Good fact based WSJ article on who pays taxes in America

[CA renter]

Exactly right, brian.

[bearishgurl]

[quote=briansd1][quote=bearishgurl]

jstoesz, which better uses than investment RE would you suggest for one’s money they have currently set aside for investment purposes?[/quote]

Therein lies the problem with Republican arguments. They don’t look at the context of the economy….
[/quote]

brian, I’m a little confused :=0

Are you referring to jstoesz as the “Republican” or to me??

If it was me, I was only registered as a Repub for a minute and a half this year until RP lost in the primaries before I “re-registered” again, lol …

[briansd1]

BG, I was referring to jstoesz.

I quoted you, BG, because you make a correct statement. The money is just speculating and not being invested in productive uses because of lack of demand.

There is plenty of money sloshing around so it’s not like high taxes and government spending are sucking money out of the economy as the right-wing ideologues would claim. (Not to say that cannot happen but that’s not the conditions we have now).

Sorry for the confusion, BG.

[bearishgurl]

[quote=briansd1] . . . There is plenty of money sloshing around so it’s not like high taxes and government spending are sucking money out of the economy as the right-wing ideologues would claim. (Not to say that cannot happen but that’s not the conditions we have now). . . [/quote]

I really think a lot of the (private) “money sloshing around” is in the hands of Joe and Jane 6p Boomer (one or both over the age of 59.5). Their retirement accounts were stagnant (in poorly-performing stocks, zero-coupon-type bonds or all cash) and they might not see it lasting long enough to provide them with adequate income for the rest of their lives. Their primary residences in those cheaper-to-live “flyover states” have been paid off for years so what would one expect them to do but to seek out bargain investment RE while blood was running in the streets? This demographic likely will never see another chance to do this in their lifetimes :=0

[jstoesz]

From what I have read, businesses are not simply sitting on a pile of cash, earned from profit. Rather they have a pile of cash and an even bigger pile of debt. Mine as well mortgage the crap out of your company while rates are so low, to hedge against future downturn. It is a cheap way to protect your company against future risk, but to spend it would be a very risky proposition indeed.

Furthermore, what piles of cash sitting out there that do exist, higher rates do not touch. Only future profit gains are affected by higher rates. This has the effect of keeping companies from taking riskier investments because their profit margin is cut. Thereby, making the risk/reward ratio less attractive, not more attractive.

[jstoesz]

[quote=bearishgurl][quote=jstoesz]No one argues that the housing mortgage deduction is not simulative of housing prices…obviously it is. Is it stimulative for the economy in general? Seems to me, the answer is no. It incentivizes people to put their savings in non productive assets. If houses were cheaper and the market not artificially skewed towards housing, that money could be put to much better uses. The same thing goes for you alls argument on business investment deductions.[/quote]

jstoesz, which better uses than investment RE would you suggest for one’s money they have currently set aside for investment purposes?[/quote]

First off, BG, people who buy real estate for investment purposes do not receive a mortgage tax deduction. So, I think this is a bit of an apples to oranges disagreement regarding what I was talking about.

With that said, housing investment seems more like speculation, much like buying metals. Gold is a non productive asset, but “investing” in it does stimulate mining jobs etc. Just like housing results in construction jobs, but it doesn’t have the same stimulation as investing in companies. Companies are built to further produce additional value from that investment (increasing efficiency and wealth for its investors). A house or a bar of gold can’t produce crapola.

[sdduuuude]

[quote=jstoesz]people who buy real estate for investment purposes do not receive a mortgage tax deduction.[/quote]

Sure they do. It is deductible as a business expense, like any other expense.

Home mortgage interest is given special consideration to be treated like a business expense when it is, in-fact, a personal expense.

Mortgage interest on investment property starts out as a business expense and is therefore deductible without any special rules.

[briansd1]

BG, you mention the money that boomers have. If there were more investment opportunities, in factories and other productive uses, the boomers would have their money in their 401k, insurance companies, etc…

The problem we have today is lack of consumer demand. Therefore business don’t see a need to invest and hire.

Since we have lack of private demand, government today does not have to compete with the private sector. Government should be raising taxes on the people who have the cash to pay, and investing in infrastructure for the future.

As far as owning a vacation home or rental properties far from home, there are cost associated with travel and management. Not everyone is equipped to do that. To make it worthwhile, you have to combine real estate investing with travel you would otherwise make anyway.

How much can you make on a condo rental? How much would the trips cost you? And if you don’t enjoy visiting your properties, then it becomes hard work.

[jstoesz]

[quote=sdduuuude][quote=jstoesz]people who buy real estate for investment purposes do not receive a mortgage tax deduction.[/quote]

Sure they do. It is deductible as a business expense, like any other expense.

Home mortgage interest is given special consideration to be treated like a business expense when it is, in-fact, a personal expense.

Mortgage interest on investment property starts out as a business expense and is therefore deductible without any special rules.[/quote]

True true. Good point. maybe it is not so apples to oranges. Not sure it disagrees with the larger point though.

[jstoesz]

Not such a large pile of cash when put in perspective.

This is from 2011, but I doubt much has changed.

[briansd1]

So?

The refrain that’s sung over and over by the right-wing is that government borrowing and spending compete with the private sector and restrict access to cash by the private sector that will invest it on productive uses.

Today, the private sector can borrow cheaply and is sitting on tons of cash. Why are they not investing? Lack of demand.

You have to look at the conditions of the economy before you decide if certain policies are appropriate.

[sdduuuude]

[quote=briansd1]So?

The refrain that’s sung over and over by the right-wing is that … [/quote]

briansd1 – ever the king of the strawman argument.

[bearishgurl]

[quote=briansd1]BG, you mention the money that boomers have. If there were more investment opportunities, in factories and other productive uses, the boomers would have their money in their 401k, insurance companies, etc…

The problem we have today is lack of consumer demand. Therefore business don’t see a need to invest and hire.

Since we have lack of private demand, government today does not have to compete with the private sector. Government should be raising taxes on the people who have the cash to pay, and investing in infrastructure for the future.

As far as owning a vacation home or rental properties far from home, there are cost associated with travel and management. Not everyone is equipped to do that. To make it worthwhile, you have to combine real estate investing with travel you would otherwise make anyway.

How much can you make on a condo rental? How much would the trips cost you? And if you don’t enjoy visiting your properties, then it becomes hard work.[/quote]

I don’t think most boomers have necessarily saved more than say, their (higher-earning) 40-45 yo (Gen X) counterpart. But the difference is that they can legally access their retirement funds without penalty. And there are some other, cultural and values-based differences such as most boomers were able to go to college much cheaper and buy their earlier RE purchases cheaper than Gen X and beyond. Many boomers have lived in the same property for more than 30 yrs, and, as a group, are satisfied with less house in more established areas, which have retained their values over decades.

This means they have successfully lived on and raised families on less (sometimes FAR less) money than subsequent generations did (no matter how much they made) and were likely able to save more money for retirement (as a percentage of their incomes).

A $100K 3/2/2 SFR in a good area of PHX (spdrun’s example) would have annual property taxes of $1800 and an annual water bill of $900 (lot is landscaped with rock, concrete and cacti).

see: http://piggington.com/las_vegas_realtor

I would guess that prevailing rent for this would be $1400 – $1600 mo. Is this too low?

At $1500 mo, that is $18K in rent per yr – 20% vacancy rate or $14,400 annual rent. If turned over to a property mgr (who charges 10% of rent collected), that leaves $12,960 yr rental income to the owner. Take out the $900 water exp and $1800 tax exp and that leaves $10,260 in net rental income, which is a 10.26% annual ROI.

Sounds more than okay to me.

Did I do this right?

How much is the prevailing rent for a 1700 sf 3/2/2 SFR in a good area of PHX?

And what is the current vacancy rate for rental houses there?

[briansd1]

[quote=bearishgurl]
A $100K 3/2/2 SFR in a good area of PHX (spdrun’s example) would have annual property taxes of $1800 and an annual water bill of $900 (lot is landscaped with rock, concrete and cacti).[/quote]

I don’t think that $100k would you get you a decent area in PHX. Decent is relative though.

[quote=bearishgurl]
I would guess that prevailing rent for this would be $1400 – $1600 mo. Is this too low?
[/quote]

Based on what I’ve seen in Vegas, $1,000 monthly rent is more in line, depending on the condition of the property.

Craigslist is your friend.

[jstoesz]

Saying businesses is sitting on tons of cash is like saying, homeowners who HELOC’ed their paid off residence are flush with cash. Yes, they have cash, but net, they have nothing…

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