Posts Tagged real estate
Hedge funds, private equity expect tax hike
Posted by Tetyana Matychak in Budget on May 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as “carried interest.” The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
“Many people are resigned because it is round four,” said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. “If it was really their choice they wouldn’t give up on it at all.”
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
For Landlords, the Numbers Are Starting to Look Better
Posted by Tetyana Matychak in Investing on March 5th, 2010
Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.
If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.
In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.
But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That’s up from roughly a 5% yield several years ago when prices were higher, he says. Read the rest of this entry »
The worst is yet to come
Posted by Tetyana Matychak in Budget, Favourites on February 17th, 2010
Over the next few years, a wave of commercial real estate loan failures could threaten America’s already-weakened financial system. So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country’s fragile economy.
The panel, chaired by Harvard law professor Elizabeth Warren, says it remains “deeply concerned” that commercial loan losses could jeopardize the stability of many banks, particularly the nation’s mid-size and smaller banks. Read the 183-page report for yourself here.
Worries about CRE loans — those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments — have been simmering for months, as we noted in an October article. See “How Banks Will Fare in a Commercial Real Estate Crash.”
The problems now plaguing commercial real estate have no single cause, and the panel notes that the loans most likely to fail were made at the height of the real estate bubble when commercial real estate values had been driven above sustainable levels and loans.
“[M]any were made carelessly in a rush for profit,” the panel said. Read the rest of this entry »
China vows to keep “hot money” out of property market
Posted by Tetyana Matychak in Investing on February 12th, 2010
China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
“Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,” the cabinet said.
It said the central bank and banking regulator should step up oversight and “window guidance” of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan ($1.5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild. Read the rest of this entry »
China takes new steps to curb bank lending
Posted by Tetyana Matychak in Banks on January 15th, 2010
China took new steps Tuesday to control bank lending, ordering institutions to set aside more reserves in a move to avert a surge in credit that Beijing worries might fuel inflation or asset price bubbles.
China’s nascent rebound from the global crisis was fueled by a flood of lending by state-owned banks last year. Bankers cut lending under government orders toward the end of 2009 but regulators worry credit might rebound this year.
The move indicates Beijing is confident growth can be sustained and has shifted focus to preventing financial excesses and economic overheating. The government is forecasting growth of 8.3 percent for 2009, up from a low of 6.1 percent for the first quarter of the year.
The central bank raised the amount of reserves that banks must hold by 0.5 percent to 15 percent of their deposits. Also Tuesday, the bank raised interest rates paid on one-year bills for the first time since August to absorb money from the market and cool credit growth.
“This series of moves by the central bank provides a clear sign that policymakers are following through on their pledge to guide credit in order to pre-empt rising inflation and avoid asset price bubbles,”said Jing Ulrich, chairwoman of China equities for J.P. Morgan, in a report. Read the rest of this entry »
Surprise! The Fed says don’t blame the Fed
Posted by Tetyana Matychak in Budget on January 4th, 2010
The Pope is considered to be infallible. Apparently, those who hold the title of Federal Reserve chairman want to be viewed that way as well.
Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed’s monetary policies were not the cause of the housing bubble.
In a speech Sunday, Bernanke said that it was the availability of exotic loans that allowed people who really couldn’t afford a home to get a mortgage that was the culprit, not the fact that rates were at then-historic lows.
By absolving the Maestro of any blame for the credit binge that led to the Great Recession, Bernanke also appears to be sending a strong message to Fed critics and the financial markets as well.
Rates, which have been stuck near zero since December 2008, are likely to stay there for some time — and Bernanke may be suggesting that this won’t lead to a repeat of last decade’s sins. Read the rest of this entry »
Buying at the Bottom
Posted by Tetyana Matychak in Investing on June 18th, 2009
As the real-estate market heads for the ground, certain investors find themselves uttering some surprising words: “I’ll take two.”
Davis Nguyen thought long and hard about investing in foreclosed homes, but plunging interest rates convinced him that it was time to dive into the housing market.
So the San Jose, California, man bought not one, but two investment properties.
“I decided to jump in because the sales price is reasonable to make a long-term investment,” Nguyen said. “I’m looking for something that is easy to rent because I need to make a little bit of profit.”
Since last fall, Nguyen began looking for three-bedroom, two-bath homes ranging in price from $290,000 to $350,000 in three zip codes: 95121, 95148, and 95112. Read the rest of this entry »
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