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The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership

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

Three Impending Scenarios for Real Estate

We at the Calstatecompanies Center for Real Estate Studies have been investigating the pandemic’s effect on the real estate market using three different scenarios that may potentially emerge.

     Deploying different scenarios allowed us to investigate the impacts of the virus on real estate markets and the most consistent investment conclusions. We developed three scenarios to highlight the influence. Before looking at the specifics of each scenario, we started by laying out the common ground for all three scenarios followed by the description of a downside scenario, an upside scenario and our base scenario.

     Currently, the full impact of the disease on the numbers of infections, mortality and recovered people is unknown. The measures necessary to contain the spreading of the virus are also uncertain. Assumptions about the intensity and the effectiveness of these measures are reflected in the outcomes of these scenarios.

Downside scenario In the downside scenario, the containment policies are not enough to halt the spread of the coronavirus. Our governments would be forced to extend current policies. These policy measures may prove to be insufficient and the real estate market may not recover.

Consequences Given this scenario, we would likely recommend a “sell” in our quarterly newsletter Market Cycles. The stronger USD, elevated uncertainty and continued disruptions would likely cause us to close our real estate investments. According to Green Advisors, shares of property-owning trusts, are down 42% from their peak Feb. 21 through March 23. Mall values? Off 61%. Hotels? Down 52%. Apartments? Down 43%. Compare that damage with a 33% drop in the broad market's S& P 500 benchmark investments to zero.

       Upside Scenario The rate of new contaminations would start to decelerate sooner and faster than expected causing our government to gradually relax containment policies, allowing GDP growth to normalize. Real estate would rebound from depressed level restoring demand. The size of fiscal policy measures would prove to be enough to offset income and earnings losses sooner than expected, initiating a recovery during the second half of 2020.

Consequences Given this scenario, we would likely recommend a “buy” in our quarterly newsletter Market Cycles. It may give breathing space for long-term benefits from a quick recovery. Inflation and wage pressures would likely be close to zero.  With containment, the expectation of the final completion of the disease, real estate would be the preferred investment.

 Base Scenario This scenario mainly outlines our basic thinking about the impact of the outbreak of coronavirus on the real estate market. First and most importantly, we expect the current situation to be temporary. This scenario may only slow the rising rate of infections. Our politicians, however, would be more reluctant to take additional restrictive measures and would likely only abandon the most restrictive measures. Real estate markets would recover slowly. However, a potential second wave of infections would force our government to immediately reintroduce restrictions which may remain in place for longer. In such a case, demand may only rebound gradually. As the restriction are not sufficient and timely, the real estate market will continue to struggle.

Consequences Given this scenario, we would likely recommend a “hold” in our quarterly newsletter Market Cycles. We would act more cautiously as demand may not be strong enough to revitalize growth. Given the uncertainty about the future development of the disease, real estate markets are not expected to rise to pre-crisis levels. With the gradual and slow return of the real estate market economy, it may be advisable to diversify your real estate investments in “pockets of opportunity” defined by calstatecompanies Center for Real Estate Studies.

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 and President of calstatecompanies. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com

UTUBE: https://youtu.be/868wrjNPQFM

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The Cal State Companies:  Center for Real Estate Studies ¨ Cal State Properties ¨ Cal State Investment LTD Partnership

¨E-Mail CalStatecompanie@aol.com  ¨ Webpage calstatecompanies.com

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

Taxpayers Can’t Believe These Medical Tax Deductions

The single most important thing to remember to get a tax deduction for medical expenses is to “get the prescription”.  This document will survive a tax audit. This article will disclose some of the eye-opening medical deductions the IRS has allowed.

Medical deductions

You can only deduct medical expenses that exceed the limitations under the new tax rules, but the IRS and court decisions have expanded the definition of deductible medical costs. Plan ahead to take advantage of as many medical expenses as possible.

Medical deductions can be taken for the costs of diagnosis, treatment or prevention of disease or for affecting any structure or function of the body (except for unnecessary cosmetic surgery). Limitations: Treatment must be specific and not for general health improvement.

Example: The IRS successfully denied deductions for the cost of weight­ control and stop-smoking classes that were designed to improve general health, not to treat a specific ailment or disease. On the other hand, a person with a health problem specifically related to being overweight such as high blood pressure might be allowed the deductions.

If an employer tells an overweight employee to lose weight or leave, and the boss has previously enforced such a rule, the plump employee can deduct the cost of a weight-loss program, because money spent to help keep a taxpayer’s job is deductible. The IRS says it will allow a deduction if a physician prescribes a weight reduction program for the treatment of hypertension, obesity or hearing problems. The same could go for a person whose doctor certifies that an end to cigarette smok­ing is necessary for a specific medical reason (such as emphysema).

The same logic applies to home improvements. The cost of a swimming pool might be deductible if it is specifically necessary for a person who has polio, as would the cost of an elevator for a heart patient.

Caution:  Only the actual cost is deductible. The IRS makes taxpayers subtract from the cost of an improvement the amount that the features add to the value of the residence

Example: If a swimming pool costs $10,000 but adds $4,000 to the value of the property: only $6,000 would be tax-deductible. To determine the value have the property appraised before and after the improvement (The appraisal fee is deduct­ible as a miscellaneous itemized deduction).

IRS Deductions can be arbitrary:

 A professional singer was not allowed to deduct the cost of throat treatments as a business expense, but an IRS agent did allow a deduction for a dancer who found it necessary to her career to have silicone breast implants.

Medically unproven treatment is generally deductible, since the IRS has taken the position that it cannot make judgments in the medical field.  For example, Laetrile treat­ments are deductible if the taxpayer receives them. So is legal marijuana.

A medically prescribed diet is deductible only to the extent that its cost exceeds that of a regular diet. Since fish, vegetables, breads, and poultry are common elements of a normal diet, it is highly doubtful that the IRS would allow a deduction for them.

Taxpayers on special diets may be able to get some kind of deduction under certain circumstances. For example, when a person who was traveling was required to have a salt-free diet, the Tax Court did allow him to deduct charges imposed by restaurants for preparing such meals, as well as taxi fares that he had to pay to get to the restaurants that were willing to prepare them.

Unusual Medical Deductions

• Acupuncture

• Addiction therapy    

• Clarinet and lessons bought on a doctor's advice to correct tooth defects.

• Companion hired to escort blind children to school

• Contact lens insurance

• Dentures, hearing aids, orthopedic shoes.

• Detachable home installation such as air conditioners, heaters, humidifiers, air cleansers used for the benefit of sick person

• Dust-free room for people who have allergies.

• Elastic stockings ordered by a doctor to alleviate varicose veins

• Extra rent for a larger apartment required to make room for a nurse/attendant

• Fluoridation device installed at home on a dentist’s recommendation

• Long-distance telephone counseling for a person with a drug problem

• Maintenance costs of a home swimming pool for a person with emphysema

• Mattress and boards to alleviate an arthritic condition

• Sex counseling by a psychiatrist for a husband and wife

• Trained cat to alert its hearing-impaired owner to unusual sounds

• Wigs to alleviate mental stress caused by loss of hair

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 and President of calstatecompanies. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com

UTUBE: https://youtu.be/868wrjNPQFM

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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 Conclusions

and the Coronavirus

The outbreak of the coronavirus  and the spread of the disease to other parts of the world have caused rising fears of a global pandemic, with an immediate negative impact on real estate markets.       Moreover, vulnerability increased over the course of last year, making prospects for early 2020 all the more uncertain. The US, the world’s second-largest economy, appeared relatively resilient, but 2.1% real GDP growth in the fourth quarter of 2019 hardly qualifies as thriving.      The lack of Chinese demand is also likely to take a toll on the US economy, where China plays an important role as America’s third-largest and most rapidly growing export market. The sharp plunge in a preliminary tally of US purchasing managers’ sentiment for February hints at just such a possibility and underscores the time-honored adage that no country is an oasis in a uncertain global economy.      The coronavirus is undoubtedly causing a significant disruption to economic activity in the US. The magnitude of US growth is highly uncertain, as it depends on the extent that it spreads, the length of contagion, the measures taken by the US to curtail the risk of infection and the timeframe until an appropriate vaccine has been developed. This uncertainty with respect to the ultimate impact on economic activity will keep a real estate market volatility higher.       But as long as the outcome of the current situation is highly uncertain, we should continue to stick to buying properties in “pockets of opportunity” areas as reported in our companies’ quarterly newsletter Market Cycles. As historical evidence shows, the outbreaks of such diseases are temporary in nature.      Remember, 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.       In the end, epidemiologists will have the final say on the endgame for coronavirus and its economic impact. While that science is well beyond our expertise, we take the point that the current strain of coronavirus seems to be more contagious but less lethal than SARS was in early 2003. 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 and President of calstatecompanies. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com UTUBE: https://youtu.be/868wrjNPQFM

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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

Coronavirus and the Real Estate Markets

The coronavirus has been the toughest force behind the recent volatility in real estate markets, which has been running uninterrupted since October 2019. We should be aware that real estate markets could react ahead of the peak of the epidemic, as they tend to overreact at the beginning of a crisis and then stabilize and rebound, despite the continuation of negative news. Unless this doubt is able to disrupt our economy into a shock wave – which is not thinking now – excessive downward setbacks could provide an opportunity for investors to acquire real estate with attractive valuations and good fundamentals.

Brexit and the US/China trade impasse were the headline stories of 2019, but the probability of a worst-case scenario on both issues has meanwhile clearly diminished. We see sufficient goodwill in the most recent US/China rhetoric to suggest that some of the previously announced tariffs could be cancelled rather than just postponed. Such an outcome might provide much needed confidence. However, the US, economic growth is expected to slow down in the near term, as the effects of weak growth, uncertainty and slower hiring continue to weigh on real estate investment. Nevertheless, policy actions by the government and the central bank to ease and maintain supportive financial conditions, lower rates, sound economic activity in the US service sector and robust job creation should result in sustainable growth of disposable income, strong domestic demand and private consumption, and thus drive US GDP higher in 2020. The US housing market could become a further source for an acceleration of economic growth in the US. Moreover, credit score requirements for new mortgages have eased compared to the level in 2018.

The decline in mortgage rates in 2019 has substantially improved the buy-to-rent and payment-to-income affordability ratios. According to the US Census Bureau, the median price-to-rent ratio (median home value divided by the median annual rent equals the median price-to-rent ratio) has fallen to 17.91, a level which compares to the ratios seen in 2015/2016 and is only slightly higher than the median ratio of 16 during 2004 to 2006. In 2007/2008, during the period when the US real estate market heated up, this ratio moved to 24.5, and then declined in the aftermath of the financial crisis back to below 20 in 2011. A very similar picture emerges by looking at the payment-to-income affordability ratio, which also stands at levels comparable with those of 2015/2016.

Another phenomenon is now  clearer. The excess homes built prior to the crisis have finally been digested, and the US housing market is now entering a period of overall scarcity, in which potential housing demand exceeds housing starts and housing inventories. US household formation is now growing faster than housing starts, which indicates that investments to grow the housing stock are needed to fill this gap. `Average annual household formations have risen since the period between 2013 and 2016, when they stood at around 1 million per year, and in 2019 now stand at approximately 1.45 million, an acceleration of about 45%, according the US Census Bureau. For the period 2017 to 2019, housing starts dropped behind household formations when they increased by only 18%. Against the backdrop of low funding costs and robust income projections for the next couple of years, this might result in excess demand for new apartments, and given an income multiplier greater than one, residential investment spending could spur GDP growth in the US.

Benefits of the partial solution for the US/China trade tension and the definitive Brexit decision will, however, outweigh the increasing concerns with respect to the outbreak of the novel coronavirus in China. We believe these corrections in real estate prices are only temporary in nature. We therefore currently do not intend to change our projections or our recommendations to purchase real estate in “pockets of opportunity” as pointed out in our quarterly research report MARKET CYCLES.

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 and President of calstatecompanies. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com

UTUBE: https://youtu.be/868wrjNPQFM

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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 Markets In

This New Decade

We at the Calstatecompanies’ Center for Real Estate Studies (CRES) are encouraged by most of the developments at the start of the new decade for the prospect of the real estate markets.      The deal between the US and China to resolve their trade disputes leads us to believe that our economy will regain some strength in 2020, after suffering in 2019. Uncertainty about future trade arrangements was one of the major drivers for restrained real estate investment spending and the main reason why our economy lost so much steam in the past year.      In addition, the parliamentary elections in the UK in December 2019 and the overwhelming vote to leave the European Union (EU) at the end of January 2020 are also sent clear signals, which have reduced uncertainty for the real estate investment markets. The UK left the EU on 31 January.     The uncertainty about a potential escalation of the US-Iran conflict also started to abate as Iran decided to avoid direct military with a token retaliation after the assassination of General Soleimani by a US drone.       A development that may have an immediate negative impact on our economy is discovery of the coronavirus in China and the spread of this disease to other parts of the world.  Real estate equities have posted losses since the discovery of the disease mid-January, with values down by around 3%.  So far, at the time of writing, 14,557 people have been infected by the new disease, around 99% of who are in China and only 1% in the rest of the world, according to data from the World Health Organization (WHO).      In contrast to the SARS disease in 2002/2003, China has taken strong measures to curtail the outbreak of this coronavirus, starting by notifying WHO immediately, restricting transportation and tourism within China, and expanding its capacity to treat infected people.  In addition, many health research laboratories are working intensively to find an appropriate vaccine. Given these measures, there is a good chance of containing this new infectious disease. With respect to the impact of this outbreak on our economy, it depends on the length and interruptions of production.       In CRES’ view, the most important development for our recovery is the partial resolution of trade tensions between the US and China. This shows that both countries are actively engaged in resolving their current differences in bilateral trade. Consequently, we are confident that the US and China will continue to negotiate further trade arrangements to iron out the remaining trade disagreements. This should restore real estate investors’ confidence. These developments will be closely monitored, and the impact on real estate values will be continuously assessed. 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 and President of calstatecompanies. To learn more about the Center, please visit our web site at http://www.calstatecompanies.com UTUBE: https://youtu.be/868wrjNPQFM