The jury’s out…
A brief example…
Some mold basics
How to get rid of mold
The new step process for mold removal
How to clean mold – yourself
How to get rid of black mold
The stupidity of it all
It’s tax time again…
The onerous capital gains tax rate
Negative effects of the current tax rates
Some basic capital gains tax tips
Determining your profit
How holding your property helps…
Will the long term capital gains rate remain unchanged?
What’s up with the Fed rate hike…
This week’s news from the Federal Reserve about hiking the Fed interest rate a quarter of a point came as good news to the stock market. Many articles have come out recently, mostly lauding the Federal interest rate hike. But what about the effect on property investors? How will this first interest rate hike in nine years affect the average landlord? Well, consider it a mixed blessing, with a little bit good, and a little bit bad. On the whole, if you have properties that already have fixed rate mortgages, this decision should have no effect on your monthly cash flow. However, if you are using any adjustable rate mortgage, or home equity line for borrowing purposes, then you can expect to be taking a hit on the borrowed funds already taken out, as your monthly mortgage payment will indeed be going up.
A reflection of an improving economy
I had already reported here early this year how the improving economy would have an impact on the overall rental market. I had said that “with lower oil prices, and more disposable income made available, the economy can’t help but pick up speed in 2015. With this, consumer confidence will edge up, still slowly, but definitely upwards. As the unemployment rate continues its trend of ticking downwards, even with the greater stratification between the haves and have-nots in our country, job creation will also continue to increase slowly, but demonstratively. This will result in an improved housing market overall. Already, over the past year, many cities have shown house pricing gains in the 10 to 15 percent arena. Expect much of urban and suburban US communities to continue to see this type of increase in housing appreciation in 2015. However, rural areas will continue to lag behind in growth rate.”
How raising interest rates was reported
In an article from MSN.com (“Seven Ways The Federal Reserve Rate Hike Will Affect You in 2016, by Laura Woods, 12/16/15), the author noted that “after much speculation, the Federal Reserve announced Dec. 16, 2015, that it would raise interest rates for the first time since June 2006. The Fed rate hike means the target funds rate range that was 0 percent to 0.25 percent will increase to a range of 0.25 percent to 0.5 percent. Federal Reserve System Chair Janet Yellen said the decision to raise rates was due to strong economic recovery and the fact that the labor market has shown major improvements.”
The author went on to explain that some mortgage holders will feel the pinch, noting that “contrary to popular belief, not all mortgage rates are directly related to the decisions of the Federal Reserve Board. Adjustable rate mortgages and home equity lines of credit will be most impacted by the Fed rate hike, but most 30-year, fixed-rate mortgage rates are based on the 10-year Treasury bond, according to The New York Times. Prices are determined according to a number of factors, including long-term economic growth, inflation outlook and short-term interest rates. If you have an ARM that currently has annual readjustments or will soon, you might want to consider refinancing it to a fixed-rate mortgage now because doing so could save you a significant amount of money in the future. Conversely, if your adjustable-rate mortgage rate is locked in place for a few years, it’s probably best to wait and see what the future holds. HELOCs will likely rise with the Fed funds rate to an approximate average of 5.5 percent, reported The New York Times. Locking in a fixed rate tends to result in a rate increase, so take the size of your loan and the amount of time you plan to pay it off into consideration before making a move.”
In addition, expect a couple more, regular future increases of about a quarter point at a time to follow, through the next year or so. Obviously, this will make future investment property acquisitions more expensive to finance as we move forward. And your cash flow projections should certainly take this current increase into account.
In a separate article on the rate hike in Reuters (Fed Raises Interest Rates, Citing Ongoing Economic Recovery, by Howard Schneider and Jason Lange), the authors pointed out that “the Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signaling faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis. The U.S. central bank’s policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
The writers then went on to quote the Fed directly as to the reasons for the move, saying “the Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective,” the Fed said in its policy statement, which was adopted unanimously. The Fed made clear that the rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.”
The upbeat news
On the positive side, any interest rate hike has an automatic dampening effect on the housing market. Though a quarter point will probably not force droves of potential buyers to the sidelines just yet. However, if you already have rental residential units as part of your investment property empire, then this Fed interest rates increase will be a boon overall. As some buyers decide to stay put and continue to rent for a longer period instead of getting into the home buying phase of their lives, there will naturally be an upward pressure felt on rents.
This can only help increase your cash flow in the coming year or two. After all, more rental demand equates to higher rents. So the Feds raising the rates is not going to be all bad news. The hike in rates in relationship to property investing will still be relatively small, and after all, it is a sign of our economy slowly becoming more robust. I wouldn’t expect any major credit crunch in the process either, and banks should retain the same lending requirements as before.
Photos courtesy of federalreservesystem.blogspot.com, thelastembassy.blogspot.com, hardmoneylendersutah.com, californiahardmoneylenders.blogspot.com, gazelleindex.com, stiles-law.com, tenantscreeningblog.com, anchorloans.com
The fight for Doctor Evil supremacy
As ISIS and Boko Harum duke it out for taking the world heavyweight title of Doctor Evil (right now the statistics indicate the latter is clearly the world leader in terrorist acts, but the former gets much better press), I mean, it’s only a matter of time before ISIS-controlled oil fields get completely bombed out, and Boko Harum’s kidnapping and extortion endeavors seem so passe, and do not make for a long term business model to continue funding their efforts. It would seem to make sense they should learn some basic house flipping 101 lessons, and create a global real estate empire to help fund their mayhem.
Reading, writing…flipping houses
Clearly they should peruse a couple of my articles I’ve posted here about how to flip a house. Most notably, they should read https://investinginproperties.org/fixing/the-art-of-the-house-flip/ for tips on how to flip houses. They can also glean some more advanced advice on how to start flipping houses by also taking in my article https://investinginproperties.org/locating-property/beware-biggest-house-flipping-danger/. Terrorists could learn a thing or two from the Mafia about converting illegal activities to societally-approved business endeavors. Of course, in doing so, they would fall victim to their own success. As they get bigger, they become bigger targets. Targets to be done in – not by the U.S. or European governments and armies, but rather, by small, upstart terrorist organizations. It’s, alas, the way of the modern-day world. The little fish eat the big fish…one teeny bite at a time.
Geo-politics and property investing
When a non-sociopath watches the incomprehensibility of Paris under attack, as we all did last week, one is filled with feelings of empathy, anger and a solidarity…mostly for some form of retribution and punishment. But when it comes to complex geo-political matters, those knee-jerk reactions, while typical and normal for most, are exactly the response the terrorists are trying to elicit. I like to take a different stance. Interestingly, I’ve advocated this position in a prior article here when it comes to investment property acquisition strategy choices. Namely, sometimes it’s best to do nothing. Yes, do-nothingism may in fact be the best solution to terrorism in general. It signals a nihilistic world view – one that is counter to every effort of the minions who would bring about a perpetual state of fear to the civilized world.
Counter-terrorism through nihilism
If do-nothingism sounds too blasé for your tastes, consider a more overtly nihilistic version of the same theme. Barbarism for the twentieth century, to counter barbarism in the twentieth century. How fitting. To properly counter terrorist acts, the world should consider taking a Masada-like view of existence…or, rather death. Namely, why allow a few to control the many? Better to kill ourselves than live in constant fear of the next terrorist attack. I’d advocate the United Nations take control of the world’s nuclear warheads en masse. (Hey…ain’t gonna happen, but I like to dream…) Then every time there is a terrorist act somewhere in the world, the UN Secretary General should throw a dart onto a map of the world. Where it lands, so goes a nuclear warhead. It’s simple meta meta rational decision making on a global scale. Protect ourselves by destroying ourselves. That way, no country gets to live in a state without fear. In effect, everyone universally can live in total fear all the time of being destroyed. I think it will eventually bring about the end of all terrorism in so doing. What will terrorists have to export if everyone already lives in complete fear for their lives every second of every day? Naturally, building your real estate investment empire would be placed in a precarious position. But then again, it would put everyone on an equal footing of fear. Or, as the French would say, vive l’egalite!
Photos courtesy of torange.us, askmen.com, ilstv.com, pixabay.com
In a world…
What would a world with Donald Trump as a US President look like? And more importantly here, how would it materially affect the way property investors run their respective businesses? I’ve been contemplating these two theses as the Trump juggernaut rolls through this Summer of Presidential Inconsequentiality. And my conclusions shouldn’t really surprise most pundits – or experienced property pros either. Basically, I have concluded that, for all his bombastic behavior, he’s all sound and fury…signifying nothing (sorry, Shakespeare).
Trump as cheerleader for domestic economic growth
While somewhat debatable, I think most would agree that lower unemployment in general tends to yield a more robust housing market. Employed folks are more prone to take out mortgages, and look to move to their “next” home – affording families a step up in the process. This is part of the American Dream. Any chink in the chain, as it were, will tend to break the model down. As the Dow rolls like a roller coaster, businesses tend to act more conservatively, creating a ripple effect in the economy, as job security is place in jeopardy en masse in an extremely macroeconomic way. The result: a skittish economy, with the hallmark being a “frozen” worker mentality of hold onto what you got, hunker down, don’t make waves. And whatever you do, do not take on a new, larger mortgage. The net effect has a chilling effect on the national economic picture, as the depressions years from 2009 to 2012 truly showed.
What can Trump do?
Can Trump steer the economy to a positive, cheery disposition? Well, as a cheerleader, possibly. But don’t expect him to really understand the true workings of the Federal Reserve Bank. His biggest decision would certainly be his choice for Fed chairman. He claims to know who best to place in positions of power…I’m not convinced, based on his track record in business, if that is necessarily true. Ultimately, I really don’t feel he – or any other potential candidate for that matter – will singlehandedly be able to somehow change the course of the US economy. Business cycles tend to run independent of politics. Even with a Republican President and a Republican Congress, you still have that pesky Democratic majority in the Senate to contend with. More gridlock? I think that’s assured…
Trump as tax code reformer?
While I think Trump can create a more positive spin for our economy due to his bluster (as opposed to a candidate that appears catatonic by comparison…well, yes, Ben Carson does come to mind), I don’t think he can change the course of any true business cycle. And I certainly don’t feel he will be a champion of heavy changes in the tax code that will place the well-off in any serious mode of panic about higher tax rates for the rich (despite his bombast to the opposite). With these two components in mind, I truly believe he will have little effect on interest rates. They will most assuredly be going up very modestly within the next three to six months with the aid of the Fed. But by next year’s election, rates should be stabilized for another year. I do not believe Trump, or any candidate in either party, will be able to unilaterally create an environment of lessening of national regulations from the Frank-Dodd Act for banking institutions. Thus, look for current tight credit to remain rigid overall nationally for mortgage seekers…including property investors.
Taking his act on the road…
While Trump may be entertaining as all get-out, I (along with most political experts) think his buffoonery will ultimately do him in. The honeymoon with the American public can last only so long, after all. The “act” that is his actual boorish personality will get old. It won’t get old fast. It’ll just get old…in a slow, grindingly offensive way. I wouldn’t be surprised if a candidate not currently in the race now in either party suddenly pops up within the next few months (and I don’t mean Biden). Regardless, the institution of the American Presidency is only a figurehead nowadays…a giant cheerleader for the country. Save for appointments to the Supreme Court, there is simply not as much power imbued in the Presidency nowadays compared to past decades in US history. And certainly, the US economy is a train that the President tends to have little control over of late.
photos courtesy of barnorama.com, cnet.com, gazelleindex.com, theswash.com, dailykos.com
The vacation rental conundrum
In general, vacation rentals have been a secondary and riskier source of property investments for the experienced investor. They represent a greater degree of risk than year-round rental units simply because they tend to be seasonal in nature. So cash flows thrown off from any vacation rental property are not uniformly consistent throughout the year. Ultimately, this makes for a greater likelihood of negative cash flows on an annualized basis. In addition, vacation homes, and time shares as well, are difficult to predict performance over the long term, due to market fluctuations and the overall state of the economy – depending on where they are located. Certainly foreign investments are even riskier, having much greater market fluctuations abroad than in the United States. Values can drop unexpectedly based on demand factor fluctuations. After all, vacations are made up of leisure time dollars. Thus, trying to predict future rental income and cash flows based on prior historical data is a tricky proposition. Also, keep in mind that vacation homes and time shares can be difficult to sell quickly should you need to get out fast.
And then came Airbnb…
With the creation of Airbnb in 2009, however, small investors have been able to utilize their own homes as investment property, converting them into part-time hotel lodgings, available to the entire world. Now you don’t have to have a villa overlooking a beach front property to get in on the action. Your small studio apartment in an active metropolitan area can suffice as a money-maker. So what is Airbnb? It’s simply an online booking service that anyone in the world can partake in – either as a host, offering your home or unit for short-term lodging, just like a hotel does. Or, you can be a traveler who actually books a lodging in one of Airbnb’s host sites. And you would book a reservation much like you would for any hotel room. This privately held company has grown exponentially since it began, and now has a twenty billion dollar valuation, and may be going public soon as well.
Airbnb offers the ability to search for lodgings of its hosts’ units by location. For example, host lodgings are quite plentiful in large metro areas. Airbnb NYC is the obvious choice for those travelers looking to book vacation accommodations in New York City. And Airbnb has numerous other search locations as well, world-wide. And they earn their revenue by charging a fee for every transaction, be it for hosts or travelers (though travelers pay a higher fee).
This business model may seem like an excellent source of additional income for the small property investor. However, keep in mind that Airbnb has been getting a great deal of flak over the last couple of years. It seems to be in a constant battle with the hotel industry (naturally). And many recent bad reviews come from a number of horror stories associated with the service. In an online article by George Hobica ( “10 Incredible Airbnb Horror Stories,” FoxNews.com, May 8, 2014), Mr. Hobica lays out many tales of woe associated with the service. As an investor, you should be certainly wary of these reports. He notes that “in many cities, Airbnb is flat out illegal. You can actually be evicted during your stay – it’s happened – and your host could find themselves on the street, right along with you (this has also happened).” He goes on to say that “I also know of users who have booked – and paid for – apartments listed as completely private, only to find them anything but. I’ve heard of hosts informing guests halfway through their stay that they’re moving the guest across town, with no compensation for the hassle. As is to be expected when you book into a stranger’s home (or, when you rent your home out to strangers), things can get plain weird.”
Some cautionary tales
Mr. Hobica summarizes in his article ten different horrendous scenarios. Here are some of the most egregious ones he reports: “The meth addicts…Troy Dayton rented out his home in Oakland, Calif. to a young woman who turned out to be a meth addict and who trashed his home and stole his birth certificate. A request to Airbnb to have his birth certificate replaced and the damages covered was ignored; he was eventually begrudgingly given some site credit. The sudden eviction…Matt Lynley moved to New York ready to take over the world – but first, he’d come face to face with some of Airbnb’s greatest weaknesses. He reportedly wound up having his reservation cancelled when an owner wouldn’t verify a booking (that’s part of Airbnb’s system), and as a result had most of his cash tied up in the pending room charge. Lynley ended up finding another place, but was out the money until Airbnb refunded it. The fraudulent rental…A California man was enjoying his rental in Berlin when a knock came at the door from a man who professed to be the real owner of the unit, wondering what was going on in the apartment. “This guy with a thick Russian accent knocks on my door, demanding what I’m doing in his house. For a moment I thought I was in a bad 80s movie,” he said at the time. The pop-up brothel…Two Stockholm women handed over the keys to their apartment only to find eventually that their flat was being used as a brothel. How’d they find out? The police alerted them that their home had just been raided – two working girls had been caught in the act.”
The problems keep multiplying
Much like driver services like Uber and Lyft Driver, Airbnb has been experiencing many legal problems despite its enormous growth. For this specific reason, property investors should be most concerned with getting involved with the service. For example, in New York City, short term lodgings are highly regulated. A permanent resident of a lodging facility must be present when subletting an apartment for fewer than 30 days. Obviously, this law is designed to protect the extensive hotel business in the city. But Airbnb hosts have run afoul of this particular law on many occasions. In a recent newspaper article by Lisa Fickenscher ( “Airbnb Feeling Effects of Big Apple’s Illegal Rent Crackdown,” The New York Post, June 5, 2015), the reporter notes that “New York’s crackdown on illegal Airbnb rentals is starting to hit home for the controversial Web site, a new analysis shows. Airbnb’s growth had been surging in the Big Apple — but that was before this year when the city put more muscle into purging bad actor landlords that violate short-term rental laws. There were 15,485 illegal listings in New York — out of more than 27,000 — as of May 1, down 3 percent from January, according to insideairbnb.com, an independent Web site that tracks the San Francisco-based company’s listings. The decline is significant because Airbnb’s growth has seemed unstoppable since it launched here in 2009.” Ms. Fickenscher goes on to quote a local politician: “Increased attention to and growing outrage over Airbnb has compelled the city to increase its enforcement against illegal hotel activity,” said Assemblywoman Linda Rosenthal, D-Manhattan. “It’s clear that this has had a chilling effect on the industry.” The crackdown could slow Airbnb’s growth in New York — and potentially other big cities that see the online room-rental company as a threat to affordable housing and the hotel industry.”
I’ve written in several articles here that vacation rentals are inherently riskier investments than year-round rentals. With the advent of Airbnb, and its tremendous success and popularity, property investors should take note of the pitfalls of this type of investment when considering all their investment opportunities in real estate. Certainly, know your local laws regarding short term rentals. And also be wary of one other story that has circulated in the news recently, providing Airbnb with some rather nasty bad publicity. The incident involved a host who rented out their unit to a traveler for a month, only to find that the traveler would not leave. Due to local law, once the traveler occupied the unit for at least 30 days, they were considered a “tenant.” And as such, they were afforded all protections due tenants in tenant law. And the host had to go through a very long, expensive eviction procedure to have the “traveler” removed. Again, property investors need to be very wary of all local ordinances regarding short term stays, as well as landlord/tenant law before using a service such as Airbnb.
photos courtesy of trexglobal.com, nypost.com, huffingtonpost.com, wired.com, nymag.com, fastcompany.com
New Year’s real estate investing trends and predictions
As we approach the beginning of the new year, as in prior years here, I like to offer several predictions on property investing for the coming year. To begin with, look for credit markets to ease up as interest rates stabilize over the course of 2015. As the FED lessens its purchasing (monetary easing) of US backed securities throughout the coming year, a practice it had already started earlier this year, look for less of an overall credit crunch on rental property loans. In addition, with a much smaller foreclosure rate, better mortgage rules for potential lenders in place, and a banking system that is generally loathe to greater speculation in housing investments (read: mortgage backed securities), look for lenders to take the signs of the improving US economy and run with it. Ultimately, this should provide more investment opportunities and options for property investors who plan on investing in real estate in the coming year.
An improving economy’s effects on rental property
With lower oil prices, and more disposable income made available, the economy can’t help but pick up speed in 2015. With this, consumer confidence will edge up, still slowly, but definitely upwards. As the unemployment rate continues its trend of ticking downwards, even with the greater stratification between the haves and have-nots in our country, job creation will also continue to increase slowly, but demonstratively. This will result in an improved housing market overall. Already, over the past year, many cities have shown house pricing gains in the 10 to 15 percent arena. Expect much of urban and suburban US communities to continue to see this type of increase in housing appreciation in 2015. However, rural areas will continue to lag behind in growth rate.
Increased consumer confidence
As housing heats up in urban and suburban America in 2015, due to more job creation, increased consumer confidence and most importantly, the positive psychological effects of expecting to hold onto their jobs, American workers will raise their confidence level enough to come off the sidelines to start purchasing first time and move-up housing. The net effect for property investors? A mixed bag: First, the positive – greater overall capital appreciation in current market value of investor owned properties. The down-side? Look for a stalling of unit rental price increases, so prevalent over the last several years, as greater numbers of potential homeowners sat on the sidelines, and became renters. The once-super hot rental markets, while not cooling off completely, will certainly slow down, as demand lessens for rental housing over the next year.
Millennials real estate investing and partnerships
Continuing a trend that began this year, 2015 should see more and more Millenials creating partnerships amongst themselves to purchase rental property. This will be especially prevalent with rental property like a multifamily that one or more can live in at the same time, as the owners then rent out and collect investment income on open units. Standard two to four family homes represent their best buying options at the lowest cost. Financing remains in the residential domain, making mortgage loans much less expensive than commercial mortgages (for five family and over properties). In addition, they can take advantage of FHA and Fannie Mae loans at lower interest costs than standard lender financing, as well as with higher loan-to-value ratios being allowed. This can be accomplished since they will be living in at least one of the units, becoming landlord-owners.
What rental property investors should consider investing in for 2015
With the increasing capital appreciation returning to urban and suburban metro areas nationwide, interest rates remaining stable for the year, and credit becoming more readily available, property investors should consider upgrading existing properties to take full advantage of their continued appreciation. Since it will be more difficult to raise rents in the coming year to account for increased cash flows on your properties, try to make any much-needed or put-off repairs in the coming year. Look to improve more than simple maintenance items, that is. Consider renovations that will add value to your investment property, and take advantage of stable interest rates in which to finance these renovations. This should be accomplished either through refinancing existing loans, or taking out new mortgages on properties previously bought for all-cash.
photos courtesy of gazelleindex.com, tenantchecker.com, lets4u.net, homeguides.sfgate.com, trexglobal.com
Selling off only when necessary
When considering if you should ever sell off one or more of your investment properties, it’s intelligent to already have an exit strategy planned out. Even when you’re buying rental property, your exit strategy should be kept in mind. Cash flow is of utmost importance here. With current US bank mortgage rates taking a dip this week, remember that holding a lot of debt is an excellent strategy – as long as you maintain your positive cash flow. Only when a property is throwing off a negative cash flow should you consider releasing it.
If you utilize the rental property calculator on our site, or any other, you should be able to input your raw property information numbers data to see if your potential property will throw off a proper positive cash flow. Take into account that current property loans with lower mortgage interest rates should be input into the calculator. In this way, you’ll be able to get a truer picture of the anticipated cash flow on a property.
When it’s time to unload your rental property
If you’ve been living with a poorly performing investment property for some time (at least two years), then it certainly may make sense to unload it. However, consider the option of converting any of your existing investment property mortgages into interest-only loans, if possible. If not possible, consider, using your home as a source of funding. If you take out a home equity line of credit, and replace an existing principal and interest payment loan on a poorly performing investment property in your stable, you may find the monthly savings from the interest-only line to be the perfect solution to a negative cash flow scenario., Even it it helps enough to create a break-even scenario, it would be best to hold the property long term for capital appreciation.
Only sell the dogs of war
The only rental properties you want to unload are the ones that have been underperforming for a very long time (what I call the dogs of war), with no sign of turnaround…even after you’re able to pare down financing costs to interest-only on them. At that point, it would be wise to sell the investment property off. Remember, it’s always best to have your exit strategy in place when you first acquire a property. And try to forestall a quick unloading of any rental property by attempting to convert an existing principal and interest mortgage to an interest-only equity line. If that’s not possible, replace the mortgage with proceeds from an interest only home equity line. The savings may be enough to allow you to retain the investment property, while taking advantage of capital appreciation…not to mention the tax breaks associated with holding the rental property.
photos courtesy of davegi.com, worldpropertychannel.com, wilmothpropertyservicves.com
The mid-term elections recap: little change for real estate investing
The mid-term elections have come and gone on Tuesday this week, only just two days ago. And because both houses will be controlled by Republicans starting in January, it doesn’t necessarily mean that the party of big business will take existing banking laws and revamp them en masse, along with their protections to the American people. Current banking loan standards will most assuredly stay in place, and the concomitant tight credit atmosphere that comprises today’s investment property mortgage market shall unfortunately remain unfettered.
On the downside for property investors
The investment property mortgage marketplace will remain as is, with very tight credit available. There’s simply too much downside for Republicans if an easing of current banking reforms (created since the banking crisis of 2008) were to be repealed, and a new banking crisis were to develop anew. Of course, President Obama would never allow any stripping of current banking mortgage protections, would the Republican majority try to proffer any revisions to current law. Obama would simply use his veto power to stop any changes in their tracks.
Minimum wage laws – some good news for property investors
Even with the Republican’s sweeping into a Senate majority, thereby controlling both houses of Congress in two months, don’t expect any major change in effects for property investment opportunities. Republicans will be quite averse to legislating anything that could hurt big business (and, to a major extent, small business as well). Before the election, there was at least a hint of a Democratic push for a major hike in the federal minimum wage. That will be tossed to the junk heap now. In addition, the wave of Republicans winning major state governorships on Tuesday, will mean that, even on a state by state level, minimum wage hikes will most probably remain at or near inflationary levels only. Even with the mass of protests by fast food workers this past year, expect the prospect of a $15 per hour minimum wage to be a pipe dream for at least several more years.
Keeping costs down
How does this affect the average property investor investing in real estate? Simple. If you don’t already do the menial maintenance work around each of your rental properties yourself, then you probably hire others to clear the walkways of snow, rake the leaves, empty the gutters, etc. As you keep adding on investment properties to your empire, these seemingly small costs become quite large when taken together. Whether you hired the labor yourself – or had your property manager do so – you still end up paying for this maintenance on each rental property you own. The prospect of a hike in the minimum wage would have definitely put a dent in your rental property cash flow. So with the Republicans being victorious on a national scale, expect to keep your maintenance costs at or near current levels. And that’s some good news that property investors can cheer about as a result of Tuesday’s elections.
photos courtesy of nola.com, socalfools.org, myweathertech.com, trashitman.com