POST-ELECTION BLOG
Whether the results of the presidential election have left you elated or disappointed, it’s a good reminder that as a real estate investor, you have far more important things to focus on. Don’t let the election noise distract you from seizing the opportunities that are happening now.
For example, many parts of the country are still experiencing high demand for single- and multi-family residences, including the I-35 corridor between San Antonio and Austin, where home sales rose by 20.2% and the median price rose by 9.4% in the third quarter of this year.
Does that mean you should ignore politics completely? Not at all. While your life may not change drastically depending on who’s in the White House, local and state officials actually have tremendous power to affect the business climate you operate in.
Consider recent legislation passed in California and New York. California Gov. Gavin Newsom signed SB 1079 into law in September, adding complicated foreclosure procedures that make it more difficult for investors to purchase foreclosed homes.
The law is designed to help owner-occupants keep their homes, but in effect, it strikes a blow to real estate investors, says T. Robert Finlay of Wright, Finlay & Zak, a law firm specializing in business, real estate and mortgage banking for the Western United States.
The new law gives the owner occupant the right to outbid the successor bidder at the foreclosure sale. It also prevents investors from purchasing bundles of homes during foreclosure auctions.
In addition to making it more difficult to acquire foreclosed properties, the new law adds limits on post-foreclosure evictions, requiring relocation assistance and just-cause eviction in the case of a post-foreclosure eviction. It also adds hefty fines of up to $5,000 per day for failing to maintain the properties after a foreclosure.
“While the goal of SB 1079 is to steer foreclosed properties into the hands of owner occupants, the mechanism to accomplish the goal is vague and ambiguous,” Finlay said. “The legislation is ripe for abuse and litigation.”
While some larger real estate investment corporations may be able to work around the legislation (or simply invest elsewhere), local individual real estate investors will be impacted the most.
On the other side of the country, New York State legislators keep trying to impose a 15-20% tax on residential flips in New York City. If passed, this policy will drive up the cost of housing and rent for working people throughout the city.
An article on the website for the Hudson Gateway Association of Realtors explains the problem with this type of tax. The legislation mistakenly targets home flipping as driving up the cost of living in the city. In reality, the process of flipping drives improvements to buildings in the city and creates more housing options in a limited and expensive market. The already exorbitant rents and home prices there would only go up under this onerous tax, which will ultimately be passed onto the consumer and add 15-20% to the cost of New York City living spaces.
The bill was tabled this year due to COVID-19, but since it’s been introduced three times previously, it’s expected to come back again.
If you live or invest in an area where housing prices are on the rise, don’t be too surprised if you see similar legislation in your area. When an industry is booming, it becomes a target for taxation.
There are three thing you can do to help maintain a strong environment for real estate investing. First, stay informed. Be aware of what your local legislators are doing and let them know that they can earn your support by enacting business-friendly policies that help your community grow instead of punitive policies that stifle investing and the real estate market. Support pro-business candidates at the next local and state election.
Second, become part of a bigger industry group to amplify your voice. Leaders at Corridor Funding are active in both the National Private Lending Association (NPLA) and the American Association of Private Lenders (AAPL). Both groups aim to protect and grow the private lending industry, helping to educate their members, the public, and state and federal policymakers about the important role private lending plays in real estate markets. Both organizations and their members work to defeat restrictive legislation impacting real estate investors throughout the country.
Third, remember that the real engines behind the U.S. economy are its people. American ingenuity and hard-work will continue to propel the country forward. Private lending and private investment will continue to provide a foundation for growth and opportunity. Regardless of who is in the White House, Senate or Congress, the best examples of true leadership come not from politicians, but from enterprising people putting their own skin in the game and making things happen.
There’s a tremendous opportunity on the horizon for real estate investors. When you’re ready to get your next project started, let the experts at Corridor Funding help make your plans a reality.
Written by Jasen Miller, Co-Chair Legislative Committee, National Private Lending Association