The Seattle Times doesn't get it ... pretty sure that some on this board doesn't get this either.
It's really simple:
"Loophole" was created in the Federal Government through a program that to the public looks great because of job creation but instead is really just a way to get rich international people that want a green card to have financial ties into creating long-term investments.
The State is doing a great job in making sure that they are ensuring enough loopholes in place to make an attractive marketplace for this investment to take place while staying within the rules. No reason to hate on the State for making sure investments take place here.
And if you know anything about rich people, you would know that the tie-in through the green card is what they are looking for first and the profits are secondary. These fuckers are so rich that the investment that they are putting up for these projects is pocket change for them. Plus, when you realize that most of these projects are going to turn into stable returns for them that are creating cash flow instead of being a drain on it, then everything is good. And the reality is that as long as Seattle remains a business hub, which from a technology standpoint there's no reason to believe that that's going to change anytime in the near future, then corporate real estate is as good of an investment as you can find for these investors.
With the leveraged depreciation schedule and conversion to long term capital gains upon recapture, they can't lose money, even with a foreclosure. It's 1986 all over again.
Some of the stuff you say is just stupid.
What the fuck is your degree in? Humanities? Sociology? Art History?
"They can't lose money, even with a foreclosure." Wow
Even funnier is you upvote tequila's tldr response, then say the exact opposite of what he just said.
You mean the part where we both talk about corporate real estate being safe investments in Seattle?
I used to run the Institutional Real Estate Leasing department for Solomon Brothers in NYC; but I don't know anything about taxation leasing models according to Hondo.
BTW, on a cash basis, they are not safe. But if the individual is in a high enough tax bracket, after they deduct the leveraged depreciation and the investment interest against ordinary income, then converts their tax basis to long term capital gain, worst case scenario (foreclosure), they do a little better than break even. If the property just maintains its value and the mortgage gets amortized, it's all long term capital gain profit.
If the owner dies, the investor (heir) takes a Section 754 election and receives a step up in tax basis to fair market value upon death and even avoids the long term capital gain tax.
But you should listen to Hondo.
You realize that you're speaking over the head for 81% of this board?
I don't disagree with anything that you are saying. What I was speaking towards was my experience working with projects that have a real estate component (which is far less in both magnitude and scope as yours).
Generally speaking, most situations that I've been involved with aren't started unless they already have a commitment in place that provides a stable contractual form of cash flow for a fairly significant period of time - which obviously counteracts any interest bearing activity that they have tied up into the mortgage. The rates at which they lease are often going to require a return (I typically saw in the 10-20% range).
What I was speaking more directly towards though was the expectation that those that would be building in Seattle would not only be in a position where they are locking in the cash flow prior to building (i.e. already secured a corporate partner that has entered into a relatively long-term lease agreement), but given the outlook for business in the area (number of companies + growth currently outpacing current availability for space available), and given the fact that Seattle real estate is some of the most desired in the country, the overall risk to such a project would be relatively low in the grand scheme of things for these types of projects.
However, should a project turn into a negative investment, not only does the green card cover some of the short-term pain, but the losses off all of this basically just offset other gains so the impact tax wise isn't as bad - which also equals cash gains.
IF this situation was viewed in any way, shape, or form as a highly risky business for those involved, you wouldn't be seeing so many eagerly trying to get involved in the process. For many, the green card alone is worth it. But when you combine green card with making money in the process, you get abundance.
The investor limited partners equity goes partly to cover initial rent-up negative cash flow. Usually these deals are structured for multiple write-off, say 300% of your investment or even more. They get there through leveraging both the depreciation and the mortgage interest.
Between, the multiple write off, deferral, and conversion, it's pretty hard to lose money. The problem is what happens to Seattle when The Banks go under (again) on all the foreclosures.
Politicians claiming that it was "Fat Cats" on Wall Street is so much bullshit. Banking is the MOST regulated business in the world. EVERY mortgage in America is structured by the government and the regulators. Then, when it turns out that the mortgage program (and the green-card program) weren't financially sound, they point the finger anywhere they can stick it. THEY INVENTED IT!
When they did this in Canada, they made the foreigners put the money into a deposit in a bank. HERE, they let them put it into speculative real estate development. This makes about as much sense as when the government invented the "liar-loan" junk mortgage industry. But that was supposed to work, because REAL ESTATE NEVER GOES DOWN. Everybody knows that.
BTW, Dan Rostenkowski, Democrat, was a massive alcoholic Congressman who was Chairman of the Ways and Means Committee, which means the drunken asshole was the guy who re-wrote the tax code every single year during the 80's, (coincidentally when Seattle First National Bank went bankrupt, which according to Hondo must have been great for Seattle).
The world is swimming in printed dollars with nowhere to go hence, 68 cranes in Seattle building offices and luxury housing for people who don't live in this country yet.
The world is swimming in printed dollars with nowhere to go hence, 68 cranes in Seattle building offices and luxury housing for people who don't live in this country yet.
It will be better for everyone at 69.
Like always.
We need a rim-shot button. (OK the door is wide open.)
The world is swimming in printed dollars with nowhere to go hence, 68 cranes in Seattle building offices and luxury housing for people who don't live in this country yet.
It will be better for everyone at 69.
Like always.
We need a rim-shotjob button. (OK the door is wide open.)
Comments
Between, the multiple write off, deferral, and conversion, it's pretty hard to lose money. The problem is what happens to Seattle when The Banks go under (again) on all the foreclosures.
Politicians claiming that it was "Fat Cats" on Wall Street is so much bullshit. Banking is the MOST regulated business in the world. EVERY mortgage in America is structured by the government and the regulators. Then, when it turns out that the mortgage program (and the green-card program) weren't financially sound, they point the finger anywhere they can stick it. THEY INVENTED IT!
When they did this in Canada, they made the foreigners put the money into a deposit in a bank. HERE, they let them put it into speculative real estate development. This makes about as much sense as when the government invented the "liar-loan" junk mortgage industry. But that was supposed to work, because REAL ESTATE NEVER GOES DOWN. Everybody knows that.
BTW, Dan Rostenkowski, Democrat, was a massive alcoholic Congressman who was Chairman of the Ways and Means Committee, which means the drunken asshole was the guy who re-wrote the tax code every single year during the 80's, (coincidentally when Seattle First National Bank went bankrupt, which according to Hondo must have been great for Seattle).
Like always.
Derek?