SOTM 65: Biden’s Tax Changes Are Coming. Will YOUR Real Estate Business Be Affected?

Aaron Amuchastegui 

Real Estate Rockstars. This is Aaron Amuchastegui. Today for state of the market 65. Today is January 13. We’ve already survived almost two weeks of 2021. And you know, I didn’t do a new show last week, because I didn’t quite know what we would do last week was one of the wildest weeks I’ve had in a really long time and coming off of 2020. I think that is really a surprise. I mean that when we’re talking news Stadium, or our state of the markets, really we try to talk real estate news, what’s the news of the week? And how is it going to impact you in your real estate business? Well, there was some really big news last week, that’s going to change all sorts of stuff. For 2021, I’m gonna do my best to try to go through some unique articles that are out there today that were really released yesterday and today with the news and how that will affect you, in your real estate careers for 2021. Now, last week, we had two big things happen, big political things happen, that are going to impact a lot of what’s going on for the next little while. So one was the Democrats won both Senate seats in Georgia. So my State of the market back in November and December said, Hey, we’re still gonna have more Republican senators than democratic senators in the Senate. And so we won’t see a whole bunch of change with tax policy. Well, now I’m wrong. So now the with now it’s kind of a split, it’s a split 5050. So now has ties happened, it’s going to go to the Vice President, which means a lot more of the Joe Biden policies that he had talked about, that we thought would have a tough time making it through the Senate now have a much better chance of getting pushed through. So that was big news of the week of you know, stuff in December that we thought were going to be tax policies that were not going to impact anybody in 2021. Now are going to so that was first big news. Second big news, the very same day, President Trump he had a there was a huge, you know, huge bunch of marchers there a bunch of people out there. And you know it unless you’re living in a hole, you saw what happened. And a bunch of people, a bunch of supporters kind of overtook one of the Capitol buildings. Now, I don’t want to go through all of the different stories behind it. But it’s there. But man, I saw so many posts online, so many posts on social media, people just completely disappointed with seeing, like people knocking fences down and climbing steps and like breaking through the Capitol and doing selfies like now people are getting arrested. Today, they the the Democratic Congress voted to impeach President Trump a second time. First time it’s ever happened in history is for is for that to happen. Now.

I won’t try to

Aaron Amuchastegui 

guess what will happen next with that, because the last time I tried to make a political guess I got it wrong. And so we’re gonna say Is today the year he got impeached again for the second time. And but there are a lot of talks of people are asking why would they try to do this right now? And how could that affect us in 2021? So, you know, as they move to a vote, they say, why would you impeach a president he’s already leaving. And the idea behind that is to prevent him from running in the future prevent him from getting his retirement? I think it’s also just to make a political statement that says, you know, that people have to be held accountable for different things. And it is a me personally, the I think, if you’ve got a president leaving in eight days, you don’t have to worry too much about that. But there are people that definitely see the other side of that. And so it’ll be it’ll be an interesting few months, because it could impact what legislators are working on for the first few months of a new president. And I think it would be a shame if they’re working on that instead of getting new policies in place. They were hoping but all right, I promised that is as political as I’m going to get. And, and although I offered very little opinion in that, really just trying to restate the news. Alright, so now with my first piece of other news, it’s actually going to lead in with some of that. So I’m gonna go ahead and share my screen you guys are gonna see the news articles and Okay, if you’re watching us on the YouTube page, but don’t worry If you’re driving in your car or listen to the podcast, you’re gonna get just as much value out of this thing. So I’m doing the state of markets by myself I like to be able to share some of the videos in case people want to see them so first article which goes in line with what happened last week is is Airbnb to block and cancel all DC reservations ahead of the inauguration. So the risk of riots and violence has pushed Airbnb to block all DC rentals next week. So that’s kind of crazy. So they said hey, they’re not gonna let anybody you know book an Airbnb booking during what’s happening now Airbnb did a lot of things out in California, they started sending notices out to people canceling reservations, you know, when they were locked down orders in place as in specific counties where they said people were only allowed to travel for Mr. There was no non essential travel anymore. Airbnb actually shut shut down some of the listings and said no one is allowed to book over certain days and certain periods. And they even went ahead and made sure that people change their your booking policies to make sure it was under 10 people. If you had allowed events before now you won’t. This isn’t even bigger step of them really have Airbnb saying, hey, and I think this is more of a liability thing. I think this is them saying hey, if if if people are staying at our houses, there’s a better chance that could lead to you know, violence or damage or something. You know, Airbnb does a policy for insurance policy for hosts. So if damage happens, you know, the Airbnb insurance policy can cover some of that. And I imagine when they looked at the risk, they said, Hey, if we allow people staying in that there’s a potential for a lot of damage to happen while Airbnb guests are there. And so they took that risk, so I don’t necessarily blame them for that risk. I think that is very, I mean, they’re definitely trying to get ahead. I had mixed feelings about it when they did in California, and they started shutting down what people were and weren’t allowed to do. But also as a business owner, I can see them being proactive, there is a safe bet. So it goes in like that was a an Inman article that came out yesterday or it came out today. And that was this morning and it said Airbnb to block all DC reservations next article along the same lines Wall Street Journal, and it says more blue chip companies halt political donations after the capital riot. So the reason I want to tie this together even though it’s less real estate news is Airbnb wasn’t the first to do it. Actually, a lot of companies and a lot of businesses are doing it. It was such a strange week was showing how much

Aaron Amuchastegui 

I different businesses were really showing their political beliefs and what they wanted to do and what different things they were going to support out there. You’ve got, you know, Twitter and Facebook, banning people and taking them down and some people leaving and some people praising it. And the power of big business in social media and the power of donors is really coming out right now. So they look at the businesses here it says at&t ge Amazon suspend giving the GOP group that sought to block Electoral College certification, the Biden win. So a growing wave of big businesses are deciding to suspend or review campaign donations in the wake of last week’s right at the Capitol with many saying they would stop donating to republican to objected election certification. So there was some some Republicans last week that rejected the certification the election and people are saying they are not going to support them anymore. Airbnb was the first one that caught my eye on it but also at&t conocophillips down Facebook united personal service were among the other companies following last week’s announcement from JPMorgan Chase and Citi group that said over the weekend they were halting donates to their pack also Amazon Comcast General Electric I mean the list goes on if a republican last week if they went against it and and what’s the wording that they use there. So the people that rejected the electoral college certification, they are companies are going to make them pay for it. So companies are trying to show that hey, if if you disagree with us, we’re definitely gonna pull our funding the way they do that. So really interesting. Next one was another. It says Airbnb hosts donations to election objectors news comes in a number of major companies say they’re suspending political campaign contributions. Airbnb will end political donations to the campaign’s of candidates who voted against the certification of election results after a mob of vile supporters of President Donald Trump broke into the Capitol Building. So that was everybody’s announcement from Monday tide into those first few articles. So that was on Inman that came out on January 11. So first article was Airbnb to block and cancel all DC reservations. Second was the article the Wall Street Journal saying all these companies are going to stop donating. The reason I brought that into the news is the third article of Inman today that first caught my eye on the subject was that Airbnb is halting donations to the election objectors. All right, next piece of news. This was an Inman in the MLS and associations category came out today, and it said Alabama and Georgia realtors pause efforts to stop eviction ban. So Alabama and Georgia realtors suspend their lawsuit against the Trump administration at least until February after legislation extends the moratorium. A federal court has granted a request from the Alabama Association of Realtors and the Georgia social and real orders to temporarily suspend their lawsuit against the Trump administration over a nationwide eviction ban that Congress has extended into the end of January, the trade groups will revisit the case at the beginning of February after the ban has expired or extended. So we’ve talked about it on here a lot right now. So there is an eviction ban. That’s a nationwide eviction ban that’s preventing evictions happening. The especially if there’s, you know, if there’s a CDC or So first, there was an eviction ban, that expired within a few months. And then they said, What, then they came up with a new one, which is a CDC form, or someone fills out a form and says, If I get evicted, I’m going to be homeless, I have a better chance of catching COVID that automatically stops any evictions, those were postponed first until January 4. So we actually had some some residents and some of the properties we own back in September and October, turning those forms, they haven’t been paying rent, since we thought that we were going to be able to go to eviction court, January 4, and that got postponed again. And so now it’s set to expire at the end of January. And I think these realtors just said, Hey, because they’re not going to vote on it anyway, I think they’re going to wait to see if the Biden administration is going to do the same thing if they’re going to extend the eviction moratorium or come up with a different one, but that one, but they are now going to suspend it. And I think with this suspension, it says that with the new with the transition to a new administration just days away and set to expire, we acknowledge that policy changes could be forthcoming on this and many other issues. With this in mind, Georgia realtors fell for a temporary state to determine how to proceed based our goals and navigate this matter in a proven and mindful manner. So when they get a stay, it just means that in a month, they can wait the judge didn’t have to grant that the judge said no, you have to proceed or not. So by getting a stay in a month, the eviction moratorium gets extended, they will be able to just continue their lawsuit they won’t have to start over. And I think that’s what they were hoping for with the status so they don’t want to waste time and money on it right now. In case it’s odd, there’s a chance that might automatically change, but they will be ready in the future. So next one so this is a Reuters article. The and it came out two days ago says us banks cast wary eye and mortgage borrowers this forbearance period ends. I put a lot of things about this on my Instagram today because I really went into the details of this article. And it says us banks are struggling to understand how the residential mortgage portfolios will perform this year because borrower assistance programs during the pandemic have clouded who will be able to pay when forbearance period ends and enhanced jobless benefits expire.

Aaron Amuchastegui 

Real Estate Rockstars This is Aaron Amuchastegui with a quick commercial break from our sponsor rent ready and you’ve heard me talking about them lately. You heard them talking about the offers. I even interviewed Ryan Barone in Episode 939 so you guys can go back and listen to that to learn more about rent ready, but here we go look into streamline your rental property finances this year, tenant management can eat up a big part of your budget, so reducing turnover and avoiding costly vacancies can save you big bucks year over year. Keep a profitable cash flow with consistently occupied units when you use rent ready, but rent ready. All you need is one software to see expiring leases list units, screen tenants, he signed leases, track renters insurance, send rent reminders and collect rent online. Rent ready can help you manage your tenants increase retention and keep business costs low. As part of a special deal, rent radios offering our listeners a whole year of rent ready for one buck, right? That’s why I’m always talking about one buck. That’s right $1. But only views are codes you have to use code Rockstar and sign up for rent raise annual plan at rent ready.com. That’s rdntvi.com if you’ve got one house five houses or 10 houses and you just want to check it out, I’ve gone and looked at it, you know, I have a lot of rentals that we own and we were using five or six different software technologies, one to be able to list properties one to be able to accept money, we create the lease in a different document, we use DocuSign for other things, and all these different sources or rent readings doing it all for one, I recommend you go check it out.

Aaron Amuchastegui 

Alright, so mortgage forbearance we’ve been talking about. So back in March and April, a lot of banks said, Hey, you don’t have to pay your mortgage right now. And we’ll let you take time off. And a lot of that was set to expire in October where they gave him like a six month stay. It’s and you don’t have to pay any of your mortgage payments for six months. And then when October hits, you’ll have to start paying again. Now some banks, we’re going to add it all up. And if you missed six months in a row $2,000 payments, they’re going to make them pay 12,000. Others we’re going to let them tack it onto the back of the loan different people had really

Aaron Amuchastegui 

good situations happened with it. Others had kind of some bad situations where they just depended on to the lender. They didn’t have really strict guidelines for that. But what this article is saying is the tough part was they don’t know who did forbearance because it was strategic and that they are going to start paying again or who did forbearance because they simply didn’t have a place to live. And they were just postponing the eviction or foreclosure. So lenders are bracing for losses, but mortgages stand out because the share of those loans in forbearance has started to creep up the key difference. The mortgage forbearance program is imposed by us agencies that back the vast majority of housing debt, and it does not require borrowers to show proof of hardship that’s made it difficult to tell who enrolled out of temporary need or extreme caution. That’s the big difference. Right? So if the people entered, you know, the forbearance program out of extreme caution, well, they’re going to be able to resume their payments, you know, or a temporary need, they’re gonna be able to resume their payments. But because they, anyone could form and say, Hey, I’m having a hardship, but they didn’t make them prove it. They’re saying they’re having a tough time figuring out now who’s actually going to start paying and who’s not so of the many millions of properties and for parents, they actually don’t have any idea how many of them are going to be able to catch up or not. There’s no one really knows how many of these people who are in forbearance are actually going to be able to recover some of the biggest us mortgage lenders including JP Morgan Wells Fargo, talking about mortgage trends. The first quarter results this Friday, it says 2.7 million US mortgage borrowers were in forbearance programs as of January 3, this was according to the Mortgage Bankers Association, the portion began rising toward the year end but remained far below the 8.6% Peak. So the it’s still at 8.6% peak in June, a lot of people are in forbearance and June 8% of all mortgages. Now it’s down to five and a half percent of all mortgages. And that could be a small percentage. But the but I think in a healthy economy, you’ve got, you know, way less than half of a percent of people that are in default. This is those homeowners who remain in forbearance are more likely to be in distress, with fewer continuing to make any payments and fewer exiting forbearance each month. More than half the borrowers have requested extensions since October. That that’s the other thing it was all supposed to stop in October, said, Hey, you have six months not make payments start paying again. It said more than half of them in October said I’m not going to start repaying it. That’s not good news. Right. And that’s not good news, because that’s meaning Hey, and everybody knows, not much has changed. If you were struggling in April and May, you’re probably struggling now. The people that were doing great in April May are still doing great now. So the banks are worried about the repayment Cliff when those relief programs expired. Most of the increase in forbearance, requests have come from customers with Ginnie Mae, back loans, and VA statistics show. So yeah, it’ll be interesting to see what’s really going to happen. What they’re really saying is we don’t know what’s going to happen. And but we do know, when the forbearance period comes to an end, that’s when they’re finally going to figure it out. So right now, they can’t predict if 90% of those people in forbearance are gonna say, Hey, thanks for the catch up, now I’m going to make my payment. Or if it’s going to be a much smaller percentage of people that say, Hey, I still don’t have a job, nothing has really changed. And if you aren’t going to help me keep postponing it, I’m going to have to leave the good news with all that is most of them do have equity, even if they’ve missed 610 12 months of payments, most of them do have equity. So that becomes potential people that can now sell their house and especially if they haven’t been working, they’ll be able to sell their house get some money from that, and the and maybe that helps. So these houses are a giant piggy bank right now. When it comes to how high prices are raising. the tough part is people having to be ready to downsize take that equity money to change their lifestyle because they don’t especially the ones that don’t have that have a house but don’t have a new job yet. All right, next the this was an admin article related to the first thing we talked about to ner won’t rule out penalties for realtors who stormed the Capitol. We’re committed to taking action that is deemed appropriate and in the best interest or Association, our 1.4 million members in our nation as a whole set following and take over the Capitol building the there not really not penalties for any of its members. At least two realtors Jenna Ryan of Frisco, Texas and Libby Anders of Chicago admitted in social media posts to storming the Capitol now this was in the Inman article, January 11. Last week, so a spokesman for an art NAR declined to tell him and whether they were aware of you know, realtors participate in the riot, both Ryan Anderson faced intense backlash from members of the public or other realtors calling for their removal of their real estate license and other disciplinary measures. And so when it comes down to you right now is we live in this world of social media, where when we go do things, we post it, and the now I mean, those guys were posting selfies as they were inside the Capitol building. And a lot of those guys are now in jail today, or they’ve been charged with different things today. And so that is one of the pros and cons of social media. Social media is also the ultimate way, you know, to hold people accountable or not. But when you see it on there, I honestly feel really bad for you know, people not really realizing their life and social media can then become a risk and that they can do when this is happening. There is so much turmoil going on right now. And when normal people are getting pointed out by it or now they’re you know, I’m sure a lot of those people thought there was no chance to be risking their career or risking their lives by doing something like that or being a part of it, especially with no one knows the real story along the way with that. All of those but the big news of that NAR won’t rule out penalties for realtors who stormed the Capitol, and there’s a big article about it and how they’re going to be looking at it. So here’s a cool article. This is from Bloomberg says billionaires row condo records. 51% resale loss in luxury glut we’ve talked

about this. We’ve talked about stuff in

Aaron Amuchastegui 

New York are stuffing it in the downtown city areas isn’t doing as well as the stuff outside. You an hour drive outside New York, the market is booming. Well, this one says a 58 floor apartment at Manhattan’s 157 has traded at 51% markdown, the biggest resale loss of the billionaire’s rotel tower that was a symbol of luxury development boom. The 4004 on a three square foot condo sold for 16.7 5 million. The seller purchased it from the developer back in 2014. So seven years ago purchased it for 34 million. So the guy bought the house bought the condo for 34 million, just sold it for 16.7 5 million. it right in Manhattan. And the and I would say I’m not very surprised that that is a huge, huge change. And I think that right now there could be some big opportunities in some of those cities for the people that believe that cities are going to come back to the 2020 alone, there were four other sales in the building, what’s the owner realize at least a 40% loss. So five people in that building have sold houses this year at a 40% plus loss. That is what’s going on downtown these luxury apartments. We talked about it before. When you take the amenities out of the city when the cities are shut down, then living there is not as much fun and there are not as many people flocked in this city right now. Lots of opportunity out there if you believe it’s going to come back. So let’s see what I’ve got next. I’ve just got a couple articles left here. The on the flip side of that this is an article from Forbes has the highest priced Pebble Beach home sale in seven years. So we just talked about sale in New York 51% loss this one says Pebble Beach and California Monterey Peninsula is known for its dramatic oceanfront scenery. It’s golf clubs at 17 mile drive to location at the top of the desirability list oceanfront and golf from the $28 million sale of an estate located at pescadero point, a short stroll from the lodge is a notable example of rare Pebble Beach oceanfront sail home. It’s also the second priciest residential real estate transaction in the town, the most expensive was 34 million sale the home back in 2014. So it’s saying it’s this $28 million sale is the second biggest one ever in Pebble Beach. And it just happened. And the other one was a $34 million home. So that’s pretty wild, too. When you’re when you’re talking about what’s going on in different places, there are some markets that are absolutely booming. And we’ve seen that Pebble Beach just hit a record, second highest home price ever sold. And in New York, we’ve got quite the opposite. So down to the last article, this is another one on Forbes, it says eight ways the Biden tax plan could affect your real estate business. Again, this ties into the idea that last week, the Senate changed hands a little bit, I became a 5050 split. But when you have a 5050 split on voting, the Vice President can break that tie. And I believe the Vice President is going to do what Biden is hoping to have her do so eight ways to buy in tax plan could affect your real estate business. Back in November and December, I didn’t think there was much of a chance that’s happening. Now. I do now. Now. Now it’s seeing more stuffs coming. So here we go. We’ve got I’m just gonna go through these quickly. And I’m going to encourage you guys to go through and look at the articles but Social Security payroll tax, currently employers employees are taxed up to 12.4%. On 137,000. In wages, no taxes are due beyond that. There’s a proposal for an additional Social Security tax for anyone making above 400,000 at a flat rate of 12.4%. So I think that can affect real estate and the higher point but the I mean, anytime taxes go up, there’s the theory that sales prices of things are going to come down but it could also affect the way the business owners modify their structures. These got on your tax bracket for ordinary income, limiting itemized deductions. I think this was going to happen. The Biden plan proposes the reinstatement of the PCE limitation of itemized deduction, additionally, attach plans to reduce the effective tax benefit of those deductions from 39.6 to 28%. That’s a big change there. So 12% deduction for those earning more than 400,000 of adjusted gross income, the elimination of the PS limitation was a recent change. So it will be it says so it might be a difficult to pass a reinstatement through Congress, we will see phasing out the cubii deduction. The deduction was employed as part of the tcj a 2017. Currently, if you have an S corp, you’re allowed to pay yourself with a W two and because you’re paying wages, you’re able to deduct 20% qualified business income on their taxes. Under the Biden plan, that deduction would be eliminated for those with adjusted gross incomes over 400,000. So 400,000 you’ve got a 20% deduction there that’s now getting taken away that’s $80,000 in extra tax, the least income not not tax, gross income basis, that is taxable basis. Long term capital gains they’re trying to eliminate or change or trying to change 1031 exchanges. They have a lower state tax exemption, and a lot of other things that will be happening. I think with those, you know, as we look at what might happen with taxes, I think some of the biggest changes we’ve talked about, they’re going to try to

Aaron Amuchastegui 

do more affordable housing, there’s benefit of that the real estate benefit to real estate agents, there’s opportunity to find that they’re going to try to create more affordable housing or trying to try to expand section eight programs out there’s there’s opportunities for real estate agents and investors in that, but they’re also going to be changing the way the taxes are. And the and, you know, that won’t necessarily affect the people that are buying one house, but it will impact the people that have, you know, repeat investor clients or having a niche for investor clients, I have to imagine it’s going to change that a little bit. And the people that do represent investor clients right now are already struggling. Because when prices are trading at an all time high, investors tend to wait. So lots of news this week, like I said, a very interesting one, we had some political news out there, we had some real estate news out there, you know, every week, I want to try to provide as much value as I can to all of our listeners, I want to try to figure out the things I think are important to you, and get my opinion on it. And sometimes I have guests me that will do the same thing. And we will get to talk about that stuff for you. If there are other articles or questions that you have, I want you to come find me on Instagram, tell me if you liked it, tell me if you didn’t like it, go back and leave a review. If you’re liking the state of the markets or not, if there’s something that we should be focusing on, or any topics that you think we’re missing, we want to hear it and we want to help you. But we’re two weeks into 2021. And for those of you that thought 2021 was going to be way different than 2020, or the 2020 was crazy, and 2021 is going to be a lot less crazy. Who knows the first week of 2021 was pretty darn crazy. So thank you listeners for listening. And we will talk to you soon. All right, Real Estate Rockstars. This is Aaron Amuchastegui. jumping in again to thank you for listening to the show. Hopefully you guys loved listening to that one. And I want to make sure that you know about all of the extra resources that we have. And also we need your help. They say podcasts are free, you get to listen to podcasts for free. But what is the cost of that podcast? I would say if I could beg you to pay anything for that podcast, I would say the cost of the podcast is going and giving a review. So whether you download it on Google, or Apple or YouTube or anywhere else, please go give us a review. Say what you liked what you didn’t like it helps us get better guests. The more reviews the higher we get in the rate rankings. Right now we are the biggest podcasts out there for real estate agents. And we want to keep that spot because we know there’s lots of podcasts out there. So give us a review. Also, be sure to go to heibon Digital comm if you liked any of the resources that those real estate agents talked about, we’ve got a huge video vault of those resources for free. Every penny that comes on the podcast that we interview, they give us something that helps them get their deals or helps them work with their clients. And we put that in the toolbox in our bowl for you to go to heibon Digital COMM And you can get it if you’re looking for real estate education, go to Rebus University comm we have all sorts of courses in there to help agents succeed in real estate, how to get the listing how to negotiate deals, you know how to become an investor all sorts of different stuff Rebus university.com and if you want to chat with me, go find me on Instagram. If you come find me on Instagram, you can send me messages. Tell me what you want to hear. Tell me what you liked what you didn’t like we tried to put a bunch of content out there too. You could find me in two different places. It’s at our UI rockstars calm for our Real Estate Rockstars page or at Aaron Amuchastegui calm for my personal Instagram page where I can chat with you about all sorts of different things. Thanks for listening. We’ll see you again soon.