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Tuesday, December 4,2012

Ask Gabe

Q: What happens with Florida Real Estate now that election is over?

-Jean Guy Tetraut, Montreal, Canada

A: Now that the election is over and we have who we have as president for the next four years, I believe there will be HUGE swings in the Florida real estate market on the whole, which will create HUGE PROBLEMS for some, while creating HUGE OPPORTUNITIES for others. Each problem has hidden in it an opportunity so powerful that it literally dwarfs the problem. The greatest success stories were created by people who recognized a problem and turned it into an opportunity. Taxes are going up folks — make no mistake about it. We need to adjust and strategize, knowing big tax increases are coming!

First, we know without a doubt that the capital-gains rate is going to increase on January 1, 2013, which is less than 60 days from today. This is going to create a massive selloff in the stock market; there is activity already pointing to this. People with brains will pull their money out of the stock market and pay the current 15-percent capital-gains rate. Once they have the money, they will need to do something with it, and I believe, while some will put it back in the market at the new basis, others will buy gold, and the rest will buy real estate, buying big into the real estate rental-property market, both commercial and residential. I couldn’t put my finger on it until yesterday, the day after the election.

They are moving OUT of the stock market and INTO real estate because they see HUGE changes coming and are “adjusting”. Do you see where I’m going here? Big investment companies with deep pockets, which know nothing about real estate, are getting into the market. In my opinion, this will drive real estate prices up and by doing so, more will follow, and prices will continue to increase.

Now let’s take a little walk back in history to the Clinton Administration before Newt Gingrich became speaker of the house and created Contract with America capital-gains rates in the 38-percent range and people had a very hard time selling their real estate because the tax bite was massive. I remember people saying, “I can’t sell because after I pay the taxes, I won’t have any money left over” or “I can’t afford to sell because I’ll have to write a check for taxes, and I don’t have the money.”

If people can’t afford to sell because of the taxes, they won’t. This will be a huge deciding factor and will remove a lot of properties from the market. Fewer properties on the market equal less inventory, and less inventory means higher prices. Creative financing, exchanging, vertical breakups, wrap-around mortgages, long-term lease options with $1 payouts, equity shares, etc., will again become popular. There’s nothing new here; all you need to do is look back in history. This will create a HUGE OPPORTUNITY for those of us who know how to “adjust”.

What this means to you and me is, Florida real estate prices will go up. They have to. Historically, 22 percent of all retirees moved to Florida. Florida has always been a retirement state, but that is changing in a big way. As the population gets older, they naturally gravitate to warmer climates. Along with them, health-care providers come to take care of them. Communities spring up, and stores open to serve the people of the communities. The current administration has this green agenda going on and has pledged to put coal-operated utility companies essentially out of business. By doing this, utility prices are going to skyrocket.

People living in the colder states will not be able to afford their monthly utility costs and I predict will move to warmer climates like Florida, where we can use the sun to create electricity and keep utility costs down. What does this mean? You guessed it: a BULL MARKET for the Florida real estate market with increasing prices. In Florida, we currently have a governor who has slashed taxes, eliminated useless regulations and fired employees. He has implemented attractive incentives for businesses to locate to Florida. Florida is a “right to work” state. Did you know Florida is now the No. 2 state in the United States for job creation? It’s yet another reason Florida will continue to grow and grow.

We have billions of dollars from hedge funds moving into the Florida real estate market. We will see properties removed from the Florida market because people will not be able to afford to sell because of taxes.

Every adversity has a seed of equivalent or greater opportunity. The challenge is now to identify the seed of opportunity, water it and take good care of it. When it begins to sprout, fertilize it and make sure it gets the correct amount of sunshine. When it begins to bloom, put in a little more effort and make it flourish. Before you know it, fruit will begin to appear. While you harvest the low-hanging fruit, the rest of them will just begin to plant. The key is to recognize the seed before the others, so you get the best soil.

To get involved in the Florida real estate market before it’s too late, call Happy Herald Realty. Let us help you get into the game. We specialize in both small residential income and commercial properties. We provide an effortless way for real estate investors to buy in Florida then continue to provide excellent services for them.

Gabriel Palotas, HHR Manager, has more than 20 years of real estate experience with a proven record of productivity, quality and integrity. (Lic. FL Real Estate Broker • Nat. Auctioneers Ass. NAA • Int. Consortium of Real Estate • ICRE Transnational Referral Cert.)


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