUELESS…Sit back and WATCH what happens to CHINA when all the CURTAIN DRESSING comes to an end and ONE BILLION PEOPLE start asking the same QUESTIONS Americnas did about their work places in the 1930’s.

Hey SEAN…I’ve never met anyone that was ATTACKED BY A PIT BULL???

I guess that NEVER happens either…

GOOD LUCK with that theory…

You sound like some (insult deleted) who thinks every OTHER country is BETTER than your own. Unlike YOU, I believe THIS COUNTRY’S best days are AHEAD OF IT!!..I’m not some goof off CONSERVATIVE that thinks our BEST DAYS are behind us and the answer to everything is UNREGULATED BUSINESS…Gee, how’d that work out for the BANKING INDUSTRY???

If you LOVE China so much…MOVE THERE…TODAY!!
And then you can ENJOY all the great BUSINESS FREEDOMS…Hey…They still USE LEAD PAINT on Kids toys there!!! Maybe you could work in the FACTORY that makes it for 10 cents an hour since you don’t believe in a MINIMUM WAGE!!!

Move to CHINA and make me a new SHIRT!!!

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I, for one, am worried that the government will pass a law that every house must pass an energy audit each and every time it is sold.

The reason that worries me, is that the government doesn’t have a lick of sense about energy conservation or construction. They might require not only brand new windows all the way around, but a solar hot water system, and maybe a wind generator, or solar electric. They don’t seem to care what anything costs as long as it is good for “global warming”.

The state government here loved the idea of solar water. They gave huge tax incentives for installing the system. Virtually none of those tax payer paid for systems are still in existence. Anyone with a drop of sense would figure out that it isn’t a good idea to have a tank of water on top of your roof in an area where it gets 20 below. Or that there is no way to adequately fasten a solar panel to a roof where the wind screams like a banshee.

So if they require a $5,000 solar water system, it would be: bolt the thing on the roof and pray the house sold before the collector blew into the next county.

Houses are already selling for far below replacement costs. Add a couple of grand in government required improvements and it is very unlikely that the sales price would go up enough to cover it.

The government likes little sound bites that sound good but are bad ideas. How about making it the law that polluting, hazardous waste material florescent bulbs are going to be the only ones available? Already passed into law.

Also, the government likes to set unreasonable standards. They offered to pay 1/2 the cost for me to pipe my irrigation water. The problem was, with their construction standards, my half of the cost was 3 times what it would have cost me to do it on my own.

My soil is sand, but Uncle Sam insisted that if he was going to pay for the pipe, I would have to bed the pipe in sand, and the sand MUST be trucked in. Why would anyone truck in sand to bed a pipe that was placed in a ditch that was dug in sand?

If every house must pass an energy audit when it is sold, there will not be any such thing as being sold “as-is”.

I think that older houses will simply be bulldozed because it will cost too much to bring them up to standards That’s going to make it awfully tough on the low income renters.

I’ve got a couple of older mobile homes that rent to lower income people. If I had to do $5K-10K renovations, they would never get sold. The trailers are probably only worth a couple hundred dollars. So they would simply be removed from the rental pool, and those lower income tenants would be homeless.

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I consider myself a “Goof off” conservative :anon.And since Ford is the only american car company who is thriving because of thier “free market”(AKA keep the govt hands outta our business),hmmmmm I thought you we’re enjoying your taste FD???

Just sayin,jus sayin.A regulated market=decent,a govt takeover=terrible.