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Old 05-18-2021, 11:12 PM
 
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Will the end of the eviction moratoriums cause home prices to decrease, increase, no effect, other? It seems that as the government decreases it's protections to renters, that housing costs may become affected, perhaps even decrease in some markets. Any thoughts on this? Much thanks in advance.
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Old 05-19-2021, 05:58 AM
 
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The government has proven recently that they have no qualms about manipulating the market as long as it moves them forward politically.

Do not look for it to end, because it will likely not for quite a while.

Instead, look for them to do what they've always done: Borrow their way out of the problem.

I would not be surprised to see government assistance for landlords and offering 60 year mortgages for those in forbearance.
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Old 05-19-2021, 07:48 AM
 
Location: Raleigh
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Originally Posted by richzimme View Post
Will the end of the eviction moratoriums cause home prices to decrease, increase, no effect, other? It seems that as the government decreases it's protections to renters, that housing costs may become affected, perhaps even decrease in some markets. Any thoughts on this? Much thanks in advance.
No effect. It will be a hassle for landlords that have properties that don't appeal to higher caliber renters, but that comes with being a slumlord.

The courts may bottleneck, I expect they will.

And while a few LL's may talk about selling and getting out of the game completely, they won't, because for many of them, they made a deal with the devil when they got into the rental business. If they've owned the property as a rental for 7 years, and sell it, every dime is a capital gain, even if the house sells for what they paid for it. Because, while a LL may decide to sell a house and get out of the game, he has to be really, really bitten to pay taxes on all that money.
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Old 05-19-2021, 08:08 AM
 
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Originally Posted by JONOV View Post
No effect. It will be a hassle for landlords that have properties that don't appeal to higher caliber renters, but that comes with being a slumlord.

The courts may bottleneck, I expect they will.

And while a few LL's may talk about selling and getting out of the game completely, they won't, because for many of them, they made a deal with the devil when they got into the rental business. If they've owned the property as a rental for 7 years, and sell it, every dime is a capital gain, even if the house sells for what they paid for it. Because, while a LL may decide to sell a house and get out of the game, he has to be really, really bitten to pay taxes on all that money.
Unless they've changed the tax rules on this recently, it's actually worse than that. On an investment rental property, depreciation will have been taken each year of ownership. When that property is sold, every penny of depreciation taken in past years will now have to be "recaptured", (i.e. "reported as") Ordinary Income on your federal taxes. As you know, ordinary income is taxed at a higher rate than long term capital gains.

BTW, I'm curious as to your figure of "7 years". Is there any significance to that length of time, or is that just an example you chose? I'm not aware of any 7 year significance on taxes other than that is the minimum time period that you should hold all your tax records in case of audit. In some cases such as investment property, you may need to keep your records longer than that since you may need to prove your Adjusted Basis and also the depreciation taken on the property when you sell it.
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Old 05-19-2021, 09:14 AM
 
Location: Raleigh NC
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why would the Capital Gain (the recapture of depreciation) be counted as ordinary income? I must be missing something.
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Old 05-19-2021, 09:29 AM
 
Location: NJ
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Quote:
Originally Posted by richzimme View Post
Will the end of the eviction moratoriums cause home prices to decrease, increase, no effect, other? It seems that as the government decreases it's protections to renters, that housing costs may become affected, perhaps even decrease in some markets. Any thoughts on this? Much thanks in advance.

The end of the moratorium will mean that people will get evicted. I think landlords will not recoup that money. That's a lot of money to lose. One landlord said his yearly total would be close to $30,000 had his tenants not paid. If they couldn't keep up with rent, there's no way they'll ever repay that. Who knows if landlords will try to sell or get new renters.

I read an article the other day that once the states open back up that there will be lots of homes being listed by people who waited to list until COVID stabilized, so there will be more then enough homes for sale according to whoever wrote it. I believe it was a local to me article. Location is everything in real estate.

Hard to say what every area will do.
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Old 05-19-2021, 09:40 AM
 
Location: Raleigh NC
22,647 posts, read 11,825,457 times
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Quote:
Originally Posted by richzimme View Post
Will the end of the eviction moratoriums cause home prices to decrease, increase, no effect, other? It seems that as the government decreases it's protections to renters, that housing costs may become affected, perhaps even decrease in some markets. Any thoughts on this? Much thanks in advance.

You seem to only be asking about renters, and what will happen to rental prices.

I am not a "rent expert", but I would say is this - it doesn't seem to be that big of a problem. The "problem" however is the availability of data/information.

you can go to nmhc.org and see what is happening with apartment rents. That doesn't cover private landlords. I'm sure large apartment complexes/property managers are going to have an easier time than private landlords. They have systems in place to evict non-paying tenants, and it's a "cost of doing business". Individual landlords typically do not have much experience with eviction.

The Big Boys don't have a problem - going back to Nov 2019 when times were good, they're still getting 95% of their rent paid in full by the end of the month, and the same general historical % paid before late fees kick in. And they're not waiving late fees.

In other words, the "same" people who didn't pay their rent the right way before Covid are the "same" people today. And when the moratorium expires (as NMHC promotes) then those non-payers will get evicted just like they used to. And so, whatever trends were happening in rent rates pre-Covid should pick right back up.

Now, going back to private landlords? I expect them to have some issues with eviction, because again, they don't know the system. Those NMHC folks will have the right paperwork filed and be the first ones through the judicial process. The private landlords will have less-than-perfect paperwork, and so the judge will tell them to get it right and come back.

The only stat I quick-found that probably tells the tale on private landlords is this:

https://ipropertymanagement.com/rese...ers-statistics

which says ~17% of renters surveyed are expecting to get evicted. If NMHC only reports ~5% delinquency, that tells me a MUCH higher % of private landlords are going to be evicting tenants.
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Old 05-19-2021, 10:22 AM
 
Location: Raleigh
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Quote:
Originally Posted by Chas863 View Post
Unless they've changed the tax rules on this recently, it's actually worse than that. On an investment rental property, depreciation will have been taken each year of ownership. When that property is sold, every penny of depreciation taken in past years will now have to be "recaptured", (i.e. "reported as") Ordinary Income on your federal taxes. As you know, ordinary income is taxed at a higher rate than long term capital gains.

BTW, I'm curious as to your figure of "7 years". Is there any significance to that length of time, or is that just an example you chose? I'm not aware of any 7 year significance on taxes other than that is the minimum time period that you should hold all your tax records in case of audit. In some cases such as investment property, you may need to keep your records longer than that since you may need to prove your Adjusted Basis and also the depreciation taken on the property when you sell it.
No real significance other than it's very roughly 25% of the "life" of the property from a depreciation aspect, and hypothetically selling a property one acquired for $200K would mean roughly a $50K recapture of ordinary income and could screw up a lot of people come tax time.
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Old 05-19-2021, 12:03 PM
 
1,811 posts, read 858,730 times
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Originally Posted by BoBromhal View Post
why would the Capital Gain (the recapture of depreciation) be counted as ordinary income? I must be missing something.
Because that's the way that recapture of depreciation has been since the Tax Reform Act of 1986. Basically, it works like this:

Your initial "basis" in the property is what you paid for it. Any depreciation that you take reduces that basis to give you an "adjusted" basis. When you sell the property for let's say a greater amount than you paid for it, your TOTAL TAXABLE GAIN will be the difference between what you sold it for minus your Adjusted Basis. However, the portion that equals what your total depreciation taken over the years will be taxed as "ordinary income" and the rest of it will be taxed at long term capital gains rates.

This is a simplified explanation since there are likely to be other things that also affect the final number, but this is basically how the recapture of depreciation is handled. Prior to 1986, the ENTIRE amount of gain (difference between selling price and adjusted basis amount) was taxed at long term capital gain rates (provided you owned the property for over 1 year), but since 1986 the recapture of the depreciation portion is taxed as ordinary income. I don't think it's fair, but that's the way it is.
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Old 05-19-2021, 12:06 PM
 
1,811 posts, read 858,730 times
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Originally Posted by JONOV View Post
No real significance other than it's very roughly 25% of the "life" of the property from a depreciation aspect, and hypothetically selling a property one acquired for $200K would mean roughly a $50K recapture of ordinary income and could screw up a lot of people come tax time.
Yep, you got that right.
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