wtf... Biden JUST killed real estate (even more)

holy smokes biden is literally trying to

kill real estate and folks you know i

just sit in the middle i don't give a

crap about

left or right i just want to see what's

right

but oh my gosh joe biden is targeting

now the 1031 tax deferred exchange

in his new infrastructure package this

was announced today that the 1031 like a

kind

exchange will get limited as part of his

plan if it passes

to any investment gains of under five

hundred thousand dollars or five hundred

thousand dollars in under

so that is if you have a uh large

multi-family property that you sell and

you have gains of more than five hundred

thousand dollars

you don't get to 1031 exchange those

anymore guess what this is going to do

to the real estate market folks

think about it for a moment if you can

have gains

and like put on your investor hat for a

moment you're going to see the complete

disaster this is about to cause for the

housing market

you already think housing's bad you

think it's tough to get a house

it's about to get a whole lot harder

because guess what happens folks

at least put your investor hat on for a

moment okay so let's say you're an

investor

and you're like okay i can 1031 exchange

up to 500 000

of gains a year well would you rather

have a 20 million dollar multi-family

building

which could appreciate say 10 million

dollars in value

and if you sell that in one year well

then those 10 million dollars of gains

you'll only be able to attend 31

exchange 500 000 of it

which means you'll be paying higher

capital gains taxes

at that nine and a half million dollars

especially at these extremely

you know higher corporate capital gains

tax rates not corporate tax rates

capital gains tax rates if you're making

over a million dollars a year

you'd be getting taxed a whole lot which

obviously if you were selling a big

building

even if you uh didn't have a huge income

just by the nature of you selling a big

building

you'd be taxed at massively higher rates

because there would be no long-term

capital gains

and you'd have no benefit of a 1031

exchange on on larger deals

so guess what folks guess what investors

are probably gonna do well here's what i

would do

in fact here's exactly what i might do

instead of buying

big multi-family real estate just buy a

crap ton

of smaller real estate in other words

rather than

investors spending big dollars to go buy

big multi-family buildings

they might now continue to compete

with first-time home buyers and smaller

real estate buyers

by buying up more single-family houses

why

well because obviously if you buy a 400

000

house 500 000 of potential 1031

appreciate you know

that you can get up to it takes a lot

longer right it's got a double and a bit

in value

and you could just one-off these just do

one a year you know if you have 500 000

a year that you could 10-31 you could

literally just take

let's say you had you had a portfolio of

50 single-family houses

you could just go oh every year we'll

just we'll just sell off

the oldest two that we have well 10 31

and we'll go buy a couple new single

families like literally

all this 1031 exchange rule is going to

do in my opinion

is going to take massive amounts of

money corporate money

investor money you name it and funnel it

straight into

the single family and condo market

because all of a sudden people are going

to be wanting that 1031 exchange

to defer ever paying taxes on their real

estate

big multifamily just got slapped in the

face with this 1031 rule

now it's fine if you want to buy a big

multi-family deal and you want to get

your gains that's fine you want to pay

taxes on your gains fine

but for those people who don't want to

pay taxes on their gains this 1031

is is a big slap in the face to the big

multifamily investors

keep in mind that in terms of who

benefits from these 1031 exchanges

which just in case you're still not

familiar with 1031 exchanges

1031 exchanges basically means if you've

got gains in a property

you can move them to the next property

so you sell your first property

you can move those gains to the next

property without you touching the money

an exchange accommodator holds the money

you move the money to the next deal and

you don't pay taxes

that's great because it gives you the

opportunity to never pay taxes in real

estate

you could just literally exchange

exchange exchange keep trading up on

real

estate and then when you die never pay

taxes as you give your children the

properties with the stepped up tax basis

it's crazy

so now focusing on who

generally benefits from this according

to figures here by bloomberg

corporations usually benefit from the

1031 exchange

by the tune of 2.3 billion dollars per

year

individuals so smaller investors

you know landlords who own two three

buildings

four buildings whatever small real

estate landlords

they're the ones who usually benefit by

the tune of 5.7 billion dollars

more than twice what corporations

benefit yet now

the small landlord is getting shafted

with this new plan to limit your 1031

ability to

500 000 per year i'm pretty sure it's

per year i have to double check but

the way this uh this rule so far reads

is implies per year we don't actually

have the text of the law yet

so this is just on the breakdown from

bloomberg here but uh wow

wow the 1031 exchange hit from real

estate

this is something people have been

rumored to be worried about happening

and now it's coming biden is literally

coming out with all opportunities

to nail investments there are even some

other changes carried interest obviously

capital gains corporate tax rate

everything investment wise is getting

smacked upside the head here

but i'm very very concerned about what

this means

for the housing crisis because you're

literally funneling investors

into single-family and smaller deals by

doing this you are making it

much more desirable to own smaller real

estate than big real estate

that in my opinion big mistake if you're

gonna get rid of the 1031

just get rid of it for all deals and

then there's no

there's no preference anymore but this

uh this preference driving

just going to make housing even more

unaffordable as more investors clamor to

get their hands on more small deal real

estate

in my opinion that 500k limit is a

big fat mistake thanks so much for

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