Learning from Past Mistakes: Avoiding the Next Real Estate Bubble

 

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“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ 

ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, PLEASE CALL ME.      

 

Stephen M. Breitstone | Jul 10, 2017

While at first blush immediate expensing appears to be a huge tax break, the honeymoon period would end with a crash when the write-off period ended.

The time may be right for comprehensive tax reform. However, certain proposals floating around Capitol Hill could do far more harm than good, drowning real estate investment and taking down markets across the country along with it. Congress should not attempt to fix what is not broken.

Particularly troubling are proposals to change the taxation of real estate investments by allowing investors to immediately expense the full value of improvements or buildings (land is not included). While at first blush immediate expensing appears to be a huge and unprecedented tax break—real estate investors would pay virtually no taxes in the first few years of the investment—the honeymoon period would end with a crash when the write-off period ended.

Nationwide, commercial real estate values have eclipsed their previous peak in 2007 by 23 percent. Real estate doesn’t need the stimulus that immediate expensing would create. Immediate expensing is akin to turning real estate into a speculative stock. Currentdepreciation levels are appropriate for this long-life asset class.

Under immediate expensing, the excess tax shelter resulting from the preliminary write-off could be used against other income and investments. This could cause a massive flow of capital into real estate, driving up real estate prices without changing the fundamentals. Bu the tax man would soon come calling, since immediate expensing’s rewards demand eliminating the depreciation deduction. The result? Taxable income that would exceed cash flow.

Immediate expensing would force well-financed investors into a pattern of flipping properties and trading up every few years to enjoy more tax shelter benefits. This cycle could not be sustained. Eventually, the real estate market, like Jack and Jill, would come tumbling down.

Real estate investment is no nursery rhyme or fairy tale. The health of the real estate industry affects every person across the nation who needs a place to live and work.

It is nearly certain that immediate expensing would create a bubble. We remember too well what happens when a bubble pops. All the wonder of this beautiful, fanciful creation dissipates in a heartbeat.

Bubbles burst when valuations get into realms that make no fundamental economic sense, or when investors run out of resources—usually when credit starts to tighten or when the rules change again. Aggressive tax incentives were put into place by Congress in 1980 to jumpstart the economy. With real estate in recession, depreciation schedules were cut in half. Real estate investors responded with alacrity, making investments on a gigantic scale. But it was too much of a good thing, creating a bubble of “see through” buildings that were built as tax shelters without regard to tenant demand, which was negligible. These buildings remained largely empty. Eventually, Congress lengthened the real estate depreciation schedule, correcting its mistake in 1986.

The party came to an abrupt end.

Congress’s actions triggered a major correction and decline in values. This was a contributing cause of the Savings & Loan crisis, in which thousands of financial institutions failed, requiring a government bailout of more than $125 billion, paid for by the taxpayers. In today’s dollars that would be $281 billion. Let’s not go there.

Stephen M. Breitstone is vice chairman of Meltzer, Lippe, Goldstein & Breitstone, based in Mineola, N.Y., and leads the firm’s private wealth and taxation group. 

 

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ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, PLEASE CALL ME.      

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Phoenix Commercial Real Estate and Investment Real Estate: Investors and Owner / Users need to really know the market today before making a move in owner user Commercial Properties, Investment Properties and land in Phoenix / Maricopa County, Pinal County / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land  Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties. I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group.  I also sold  hundreds millions of dollars’ worth of  Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with  brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also internationalClick here to find out what is a   CCIM:   https://en.wikipedia.org/wiki/CCIM 

ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, PLEASE CALL ME.

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WEEKLY LAND CLOSING UPDATE / THROUGH June 23, 2017 / Phoenix Arizona Metro, Maricopa County, Pinal County.

 

WEEKLY APARTMENT CLOSING UPDATE THROUGH  June 23 / 2017 /  Phoenix Arizona

Metro

 

How to Capitalize on Hot Phoenix Apartment Market

 

WHY PHOENIX? AMAZING!!!  POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”

 

ARIZONA FACTS – YEAR 1848 TO 2013

PHOENIX TOPS US IN POPULATION GROWTH (MORE THAN LA, NYC) AND WHY THAT’S GOOD FOR THE ECONOMY, BUSINESS

DOT – LOOP 202 / SOUTH MOUNTAIN FREEWAY / PHOENIX AZ – UNDER CONSTRUCTION

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WEEKLY LAND CLOSING UPDATE / THROUGH June 9, 2017 / Phoenix Arizona Metro, Maricopa County, Pinal County.

 

WEEKLY APARTMENT CLOSING UPDATE THROUGH  June 9 / 2017 /  Phoenix Arizona Metro

 

WEEKLY LAND CLOSING UPDATE / THROUGH June 2, 2017 / Phoenix Arizona Metro, Maricopa County, Pinal County.

 

WEEKLY APARTMENT CLOSING UPDATE THROUGH  June 2 / 2017 /  Phoenix Arizona Metro

 

DOWN TOWN PHOENIX IS HOT – MULTI-FAMILY HOUSING ANALYSIS  MAY 17-2017

  • DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
  • The average age of the population is 34 years old.
  • The health cost index score in this area is 102.1. (100 = national average)
  • Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).

 

PHOENIX PROJECTED AS NUMBER ONE US HOUSING MARKET FOR 2017

LIST OF ECONOMIC DEVELOPMENT PROJECTS IN PINAL COUNTY, REVISED 2-14-17

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2016 Official Arizona Visitors Guide

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Why Phoenix?  This is a very interesting article, you should read it, amazing, there were only 350 K people living in Phoenix in 1950

Timeline of Phoenix, Arizona history

Phoenix, Arizona

Facts of Arizona – year 1848 to 2013

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I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years.  If you have any questions about Commercial / Investment Properties in Phoenix or Commercial /  Investment Properties in Arizona,  I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us. 

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Phoenix , AZ 85018

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