On January 31st, 2018 our small group of investor friends of the San Mateo Real Estate Investor Meetup came together. As a diverse group of architects, hotel owners, multi-family operators, wholesalers, landlords and private lenders, we had a lot to cover, especially after the hiatus Kiri and I took for our newborn last month. (She is teaching us how to function on very little sleep. It's a slow process though as we've yet to figure out how to take caffeine intravenously.)
Below we have a brief summary of where we see the economy going in 2018, how the tax reforms will impact us as investors and how to win the inner game to investing and life.
With low unemployment and job growth continuing, 2018 is shaping up to be a solid year for investing in real estate. However, those buying retail right now are potentially at the height of the market. If buying an investment property, be sure to check out our free tool from our October post - Finding Off-Market Properties.
Additional forecasts for 2018:
- Peer-to-Peer Lending and crowdfunding, which has become more mainstream, will continue to see growth.
- A shortage of affordable homes inventory will continue to push prices upwards.
- Many of the new homes are in suburban areas due to cost of land. Combined with the low energy prices of today, these home buyers will be affected first if and when there is a correction in the market. This is why we are staying away from suburbs more than 45 minutes from metro areas.
Tax Reforms Impacts On Real Estate Investors:
Many are predicting the latest tax reforms will spur our economy to even higher heights. But are the changes to the tax system good for real estate investors?
Although the legislative branch of our government has kept many of the previous benefits in place, it will be more challenging to be a real estate investor, especially here in California. Some of the major reasons include:
- Home equity line of credit (“HELOC”) will no longer be eligible for the home mortgage interest deduction on 3+ properties.
- Potential drop of home prices up to 10% in high taxed states (i.e. California) due to cap on deducting property taxes up to $10,000.
- Interest deduction capped on home debt at $750,000.
- New tax deduction of 20% on pass through on some businesses.
- Depreciation of business automobile increased to $10,000 first year, $16,000 second year, $9,600 third year, and $5,760 fourth years and more.
- No more deduction of entertainment expenses, including dinners with clients.
- 50% deduction on meals for business travel or hosting conferences or seminars.
How To Create Inner Game To Be Successful:
Given these new challenges, real estate investors will need to find a way to overcome some of these headwinds as well as staying focused on growing their assets safely. To help us plan for 2018, we had Dragan Trajkovski (email@example.com) provide a short presentation on how to achieve peak performance.
Some highlights of Dragan's talk include:
- Everyone has 24 hours in a day. Why are some doing so much better than others?
- #1 Success Factor is our PATTERNS (habits, routines, standards we accept)
- To change our patterns, we need to update our belief systems, from limited beliefs to empowering beliefs.
- To overcome our limiting beliefs, we need to identify them, become aware of them, decide what to do about them and then repeatedly take action to overcome them.
- Recipe for success = 20% strategies and actions + 80% state of mind.
If you'd like more on inner game and self development, I highly recommend looking more into Tony Robbins. If you've seen the Netflix movie "I'm Not Your Guru," you know that Tony is a practical psychologist who figures out why we do what we do and how to change. I found this video on Youtube that sums up his 40+ years of coaching and mentorship.
On March 15-18th, Tony will be in San Jose, CA for his Unleashing The Power Within (UPW). For discounted and group tickets, reach out to Dragan.
Kevin + Kiri
Bureau of Labor and Statistics - Unemployment rate
National Association of Realtors - The Tax Cuts and Jobs Act - What it Means for Homeowners and Real Estate Professionals
Forbes.com - 2018's Housing Market Looks Good Unless You're A First-Time Millennial Buyer