Here’s a quick digest of what happened in Denver real estate last month:
+ The Denver housing market continues to keep buyers on their toes as 74% of listings go under contract within a week versus 47% nationally.
+ As investors account for one in seven home purchases in Denver, high prices are turning potential buyers into renters.
+ While Denver’s home appreciation rate remains on par with rest of country, the metro area’s price per square foot is nearly 30% more expensive ($242 in Denver compared to $187 nationally).
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Source: Ben Casselman and Conor Dougherty of the New York Times
Competition from investors has made the already tough housing market even more difficult for first time home buyers. Anyone who has ever seen HGTV knows the appeal to flip homes has been glamorized and popularized, and now big time Wall Street investors have entered the game. Last year, investors bought one out of five starter homes in the U.S. This is pushing prices up rapidly in areas of future growth. Coupled with their ability to pay with cash and sit on homes until they are double in price, first time home buyers have an added competitor.
To hear more about where investors are honing in on homes, read the full article below.
Source: Jeff Johnson and Andrew Monette of Pinnacle Real Estate Advisors
Do you invest in real estate? If so, we have great news for you! The largest tax system overhaul in 30 years will benefit most real estate investors. Let’s shed some light on a few of the less apparent changes in the new tax code:
There will be no new restrictions on 1031 exchanges.
Unfamiliar with IRC Section 1031? It allows real estate investors to postpone paying taxes on gains, so long as those profits are reinvested into bundles containing property similar to the one they profited on. Keeping this section in place favors real estate investments over other opportunities.
Several changes were made to the way equipment and other improvements are depreciated.
For residential owners, nonaffixed appliances and furniture can be fully expensed in the first year. The same is now true for property that falls under MACRS with a life of 20 years or less, computer software, water utility property, and other qualified improvements. The last depreciation change the article mentions is the increased cap for immediate expensing of tangible personal property from $500,000 to $1,000,000.
A pass-through tax deduction, or bonus depreciation has been created.
This allows for sole proprietors and investors using pass-through entities to enjoy a 20% deduction on taxable income. A pass-through entity is one that allows investors to set up an entity to relieve liability of themselves, while “passing” their revenue through that entity to themselves before paying taxes at their personal rate.
As a result of the new tax code, the authors of this article predict a shift in investment from equities to real property both in the Denver market and Across the United States.