{"id":176254,"date":"2024-08-09T11:10:55","date_gmt":"2024-08-09T17:10:55","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=176254"},"modified":"2024-08-09T11:23:31","modified_gmt":"2024-08-09T17:23:31","slug":"how-the-financial-policies-of-trump-and-harris-could-impact-real-estate-investors","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-the-financial-policies-of-trump-and-harris-could-impact-real-estate-investors","title":{"rendered":"How the Financial Policies of Trump and Harris Could Impact Real Estate Investors"},"content":{"rendered":"\n

The<\/span> most direct impact <\/span>that presidents have on our day-to-day lives is their economic policies. And as<\/span> real estate investors, those policies can make or break our investments\u2014or even our careers.<\/span><\/p>\n\n\n\n

So, how might the two candidates\u2019 economic and housing agendas impact us as investors?<\/span><\/p>\n\n\n\n

Since I know you\u2019re wondering about my own \u201cagenda\u201d and what \u201cspin\u201d I\u2019m putting on this article, I\u2019ll tell you right now that I dislike both candidates and will be unhappy no matter who wins in November. Consider me an equal-opportunity hater. <\/span><\/p>\n\n\n\n

I don\u2019t have a horse in this race<\/span>\u2014but<\/span> I <\/span>do<\/span> want to prepare my portfolio for the headwinds <\/span>that<\/span> I see each candidate bringing if they win.<\/span> The thing is, those headwinds are <\/span>completely<\/span> different for each candidate.  <\/span><\/p>\n\n\n\n

Except for one, that is. But we\u2019re getting ahead of ourselves. <\/span><\/p>\n\n\n\n

Here are the real estate-related risks I see from each of the two major candidates and how you might protect your portfolio from each. <\/span><\/p>\n\n\n\n

Financial Risks from Trump\u2019s Policies<\/span><\/h2>\n\n\n\n

Trump\u2019s economic policies might seem disparate, but they all have one thing in common: They\u2019re inflationary. <\/span><\/p>\n\n\n\n

You don\u2019t have to be an economist to understand that when you impose tariffs on imports, those goods (and everything manufactured from those components) cost more for the American consumer. And <\/span>Trump loves his tariffs<\/span><\/a>. He\u2019s proposed a 60% blanket tariff on all imports from China and a 10% standing tariff on imports from everywhere else. <\/span><\/p>\n\n\n\n

Then there are his <\/span>proposed tax cuts<\/span><\/a>, which, by their very nature, are designed to stimulate the economy<\/span>. And<\/span> often, the economy does need <\/span>stimulating<\/span>.<\/span> <\/span><\/p>\n\n\n\n

But do you know what happens when you <\/span>overstimulate <\/span><\/em>the economy? <\/span>Inflation<\/span>, <\/span>which<\/span> is something we\u2019re now all too familiar with, given the over-stimulus of the economy back in 2020-2021.<\/span> And it\u2019s something Jerome Powell and the Federal Reserve have spent the last two years battling. <\/span><\/p>\n\n\n\n

Of course, <\/span>Donald Trump doesn\u2019t like Jerome Powell<\/span><\/a>. <\/span>He doesn\u2019t like the <\/span>very<\/span> idea of an independent Federal Reserve and has argued that it\u2019s within his power as president to fire Fed chairs and install his <\/span>own<\/span> crony\u2014one <\/span>who<\/span> he can then <\/span>order to lower interest rates<\/span><\/a>.<\/span> <\/span><\/p>\n\n\n\n

Don\u2019t get me wrong:<\/span> There\u2019s a time and a place for tariffs, tax cuts, and low interest rates. But they all come with inflation risk, and I <\/span>personally<\/span> have little trust in Trump\u2019s discretion for not overheating the economy. <\/span><\/p>\n\n\n\n

Reducing inflation risk under a second Trump presidency<\/span><\/h3>\n\n\n\n

Facing higher inflation risk,<\/span> investors can find shelter in real estate equity, precious metals, and stocks.<\/span> Watch out for fixed-interest debt investments like notes and bonds once interest rates drop again. <\/span><\/p>\n\n\n\n

For real estate investments,<\/span> it also doesn\u2019t hurt that Trump would almost certainly lobby Congress to extend <\/span>bonus depreciation<\/span><\/a>.<\/span> That featured prominently in his signature legislation from the last time around, the Tax Cuts and Jobs Act of 2017. <\/span><\/p>\n\n\n\n

People tend to pay the going rate for real estate, regardless of the <\/span>value of currency<\/span>. <\/span>As for stocks, <\/span>it turns out that<\/span> they <\/span>actually<\/span> hedge against inflation<\/span><\/a> pretty well.<\/span> <\/span><\/p>\n\n\n\n

There\u2019s<\/span> another asset class poised to do well under a second Trump presidency<\/span>: cryptocurrency<\/span>.<\/span> I don\u2019t want to go down the crypto rabbit hole\u2014I consider it speculation, not investing\u2014but Trump\u2019s sudden <\/span>coziness with the crypto industry<\/span><\/a> has proven one of the surprises of this campaign season. <\/span><\/p>\n\n\n\n

Financial Risks from Harris\u2019 Policies<\/span><\/h2>\n\n\n\n

For real estate investors, the financial risks from Kamala Harris\u2019 policies come from <\/span>two directions: higher taxes and higher<\/span> regulation.<\/span> <\/span><\/p>\n\n\n\n

On the regulatory side, Harris has a long history of protectionist policies for renters. <\/span>She has <\/span>called housing a human right<\/span><\/a> and as a U.S. senator, proposed the <\/span>Rent Relief Act<\/span><\/a> of 2018 <\/span>that<\/span> would subsidize renters who spend more than 30% of their income on housing. (As a renter myself, that sounds like an invitation to <\/span>go<\/span> spend more on rent and enjoy some free subsidies, but I digress.)<\/span><\/p>\n\n\n\n

More recently, the Biden-Harris White House proposed a <\/span>nationwide 5% rent stabilization law<\/span><\/a>. The administration also funded an extra $5.5 billion initiative at <\/span>HUD to prioritize affordable housing regulations<\/span><\/a>.<\/span><\/p>\n\n\n\n

In short, expect a Harris presidency to come in hot with housing regulation on <\/span>multifamily<\/span><\/a> investors. <\/span><\/p>\n\n\n\n

Harris has also consistently called for higher taxes on businesses and successful individuals. In her 2020 presidential campaign, she called for <\/span>raising the corporate tax rate<\/span><\/a> from 21% to 35%. <\/span><\/p>\n\n\n\n

She has also called for raising the top individual income tax rate to 39.6%. Additionally, she proposed a <\/span>new blanket 4% tax<\/span><\/a> on all families earning more than $100,000. Oh, <\/span>and<\/span> raising the Medicare tax from <\/span>3.8% to 5%<\/span><\/a> for higher-earning taxpayers. <\/span><\/p>\n\n\n\n

Relevant to real estate investors, the Biden-Harris administration called for more than doubling the <\/span>capital gains tax rate, up to 44.6%<\/span><\/a>. Yikes. <\/span><\/p>\n\n\n\n

The administration has also called for <\/span>eliminating the 1031 exchange<\/span><\/a>. <\/span><\/p>\n\n\n\n

Reducing regulation risk under a Harris presidency<\/span><\/h3>\n\n\n\n

Let\u2019s start easy by avoiding all the housing regulations <\/span>that Vice<\/span> President Harris wants to add: <\/span>Just<\/span> don\u2019t invest in residential rental real estate.<\/span><\/strong> <\/span><\/p>\n\n\n\n

In particular, watch out for multifamily. <\/span>Multifamily<\/span> real estate <\/span>syndications<\/span><\/a> will find themselves in her crosshairs <\/span>if she wins the election<\/span>.<\/span> Smaller landlords with a few units would likely avoid the worst of the regulation blitz. <\/span><\/p>\n\n\n\n

Know what types of real estate won\u2019t fall under her regulatory crusade? Everything else. <\/span>Industrial, retail, office, raw land, agricultural, short-term rentals<\/span>\u2014they should all be safe<\/span>.<\/span><\/p>\n\n\n\n

In SparkRental\u2019s Co-Investing Club, we\u2019ve intentionally started <\/span>de-emphasizing multifamily<\/span><\/a>. We\u2019ve been forming more private partnerships for <\/span>house <\/span>flips<\/span><\/a>, spec home construction, and land flips. We\u2019ve also <\/span>started<\/span> looking to diversify as much as possible, although we still look at plenty of multifamily deals when we meet <\/span>each month<\/span> to vet investments together. <\/span><\/p>\n\n\n\n

Reducing tax risk under a Harris presidency<\/span><\/h3>\n\n\n\n

Avoiding higher tax liability is a tougher nut to crack. You can invest through a <\/span>self-directed IRA<\/span><\/a> or solo 401(k) to <\/span>either<\/span> avoid taxes now or let your investments compound tax-free with a Roth account. <\/span><\/p>\n\n\n\n

That said, retirement accounts may not be safe from a Harris administration. The Biden-Harris White House has proposed <\/span>reducing retirement account protections<\/span><\/a> for higher earners. <\/span><\/p>\n\n\n\n

You can\u2019t count on 100% bonus depreciation <\/span>being extended<\/span>, either. Even so, I expect the \u201c<\/span>lazy 1031 exchange<\/span><\/a>\u201d to <\/span>keep working<\/span> well for passive real estate investors like myself. These get even easier when you invest $5,000 at a time, like we do in our Co-Investing Club, instead of the typical $50,000 to $100,000 if you invest in real estate by yourself. <\/span><\/p>\n\n\n\n

In short, the tax landscape could shift dramatically. Stay on top of tax changes, and set aside some time to sit down with your tax advisor to adjust your tax plan. <\/span><\/p>\n\n\n\n

When in doubt, you can always <\/span>move overseas like I did<\/span><\/a>, to take advantage of the <\/span>foreign earned<\/span> income exclusion!<\/span><\/p>\n\n\n\n

Financial Risk from Both Candidates: Record Spending<\/span><\/h2>\n\n\n\n

Now that I\u2019ve infuriated every <\/span>single<\/span> reader by critiquing their candidate\u2019s policies let\u2019s take it a step further: Whether Trump or Harris wins, I expect record federal spending. <\/span><\/p>\n\n\n\n

Kamala Harris has always supported higher spending and <\/span>higher taxes<\/span>, as I\u2019ve touched on<\/span>.<\/span> And Trump? <\/span>The<\/span> federal government added <\/span>$7.8 trillion of debt<\/span><\/a> under his first administration<\/span>, and his executive actions and signed legislation are expected to cost $8.4 trillion over the next 10 years.<\/span> <\/span><\/p>\n\n\n\n

So, no matter who wins in November, I expect the federal budget and deficit to keep ballooning. <\/span><\/p>\n\n\n\n

To me,<\/span> that suggests higher taxes and inflation in the long term: higher taxes to pay a higher debt bill and higher inflation as the government prints more money to reduce the <\/span>real<\/span> value of existing debt by inflating it away.<\/span> <\/span><\/p>\n\n\n\n

With<\/span> or without a major <\/span>geopolitical crisis in the next decade<\/span><\/a>, I believe that higher taxes and inflation are coming<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Final Thoughts<\/span><\/h2>\n\n\n\n

On one hand, <\/span>I believe that<\/span> people get too emotionally charged in elections.<\/span> Do you know<\/span> what\u2019s more important than who sits in the Oval Office? Your <\/span>personal<\/span> relationships\u2014which many Americans are wrecking with their political intolerance of anyone who doesn\u2019t stand in the same echo chamber as them.<\/span><\/p>\n\n\n\n

On the other, presidents do create policies that affect our lives. Rather than getting angry because I don\u2019t like whichever candidate ends up winning, I <\/span>simply<\/span> plan to adjust my financial plan.<\/span> <\/span><\/p>\n\n\n\n

If Trump wins,<\/span> I plan to protect against an overheated economy and inflation.<\/span> If Harris wins, I\u2019ll <\/span>keep a close eye on<\/span> tax changes and prioritize nonresidential real estate investments over multifamily.<\/span> <\/span><\/p>\n\n\n\n

As the election <\/span>gets closer<\/span>, our Co-Investing Club plans to hold a live workshop on this <\/span>very<\/span> topic, diving deep into the financial implications of each candidate <\/span>winning<\/span>.<\/span> Policies will change in 2025, and it\u2019ll help to get a head start in November. <\/span><\/p>\n\n\n\n

America won\u2019t burn down, no matter which candidate wins. Hug your family and friends even if you disagree with their politics. Better yet, try to actually understand where they\u2019re coming from.<\/span><\/p>\n\n\n\n

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\n \"\"\n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

With the election just three months away, it’s important to take a look at how each candidate’s policies would impact the economy and, ultimately, investors.<\/p>\n","protected":false},"author":158586,"featured_media":174191,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4433],"tags":[],"class_list":["post-176254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/176254","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/158586"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=176254"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/176254\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/174191"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=176254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=176254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=176254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}