Quote:
Originally Posted by GrabberGT
I'd also like more info here. I've been tossing this around for a while regarding the proposed tax hike on Capital gains and such and am curious why you would choose not to make that investment. Receiving a dividend check regardless of size as a result of your investment is still more money in your pocket. Just not as much now that you're paying 30% tax rather than 15%. Im not saying its right or wrong or that Im in favor of tax hikes but just trying to wrap my head around it.
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Property investments - and in particular INVESTMENT/COMMERCIAL properties are valued solely based on the return. The return is weighed against other returns offered elsewhere. It's just math. The only real way to invest in these types of properties is the combination of the cash flow and the increase in value when sold - so just like stocks - it's the TOTAL RETURN.
So two things come into play here. These are multi million dollar investments.... 7% return tied up for 10 years or so looks great if you think interest rates and returns would be "sub" that. But if we are going to tax these types of investments at ordinary income rates - then you have to take 40% off that 7%... and if we go to sell - and normal interest rates are lets say 5% 10 years from now - then the selling price of the property would be less than we paid... because the sales price will be based off the income the property can produce.
Now - if over the holding period we can raise rental rates - fine - then there's more cash flow etc - but then that would also mean that we're most likely seeing INFLATION... that inflation rate baked into the final sales price to another investor group would also affect the asking price.
Basically -- I'm making a 10 year "bet" on interest rates - property values etc. Since I'm not certain about much of that.... then I'll choose NOT to make that bet and stay more liquid rather than lock up a couple million into an investment that is NOT liquid at all and that I can't call the shots on because I'm not the managing partner - I'm only along for the ride.