The November 3rd elections are over and the big question is what will real estate investing look like under a Biden Administration?
For Real Estate Investors, there has naturally been a lot of concern regarding if real estate investing will continue to be the same under President Biden, as it has been under President Trump.
Real Estate Investing And The Biden Administration
There’s no denying that the real estate market has enjoy explosive growth over the last three and a half years.
Even in 2021 with the virus raging, real estate in the United States has continued to be extremely profitable for investors in the United States, and around the world.
With an incoming Biden Administration, the future of real estate investing is in jeopardy as Joe Biden has already indicated that he plans on changing, or eliminating, several of the key benefits that investors have enjoyed over the last three years.
This is why in today’s article I’m going to break down what real estate investing could look like under a Biden Administration so that you can have some insight into how his presidency could affect you.
1031 Exchanges May Be Diminished
One of the huge benefits that Real Estate Investors have enjoyed over President Trump has been 1031 Exchanges.
Also known as like-kind exchanges, a 1031 exchange enables an investor to sell their property and forgo having to pay capital gains tax by investing that money into another “like-kind” property.
1031 exchanges have been very popular but, under President Biden, he would limit their use to investors who earn less than $400,000 annually.
If Biden were to follow through with this plan, his administration would use the money from taxes on individuals who earn more than $400,000 annually towards paying for $775 billion dollars in child and senior care over the next ten years.
Upon learning about what could be the future of 1031 exchanges under a Biden Administration, most Real Estate Investors have voiced their disapproval, including New York developer Francis Greenburger, who recently stated that up to two-thirds of real estate Investments nationwide could be affected if Biden’s administration were to change 1031 exchanges.
Opportunity Zones Could Be Changed
Another thing that’s benefited Real Estate Investors during the Trump administration has been opportunity zones.
Many real estate investors have flocked to investing in opportunity zones over the last three years, especially in areas like Detroit Michigan, that have been rock hard economically and have thousands of low-cost single-family homes and affordable multi-family properties.
With an Opportunity Zone, a real estate investor can defer paying capital gains after selling their property if they hold on to that property for up to 10 years.
Some critics of the program have said that opportunity zones only reward Real Estate Investors, and not people or businesses, that live in the opportunity zones themselves.
During his campaign, Biden said that his goal was to “reform” opportunity zones and he would require Real Estate Investors to provide more detailed reporting, including information on how opportunity zones directly affect residents.
One of the most important things that every investor is concerned about is taxes. Under a Biden Administration, investors could see the top tax rate raised from 37% to roughly 39.6%. This would affect investors who earn more than $520,000 per year and married taxpayers who earn over $620,000 per year.
We could also see Biden’s Administration increase the top tax rate for long-term capital gains, on investors who earn more than $1 million per year from 20% to 39.6%.
When Will These Changes Take Effect?
Even though changes to the tax code under a Biden Administration sound ominous, the reality is that President Biden would still need the support of Senate lawmakers to Institute tax code changes and that’s not going to happen as easily as he wants.
If he does indeed take office in January 2021, Bidens Administration faces a wide variety of challenges that may put potential changes to the tax code on the back burner for at least one year or longer.
Some of the challenges that he faces include the coming eviction and foreclosure crisis, the need for more economic stimulus, and most important all, using the Government to help with the rollout of the Coronavirus vaccine nationwide.
When it does finally come time for his administration to focus on making changes to tax code, it’s not likely that he’s going to have an easy road ahead especially since the Senate is going to remain in Republican control and may block most of the changes that he hopes to me to the tax code.
Ultimately, time will tell what the road ahead will be like for Real Estate Investors in the United States.
If you’re planning on investing in multifamily properties now, you need to get off the fence and make your move before the end of the year so that you can take advantage of the current tax code before any changes occur under the next Presidential Administration.
Contact Trier Capital
At Trier Capital, we specialize in investing in multifamily properties nationwide.
We do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.
For more information about partnering with us, contact me today by calling (630) 229-2383 or click here.