House Flipper Get Ready to Pay an EXTRA 25% in Taxes on your Profit King Newsom Says you are Problem

Video Closed Captioning:

good morning good afternoon good evening

folks michael super onerous atlanta time

back with his good friend friend of the

channel mr jonathan twomley how you

doing sir i’m doing great michael how

are you i’m doing well one of the things

i love to do with you is kind of just we

we’re in the business of real estate we

play at different levels you’re big i’m

small

uh meaning residential versus commercial

and sometimes i just like to share the

nuttiness of california

you ready for this yep

so california our lovely socialist

governor and

assembly people or whatever they’re

called i just call him king newsom

because he’s acting like a king because

he’s got all these special powers

because we’re an emergency always in an

emergency so he’s king king newsom

uh he now has decided that uh house

flipping uh is causing uh the housing uh

crisis in california

so he now wants to go after house

flippers and again

uh hit them with more taxes so i thought

i would bring this article up it is

currently just a proposal but it shows

how nutty that king

king newsom is here we go

all right so

let me minimize this window a little bit

so go away

here we go

so again assembly bill would tax house

flippers so again it’s focused on them

who sell houses in less than three years

and get this they’re going to tax them

25

an additional

25

for any house that’s sold bought and

sold in under three years

this this

this is uh

this is wild

how

okay so my first question is how do they

propose to distinguish people who

flip a house

in three years from someone who

buys a house and then has to sell it for

some reason so i’m sure they they have

it this is just a proposal they’re just

trying to get everybody fired up because

housing is so unaffordable i’m sure it’s

going to be multiple sales multiple

transactions right

yeah i mean well look uh so i mean one

thing i do want to point out is you know

the

the um

maybe this doesn’t really apply to

house flippers

uh that much but when the

the trump uh tax

reform went through yep one of the

things that was changed was the carried

interest yep uh treatment and it went

from one year to three years and i said

at the time that this happened that this

was going to impact

a lot of real estate investors who used

to turn over a property in

you know in under three years because

they to get

the carried interest capital gains

treatment it couldn’t just be one year

anymore it had to be three nobody really

seemed to notice that so i mean this is

sort of

similar to that right that they’re going

to what’s the tax right now so this is

in addition to the president

surcharge yeah surcharge sure targeting

so you already have crazy california tax

at 13 that’s our state yeah state tax

13.3 i think so again

so you’re gonna that’s crazy i mean so

you’re gonna pay

13 tax on flipping plus your federal tax

plus 25 percent more

gosh i mean

yeah i just think this is this is dumb i

mean like the

listen i mean

for every flipper right there’s a home

buyer on the other end correct yes so

and what the flippers are doing

is they’re taking

housing stock that’s obsolete and

they’re

rehabbing it into something

that is

yeah so

i’ve done 56 flips

uh well i haven’t done any this year i

did 56 flips in two and a half years i

promise you

not a single homeowner alive would have

bought any of the 56 homes

that i bought they wouldn’t have

qualified for lending yeah nothing i

bought would qualify for lynn so if

you’re going to do this

one of two things are going to happen

that housing stock will i bought one

house for 40 grand that i had to spend a

hundred and ten thousand dollars every

month everything was changed and yes i

sold it for 250. i made a bunch of money

it took me a year to do or nine months

that house would just fall apart

it would never it would never be back on

the tax records

it would

i mean it’s just a horrible idea i think

this is just you know this this also

reminds me of

so listen i think this is ridiculous

like like you’re taking you’re you’re

destroying

the incentive for people to upgrade the

housing stock right and

it’s the same kind of impulse

behind like banning airbnbs right and

like and i see

there are places where

you know

you’ve got towns around america like you

know like upstate new york right we have

our house where

selling to an airbnb investor may be the

only exit that a homeowner has there

because the population is is declining

right and so you’re helping people out

yeah yeah so if you’re if you’re telling

people that you’re going to ban airbnbs

because

you know it’s just it’s it’s

counterproductive that may be

an only per you know person’s only shot

to sell their house the issue is not

airbnbs or flippers

right the issue is

that

you know governments on the one hand

feel like they have to respond to the

public outcry

around the cost of housing and on the

other hand they’re not willing to take

on the real problem because that would

be pl you know exactly often because

it’s the very same people who are

complaining about the cost of housing

who also would would complain about the

solution to the cost of housing which is

just letting people build more build

build more build more densely right just

build more housing that will solve or at

least ameliorate the housing crisis

right and

problem solved but nobody wants anything

built in their backyard right

everybody

fights it like you try to build

something near

anybody i don’t care democrat republican

independent

martial in my backyard yeah from

atlantis like it doesn’t matter where

they’re where they’re from they don’t

want it built near them because

they just don’t like it right and

uh

you know that’s why we have a housing

crisis exactly it’s a supply it’s a

supply problem yeah all of those people

talking about this it’s a supply problem

and again this is not how you fix it you

don’t tax the people that are upgrading

housing stock again i want to say the 56

properties i flipped and yes i made a

bunch of money none

zero of them would have been bought by a

first-time homebuyer but all of them

were at the end and not only that but if

you’re talking about if you’re talking

about the prices that you’re talking

about right like 140 and 250 out

like 250 000 house in california is

still like an affordable house that is

installed below the meeting my meeting

is 28 385 right it is it’s a starter

it’s a starter home it’s a starter home

right and you are actually you’re

actually

creating more homes right more

absolutely i’m taking something

unlivable unlivable because obsolescence

right destroy is part of the housing

supply every year and

you know

this is this is part of housing stock is

constantly being aged out and if people

are not

given the incentive to rehab it to fix

it up it’s it’s just as bad as not

constructing new property right

at least you’re maintaining the the

existing number of years i would say

it’s worse because you’re losing the

body you’re losing the first-time

homeowner yeah and this is why as i have

discovered something i didn’t realize

right is that even in some of these

rural markets around the country where

the population is declining they still

have a housing crisis exactly how crazy

is that crazy it’s crazy because because

the housing stock is lowering stock is

the housing stock is becoming obsolete

faster than the population is declining

and on top of it and you were talking

about the supply issue not just the

supply issue

what

you know

the federal so as

at the same time that state and local

governments are restricting the amount

of housing that’s available the federal

government is juicing this the demand

for it by lowering interest rates all

the time right just wait for first-time

homebuyer programs wait for the 40-year

mortgage

yeah it says supply problems demanded

supply is undefeated it is a supply

problem so if you you know and and if

you and i’ve said this before i mean

the

the places around the country that are

kind of like

everyone’s looking at is though this is

like some kind of nirvana of cheap

housing

basically what they have there is cheap

land right

like they have cheap land that hasn’t

been built on yeah and also zoning

that’s not as rigid but even listen even

in the zoning is the zoning follows

correct the building right so

this is the way that this plays out and

this is how it’s played out everywhere

in the early stages

this happened this happened in you know

new york it happened in california the

places that people point at as being

like the horrible places to invest

this happened

it’s going to happen in texas too just

maybe you and i won’t be alive when it

does but just telling you what’s coming

right

developer people started they wanted to

buy they lived in the cities

they you know people moved to the

suburbs right so whatever is you have

people moving to an area right they want

to live there developers buy

farmland right it’s unzoned you can

build whatever you want on it right on

farmland yeah they buy they buy farmland

you can

do it whatever you want they build it

right

then what happens well that gets filled

up they buy the next farm and they buy

the next farm until you get to the point

where you’re too far to commute and that

and it stops

what happens to all that stuff that gets

built well every single person who buys

that single family

you know cape cod you know house wants

to make sure that that neighborhood

stays exactly the way it is or the

builders even built in deed restrictions

to make sure that you can’t change it

right because that’s part of like their

marketing their selling point like it’ll

never it’ll always be like this forever

you’re buying

you’re stopping the clock

in this part of the world right and so

and then

then they’re stuck and you’re stuck with

that for generations right so you have a

place like like texas it has like vast

it’s a huge state there’s vast amounts

of you know open land there’s land

everywhere yeah but

california was once like that california

is also a huge state and then what

happened the population exploded right

it did right so

texas you’re seeing it already right the

the the cities

are zoning all those places that had no

zoning now that people live there what

do people want they want to make sure

that it will never change from what they

bought into right so

you were just going to have the same

problem there it’s just it’s just behind

by several decades right so correct so

you know so now’s the opportunity right

get in there while you can but the thing

is you know when you talk about

that concept of like people want to buy

property where there’s barriers to entry

right they want to buy infill like

there’s a whole a lot of people who buy

this what they do they want to buy

they want to buy a place like california

or new york precisely because

the housing supply is locked in and with

that dynamic of rising demand and

stagnant supply they know it’s going to

go up right so

that’s kind of like now you can get in

early on that in places like texas but

the same thing is going to happen it’s

just you’re going to wind up with this

unless

like as a country we

make a different decision which is that

we we value

you know

basically the the pre-world war ii

idea

of what

of their ship there being a free market

in in housing right like that with no

zoning

you know as the city gets more dense you

go vertical right and like manhattan

think about manhattan

man there will never be another

manhattan right because

it can’t happen right you can’t have

that dynamic of like starting out with

farms and then single-family houses and

then row houses and then small apartment

buildings and then giant apartment

buildings because

the zoning because it’ll be locked in

like one acre lots

for the rest of human history unless

unless we have the political will to

like address this issue right so which i

don’t think we will so yes i just want

to i want to kind of close this out with

what i would do again it’s just a

proposal uh knowing king newsome this is

going to happen

but let’s just take the 56 homes that i

bought upgraded turned into quality

below median

i i actually went because i knew i was

going to talk about this today uh i

would have gone back and i probably

still would have bought 45 or 46 of them

i just would have kept them

i just would have made them rentals

yeah right i would have put the debt

structure in place i had the capital do

the deals so again of the 56 i still buy

46 they just don’t go to first-time home

buyers yeah they say rentals or at least

for three years right at least for three

years well one once our rental for me

they’re gonna be a rental until it’s

unaffordable and then i’ll 1031 into

apartments so again this doesn’t fix the

problem yeah it is a supply problem not

a demand yeah it’s it is uh it is a

problem

you know

politicians have to do something right

there the pressure is on them to do

something people elect them and they

want to point at somebody else and not

themselves right and so and so they well

also frankly they don’t want to point

the finger back at the voters either

because that’s not that’s not like yeah

every time you turn up certainly not a

good idea yeah every time you turn

around into the voters and say actually

this is your

like you created this problem yeah right

uh that does that’s not a good way to

get reelected so they don’t do it right

so they you know they point the finger

at the at the bad guys the landlords or

whatever it is instead right so yeah so

again what i think happens with

something like this if it gets approved

and again and again i see every reason

king newsome would make this happen is

we would see

less first-time home buyers which is

exactly what they’re trying to do again

first-time homebuyers will not qualify

to buy what most flippers upgrade it

just won’t happen yeah and you you also

you know you want to be wary of

creating a dynamic like say for instance

rent control in new york city yeah right

has has created

a dynamic where

you can’t build anything that’s that has

affordable rents because you don’t want

to get trapped into the rent control

regime so you only build luxury right

exactly and and

also the costs are so high anyway that

you only build luxury right and that’s

that’s kind of a problem around the

country actually with high construction

costs is you you know

the the additional cost to build luxury

is not

you know like just the cost benefit of

like going luxury because you get so

much more profit right and and so

because of the the cost of it and

if you’re going to raise the cost of

flipping

then probably what will happen is you’ll

wind up with people upgrading to an even

higher standard right and the houses

will become more expensive because they

got to make up the taxes that they’re

losing yeah right and they can do that

with a higher price you know even though

they’re going to pay a little

percentage-wise more tax yeah you know

they’re going to be making 75 they’ll

make 75 cents on the dollar by going

more expensive right and offset that so

that their after tax dollar profit is

the same and they do that by upgrading

to a higher standard and making it less

affordable all that’s going to happen is

affordable housing is going to go down

you’re going to have some housing stock

just go to zero because you can’t save

it you’re gonna have other housing stock

upgraded and become rentals doesn’t fix

a problem and then to your point the

last one is some people upgrade and take

it right to the top

and you’re you are going to do nothing

except hurt first-time homebuyers with

this but again

king newsome likes to be king so i

suspect this will happen jonathan where

can people find you

so uh one place to go is the

multi-family investment community on

facebook where we can continue to talk

about these issues online uh you can

also if you would like to learn how to

actually buy apartment buildings the

right way uh you can go to

multifamilylaunchpad.org

join and you can see how to join my

program and the last thing uh is if you

would like to invest with me we do have

deals ongoing

and if you were an accredited investor

of course

and you can google my company two

bridges asset management

and then

you just you know google us that’s the

easiest way to find us and fill out the

investor form do yourself a favor folks

do all three of those things figure out

how to buy apartments it’s a great thing

uh look at his deals if you’re an

accredited investor and you have to be

in his facebook group but it’s something

i go to almost every day so thanks

jonathan cool thanks michael

Leave a comment

Your email address will not be published.