Thread: Making Business Decisions in an Election Year

My biggest concern is that there could be an increase in Capital Gains tax depending on who wins the election. This is the single biggest factor from the government that influences my house flipping business, and in my opinion I'm already paying way too much in tax when I do a short term deal. Long term capital gains taxes of 15% do seem more fair to me, and I was hopeful that a candidate might cut short term cap gains taxes to 15% also, but it doesn't look like I'm going to get my wish.

If capital gains taxes creep up to say 40%, there will be no incentive to really stay in the house flipping business, because even with deep discounts and great deals -- You'll end up giving almost 1/2 of your profits to the US Government. If this type of thing occurs, I suspect most people in this busniess will change their business model to be a more "buy, rehab, and hold" type company for rental income/cashflow. Maybe then at some point in the future if we get a more business friendly president, we can liquidate our holdings at that time for less of a tax burden.

- Hakrjak

- Hakrjak

Originally Posted by hakrjak

If this type of thing occurs, I suspect most people in this busniess will change their business model to be a more "buy, rehab, and hold" type company for rental income/cashflow.

isn't this what it's like now b/c of the decline in home values?

my friend who has 5 FC props is renting them all out as SFH's until things turn around to keep his head above water.

in my situation, thankfully I live in the property I own and I can sell in 2yrs and avoid the captial gains taxes, just hoping by that time I'll have a few more or one of the net based service biz ideas I've been brainstorming catches on and I can do REI as a supplement

Originally Posted by vr4playa

isn't this what it's like now b/c of the decline in home values?

my friend who has 5 FC props is renting them all out as SFH's until things turn around to keep his head above water.

in my situation, thankfully I live in the property I own and I can sell in 2yrs and avoid the captial gains taxes, just hoping by that time I'll have a few more or one of the net based service biz ideas I've been brainstorming catches on and I can do REI as a supplement

Home prices are not down across the board -- it's a huge misconception because of the impact some large parts of the contry are having on national home price trends. If you live in California, New York, Florida, or Arizona -- yes, you are in trouble. Throw some other major cities in there too, like Las Vegas...

If you live in most places in the center of the country, aka the heartland -- you do not suffer from these problems, and home values have actually be rising slowly over the past few years. Texas is fine, Oklahoma is fine, Colorado is fine...

- Hakrjak

p.s. -- I forgot to mention earlier that my decision to dump 3 long term hold rental properties after rehabbing them in the last 12 months was largely due to my prediction that long term capital gains will be raised after the coming presidential election.

- Hakrjak

Hard topic to discuss without getting political. But at the core of politics are policies which (can) lead to legislation.

I have several prospective business ideas simmering on the back burner. I'm not going to pull the trigger on any of them until after the elections probably. If I buy rental properties, it will be those with a good enough positive cashflow to justify holding them if I have to in order to avoid capital gains.

Things I will take into consideration, for the sake of the types of business and investments that interest me, are areas of legislation involving:

Capital gains taxes for reasons already mentioned by someone else
Corporate tax rates. i.e. will I be able to compete with other companies whose tax burden is less than 1/3 of mine?
Mandatory compensation for employees in the form of increased minimum wage or health care of some other benefits. Again, will I be able to compete with other companies from countries who impose no such restrictions?
Internet taxation
"Fairness" Doctrine or any restrictions of 1st Amendment rights, which could eventually seek to restrict or over-regulate the content of internet communications, blogs, etc
Enviromental restrictions that are based on (how do I say this tactfully?) something less than universally accepted consensus of science. While I don't currently have any endeavors that would be effected by this one, many people DO. Will my neighbors be forced to use a particular type of cleaning agent for their janitorial business?

Hmm. I've never sat down long enough to write them down. But now that I have the beginnings of a list, it appears that the over-arching themes are a fear of 1) taxes that would reduce profitability and impede a company's ability to compete in a global economy and 2) Any other general restrictions that are imposed in such a way that they throw out the proverbial baby with the bathwater.

I could write a dissertation on any or all of the points above. But I think the purpose of this thread is to pose general topics to consider when starting a business in an election year. So we'll leave it there. Note: This is intended to be a list of MY concerns that I am considering. If anyone wants to argue, please take it offline.

Originally Posted by Jill

Mandatory compensation for employees in the form of increased minimum wage or health care of some other benefits. Again, will I be able to compete with other companies from countries who impose no such restrictions?

That's a biggy that I forgot. I would definitely not be looking at buying a franchise or starting any other business that relies on cheap labor right now, until you see who wins the election. If the next president raises the minimum wage to something "liveable" like $10-12/hr -- You can kiss your Subway or Pizza parlour goodbye. I mean, unless people are willing to pay $12 for a footlong, which I'm guessing they are not? ROFL... Makes ya wonder if more people will just go "underground" and pay people under the table, etc if times get tough like we're predicting... I know a guy who owns a pizza place in town right now, and I know for a fact 50% of his employees are "off the books"...

- Hakrjak

Right. For example, I can pay 12 guys $10/hr or 10 guys $12/hr. But my comp budget won't allow me to pay 12 guys $12/hr. 2 of them will have to pound pavement.