Friday, October 18, 2019


If a natural disaster damages your property, you have undergone a casualty loss, which can be deductible as an itemized deduction on your federal income tax return.

As a rule of thumb, to be considered a casualty loss, it must be caused by an "Act of God". Simple wear and tear over time does not count. One type of casualty loss is damage to property caused by earthquakes and fires. You may take a deduction for casualty losses only to the extent that the loss is not covered by insurance.

You can deduct only the amount of the loss that exceeds 10% of your adjusted gross income (AGI) for the year. A one-time $100 deduction applies for the year.

Example: Your home is damaged by an earthquake. Your home has a $50,000 reduction in fair market value, but your adjusted cost basis was $20,000. Therefore, now the lower limit is $20,000. Your earthquake insurance covers $10,000 of the damage. The unpaid part of your claim is $10,000. Subtracting the $100, you end up with $9,900. If your AGI is $45,000, 10% is $4,500. You can deduct the portion of your loss above the $4,500, so you subtract that number from $9,900. Your total deduction is $5,400.

Where your disaster loss exceeds your current income, you may carry back the excess loss three years to get refunds of prior years' federal tax payments. If you still have some unused loss, you may carry it forward for up to 15 years.

What happens if you do not repair or replace the damage? You are entitled to the deduction when the loss occurs. You do not have to fix the damage to claim tax deductions.

Casualty losses are always deductible in the year the casualty occurred. However, if you have a casualty loss from a federally declared disaster, you have another option: You can treat the loss as having occurred in the prior year, and deduct it on your return or amended return for that tax year. This way, you can get a quick tax refund.

For your records, you will need to have the following:

   ►   Documents showing that you owned each asset you claimed was    damaged or destroyed—for example, a deed or receipt.

   ►   Contracts or purchase receipts showing the original cost of the item,        plus any improvements you made to it.

   ►   An appraiser can determine the value before and after the earthquake      and subtract the two; the difference is your disaster loss.

This road to recovery also applies to storm, fire and theft damages. It will lead to a less painful recovery by allowing the government to help pay for the costs of repair and/or replacement.

ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and  investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, a real estate research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com



Wednesday, October 16, 2019


         News      
The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
¨E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com


Real Estate Investment Outlook
October  2019
         
                                                                                           
          LOS ANGELES, CA. The reduction of the interest rate was justified because the growth of credit demand has slowed since the beginning of 2018, and is now expanding at a rate of around 4.5%. Compared with the average growth of credit demand during the pre-crisis recovery of approximately 8.5%, this weak demand is a favorable development for  real estate markets.

          Change in the monetary policy stance in 2019 has been dramatic. The  Feds have moved from a wait-and-see attitude in early 2019 back to a let-up mode. The Fed cut rates by 50 basis points in 2019. Against the backdrop of threats and a slowing due to trade tensions, this  seems to make sense.

          Our economic expansion is established and is now officially the longest on record. While business cycles do not last forever, we should recognize that the longer an expansion lasts, the more likely it is to stagger. Another sign suggesting that our economy is in the later stages of the business cycle is the extremely low unemployment rate. The yield curve shows signs of inverting from time to time, such inversions are not a guarantee that a recession is coming. They tend, however, to coincide with an increased risk of an economic downturn six months to two years into the future.
          We feel a recession is unlikely thanks to strong household income growth. Consumer spending is likely to remain solid, but trade uncertainty will be an ongoing drag on real estate investments. Tariffs themselves are harmful to grow. The larger impact occurs because of the rising uncertainty, which brings caution.

          Tariffs make investors unsure to what may be in the future. Many investors are waiting for greater clarity. We have already seen a significant decline in activity, and more weakness in sentiment indicators is likely in the coming months.

          Despite the slowdown in investment,  we feel that consumer spending growth is likely to remain solid, supported by continued improvement in the labor market. Job gains appear to be moderating, but this is being partly offset by a faster pace of wage growth. Overall, labor income has slowed modestly, but growth is still near its post-crisis trend. The unemployment rate has declined to multi-decade lows.

          ApartmentData.com reports that currently, the residential real estate marketplace is slowing down. This specifically means that single-family homes are becoming scarce. This is likely to drive up prices in areas that are experiencing limited supply and high demand. Core Logic recently published a survey indicating that home prices are expected to increase by more than five percent by May 2020. Scarcity of affordable homes leads directly to increased demand for rental and lease properties

ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and  investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, an educational and research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com



Saturday, October 5, 2019

         News      
The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
¨E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com


Just Released 3rd Quarter 2019
Leading Rental Income Markets


          LOS ANGELES, CA. The Center for Real Estate Studies (CRES) research report has just released their third quarter 2019 issue of “Market Cycles".  It gives a forward look at more than 150 income rental markets with “buy, sell or hold” recommendations. This publication gives the real estate investor a two-year head start on where and when to invest in rental income properties.

          The current number of markets in the “Sell Phase” is  forty-eight, according to Eugene E. Vollucci, Director of CRES.  The number of markets in the “Buy Phase” is eighteen. Mr. Vollucci states, “This quarter the three top buy recommendations are Milwaukee, WI, West Palm Beach, FL and Youngstown, PA. The three top sell recommendations are New York, NY, Eugene, OR and Raleigh, NC.” according to Mr. Vollucci.

          In this edition of our Market Cycles, we find the national vacancy rates in the second quarter 2019 were 6.8 percent for rental housing and 1.3 percent for homeowner housing. The rental vacancy rate of 6.8 percent was virtually unchanged from the rate in the second quarter 2018 and not statistically different from the rate in the first quarter 2019 . The homeowner vacancy rate of 1.3 percent was 0.2 percentage points lower than the rate in the second quarter 2018, but not statistically different from the rate in the first quarter 2019.

          Approximately 87.8 percent of the housing units in the United States in the second quarter 2019 were occupied and 12.2 percent were vacant. Owner-occupied housing units made up 56.3 percent of total housing units, while renter-occupied units made up 31.5 percent of the inventory in the second quarter 2019.

            Unemployment rates were lower in August in 5 states, higher in 3 states, and stable in 42 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Five states had jobless rate decreases from a year earlier, 2 states had increases, and 43 states and the District had little or no change. The national unemployment rate, 3.7 percent, was unchanged over the month and little changed from August 2018.
 
            Nonfarm payroll employment increased in 5 states in August 2019, decreased in 1 state, and was essentially unchanged in 44 states and the District of Columbia. Over the year, 26 states added non-farm payroll jobs and 24 states and the District were essentially unchanged. Nonfarm payroll employment increased in five states in August 2019. The largest job gains occurred in California (+34,500), Florida (+22,500), and Georgia (+20,800). The largest percentage gains occurred in Kansas (+0.6 percent), Georgia (+0.5 percent), and Arizona (+0.4 percent). Employment decreased in August in Oklahoma (-0.5 percent). 
 
            Twenty-six states had over-the-year increases in nonfarm payroll employment in August. The largest job gains occurred in California (+314,200), Texas (+303,500), and Florida (+221,200). The largest
percentage gains occurred in Nevada (+3.0 percent), Utah (+2.8 percent), and Washington (+2.6 percent).
 
 
            National vacancy rates in the second quarter 2019 were 6.8 percent for rental housing and 1.3 percent for homeowner housing. The rental vacancy rate of 6.8 percent was virtually unchanged from the rate in the second quarter 2018 and not statistically different from the rate in the first quarter 2019 (7.0 percent). The homeowner vacancy rate of 1.3 percent was 0.2 percentage points lower than the rate in the second quarter 2018, but not statistically different from the rate in the first quarter 2019. The homeownership rate of 64.1 percent was not statistically different from the rate in the second quarter 2018 nor from the rate in the first quarter 2019.
 
          The enduring strength of the apartment market was the main takeaway of the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions for July 2019, as the Market Tightness (60), Equity Financing (56), and Debt Financing (80) indexes all came in above the breakeven level (50). The Sales Volume Index (48) indicated a continued softness in property sales, albeit with considerable disagreement among respondents.
          "These latest figures illustrate that, in spite of construction levels hovering near recent highs, there remains significant pent-up demand for apartments," noted NMHC Chief Economist Mark Obrinsky. "Nearly a third (32 percent) of respondents reported stronger rents and occupancy levels, while just 11 percent indicated looser market conditions." 

          While the industry outlook is positive, political and regulatory threats like rent control threaten to upend regional markets. Among respondents to the NMHC Quarterly Survey, sixty-two percent operate in jurisdictions that have either recently imposed rent control or are seriously considering doing so. Of this group, a fifth (20 percent) has already cut back on investment or development in these markets, while an additional 60 percent is considering making changes in the future.
 
ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and  investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, a real estate research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com



Saturday, September 14, 2019


         News      
The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
¨E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com


Real Estate Investment Outlook
September 2019

         
          LOS ANGELES, CA. Economic growth in the second quarter was slightly better than expected. The economy expanded at a pace of 2.1%, while the growth rate for the first quarter was downgraded from 3.2% to 2.7%, showing that our economy has been losing steam since mid-2018.  The fact that the economy has held up better for a while is due to the fiscal stimulus and tax reduction at the beginning of 2018. This effect is now fading for real estate

          If employment remains stable with future job creation, household consumption will continue to support economic growth, while the deterioration in business will damage the upturn of real estate. Another force of growth incentive in 2019 and the following two years will be an increase in government spending, as Congress and the president have announced a plan to raise spending caps for fiscal years 2020 and 2021. Trade will continue to make a negative contribution to growth despite the protectionism of the administration. Against the backdrop of high employment and stable domestic demand, the probability that our economy will fall into a recession remains moderate for now.

          Wage pressure is rising only slowly. Thus, inflation rates are well below the target rate of 2%, at around 1.6%. Banks can therefore adjust their policies to reflect the blurring outlook for the economy. The banks have already reacted to the unexpectedly low inflation and the risks inherent in Trump’s trade policy. The Fed already stopped cutting interest rates. Therefore, they have taken a wait-and-see stance, given the trade tensions between the US and China.

          We now expect that the Fed will adjust its stance, given the trade tensions between the US and China, to alleviate the negative impact of declining trade growth on the economy. Given the rise of our corporate advantage by approximately 48%, according to the US Flow of Fund statistics, since the end of the Great Recession, lower interest rates may help to better mitigate lower revenues in case of slowing demand, and may help to stabilize employment growth, disposable income and the real estate industry.

          The US current account deficit has decreased relative to the highs of the 2002 – 2007 periods, but remains by far the largest in the world at 2.4%.  Although the current account deficit implies that we are funds importers, this can sometimes be misleading with respect to gross flows. US investors are one of the largest portfolio capital exporters in the world. For example, in 2012 – 2014 they were buying more foreign stocks and bonds per year than Eurozone and Japanese investors combined. In Q1 2019, overall G3 demand for foreign portfolio assets fell to the lowest levels since the Great Recession in 2008


          In spite all of this tension, however, it is not inconceivable that deals could be done and real estate investors could relax once more. However, the uncertainty persists for now and the longer these concerns affect real estate investments, the longer plans could be held back. Nevertheless, many parts of our economy are holding up well, in particular the service sector on the supply side. On the demand side, consumer spending should save the current economic expansion given the level of employment and steady wage growth.




ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and  investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for RE Studies, an educational and research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com



Thursday, September 12, 2019

*              News
The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
¨E-Mail CalStatecompanie@aol.com  ¨ Webpage http://www.calstatecompanies.com



Making Money With

 Residential Income Properties

           
            LOS ANGELES, CA. You have heard time and time again “If I only had purchased that rental property, I would be worth millions today”. Years ago, I discovered that real estate was the best investment to control risk and create wealth. The Real Estate Digest reports that seven out of ten millionaires made their money in real estate, and Forbes magazine states that there is a three times greater chance of becoming wealthy through real estate than with any other type of investment.

Using Real Estate Investing to Control Risk

            Real estate allows you to control your risk because you can actively participate in the decision-making process. Passive investments such as stocks don’t give you this opportunity. Movements in real estate values are less erratic than in the stock market. Most people don’t understand the economic forces influencing the market. Since real estate is less volatile, it’s easier to control and to understand.  Real estate is tangible. You can touch it, you’ve been exposed to it all your life, and you can identify with it. As a result of this familiarity, you are better able to understand it. 

Effectively Reducing Your Taxes

            Real estate ownership continues to be the most popular form of investment because of its potential for substantial tax savings. Since you are able to actively participate in the management of real estate, the Internal Revenue Service (IRS) currently allows qualifying individuals to write off up to $25,000 per year against salary and other income. No other investment gives you this capability. In addition, you can defer paying income taxes on profits indefinitely by using tax-deferred exchanges. 

Leveraging That Works

Real estate is the only major investment that gives you the ability to acquire ownership with very little money down. This degree of leveraging allows you to amplify profits by using other people’s money. The more assets you are able to control, the more opportunities you have to succeed.  The degree of leverage is calculated by dividing the total purchase price of the property by the amount of funds used to purchase it. Thus, if a down payment of $10,000 plus a $90,000 loan is used to purchase a property, a 10 to 1 leverage ratio has been achieved.  The greater the leverage, the more equity will increase with the change in value of the property.


Residential Income Properties

            In the past 20 years, residential income properties have delivered the highest average total investment returns of all real estate types. With a built-in hedge against inflation, it’s no wonder that residential real estate has out-performed all other types of real estate investments with relatively low risk. Based on supply and demand over the next 10 years, residential income will out pace all other types of real estate investment. Strong demographic and financial indicators along with changing lifestyles should continue to positively influence residential income investments. 


Residential Real Estate Investing: These Advantages

1.      They are less dependent on business cycles for occupancy than any        other type of real estate investments. It doesn’t matter if interest rates                and home prices are high or low, residential real estate investments are generally more affordable.

2.       They have shorter leases; thereby offering greater protection          from inflation than the long-term leases associated with                         commercial properties. Rents can be negotiated more frequently.

3.      The pool of tenants is much greater for them than other types of                  properties. This ensures a more consistent occupancy than industrial             or commercial properties, which usually have only a few tenants to           choose from.

4.      Cash Flow: Purchased on the “correct” terms income properties can generate cash flow to supplement other income.
.
5.      Inflation Hedge: As hedge inflation, residential income properties continue to be one of the best hedges against inflation.



Real Estate Investments as a Shock Absorber

            Real estate generally outperforms equities because of its higher yields, greater price stability, and downside protection even in a recession. When stock markets are down, real estate investments hold value and produce a positive return. Real estate is less prone to booms and busts. Residential income real estate is now stronger than it has been in many years. 



ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and real estate investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for Real Estate Studies, a real estate research organization. To learn more about the Center for Real Estate Studies, please visit our web site at http://www.calstatecompanies.com




Saturday, August 17, 2019

     News
 The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
 Web page calstatecompanies.com ¨  E-Mail  calstatecompanie@aol.com

Media Contact: The Center for RE Studies                       For: Immediate Release

 

Real Estate vs. the Inverted Yield Curve


        Los Angeles, CA. An inverted yield curve is an interest rate situation in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a forecaster of economic recession.
          A renewed center of attention on the yield curve inversion this week raised fears of an upcoming recession. On Wednesday, the S&P 500 declined 2.93%.The 10-year US Treasury yield fell below the 2-year yield for the first time in over a decade – a negative sign since yield curve inversions have occurred prior to each of the past recessions. In addition, the 30-year Treasury yield fell to a record low in a flight to safety, suggesting investors expect low rates to persist for an extended period. The price of gold, up 1% Wednesday and 18% for the year, is another sign of investor fear. Despite such indications of concern from the market, we only see a minor chance of a US recession in 2020.
          This may be a warning sign for recessions, but they are shocking as timing indicators for selling real estate investments. Unlike trade conflicts, an inverted yield curve by itself has limited economic impact. Instead, its signal about the health of the economy is what matters, and it is not as negative as some investors fear. Historically, there has been a long and variable lag between initial yield curve months for the last five recessions. Additionally, the length of time the yield curve is inverted, and by how much, matters. If Fed rate cuts successfully steepen the curve into positive territory, this brief curve inversion may be a premature recession signal. Neither does a yield curve inversion indicate it is time to sell real estate investments. Since 1975, after an inversion in the 2-year/10-year yield curve, real estate continued to rally.
          So hold on to your hat and try to enjoy the ride. Remember, one of the best lessons you can learn in life is to remain calm. Before you panic over the latest inverted yield curve story, keep in mind the Fed can lower interest rates any time they feel like it to  restore a rising yield curve, and that even telegraphing that they might do so in the future can impact the real estate markets. The Fed is very aware that a prolonged inverted yield curve won’t be interpreted as a healthy sign. They can drop rates almost instantly whenever the spirit moves them. However, predicting what they might do or when is a loser’s game. The only people who really know aren’t talking.

ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on  taxation and real estate investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for Real Estate Studies, a real estate research organization. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com




Thursday, August 8, 2019

*              News

Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership
E-Mail  CalStatecompanie@aol.com ¨ Webpage Calstatecompanies.com

Media Contact:  Center for RE Studies                         For: Immediate Release
                  
How Landlords Can Help Prevent
 Domestic Terrorism

          LOS ANGELES, CA. If you look back at where the majority of these domestic terrorists lived, you will find that many of them were renters.  Landlords, with the right training, could alert the authorities. How can they accomplish this?

Find the Right Property Management Company

          Landlords should use a property management company that only does property management. You will find companies that advertise that they do property management but also conduct real estate brokering activities These kinds of companies usually have a divided staff. Their efforts to be vigilant will be divided also. They might not keep an EYE OUT for suspicious activity or do proper background checks.

Procedure Manuals Are Critical

          Landlords searching for property management companies should ask to see their operations or procedure manual. Read it and ask questions. You will get a clear indication of how a property management company manages rental property from the manual. Be leery of the company that does not have one. In fact, do not consider using a company unless they have a formal plan. Probably one of the most important section in the manual is “how to screen tenants”. It should include procedures for indentifying and reporting suspicious individuals to the US government.
          The U.S. government  maintains a central database  the Terrorist Identities Datamart Environment (TIDE), that lists  known or suspected  domestic terrorists, and contains highly classified information provided by members of the Intelligence Community such as CIA, DIA, FBI, NSA, and many others.
          As of February 2017, there are 1.6 million names in TIDE.  In 2008, more than 27,000 names were removed from the list when it was determined they no longer met the criteria for inclusion. According to the FBI, terrorists include those persons who carry out terrorist activities. For this purpose, they may include U.S. persons (U.S. citizens and legal permanent residents). The Terrorist Identities Group (TIG), located in NCTC's Information Sharing & Knowledge Development Directorate (ISKD), is responsible for building and maintaining TIDE.[3]
          From the classified TIDE database, an unclassified, but sensitive, extract is provided to the FBI's Terrorist Screening Center, which compiles the Terrorist Screening Database (TSDB).
          This database, in turn, is used to compile various watch lists such as the TSA's No Fly List, State Department's Consular Lookout and Support System, Homeland Security's Interagency Border Inspection System, and FBI's NCIC (National Crime Information Center) for state and local law enforcement.

What to Expect from Your Property Manager

Your role as a landlord is to monitor the property management company in order to establish effective policies and to make management decisions.

          What support should your property management company provide?  Ideally, they should be able to provide all services in the areas of acquisition, operation, and disposition of your property.

          A first-rate property management company should be able to give statistical, as well as subjective, information concerning socioeconomic, political, and developmental conditions. A quality firm should be capable of preparing physical inspection reports, capital improvement requirements, and an effective operations budget.

          During the operations phase, a competent property management company will issue timely monthly operating reports that compare actual income and expenses to budgets and report any suspicious activity.  Homeland Security and Preparedness has released a new document entitled “Terrorism Awareness and Prevention”.   The paper is aimed at raising awareness on how one can help combat terrorism, including tips on how to spot signs of suspicious activities and behaviors.

            Your property manager should have this plaque in the office. “If You See Something, Say Something”.   Those who become domestic terrorists do so because they feel as though they are not being heard; or they feel insignificant, or unimportant. Trained property managers can help in identifying domestic terrorists.

ABOUT THE AUTHOR: Eugene E. Vollucci,  is considered to be one of the foremost authorities on real estate taxation and real estate investing and has authored books in these fields published by John Wiley & Sons of New York. He is the Director of the Center for Real Estate Studies, a real estate research organization. To learn more about the Center for Real Estate Studies, please visit our web site at http://www.calstatecompanies.com