After a tumultuous election season and an agonizing number of days, we finally have a verdict: Joe Biden will be the next U.S. president, bringing Donald Trump's four-year reign to an end. No matter how you feel about the results of the election, if you're a real estate investor, you should know that a Biden win could result in a number of near-term and long-term changes. Here are a few to keep on your radar.
1. A mask mandate could prevent business closures
The coronavirus pandemic is clearly out of control. With many states reporting massive surges in cases, the so-called second wave has not only arrived but shows no signs of slowing down. Biden has framed his campaign around putting a stop to the outbreak. To that end, he may seek to institute a national mask mandate.
Whether or not you agree with it, forcing Americans to wear masks in public could actually work wonders for the economy. If masks prove effective at curbing the spread of the virus, the nation can avoid widespread closures that hurt businesses small and large. And that's good news for real estate investors, because if things don't turn around, more businesses may be forced to close, resulting in a vacancy crisis.
2. Homeownership could become more affordable
People who own property often have more financial stability than renters. To this end, Biden has a plan to help families buy homes. It's called the First Down Payment Tax Credit, worth up to $15,000 for qualified homebuyers. Biden also intends to work with Congress to establish a new renter's tax credit, the goal of which would be to reduce rent and utilities to 30% of income for low-earning tenants who make too much to qualify for housing vouchers.
Biden's plan could impact residential real estate in a number of ways. First, it could create a surge in starter home demand, which gives real estate inventors -- notably, developers and house flippers -- an opportunity to make money. It could also impact landlords, for both better and worse. If homeownership becomes more affordable in parts of the country where it previously wasn't, demand for rental units could go down. On the other hand, Biden's tax credit for renters could make it easier for tenants to keep up with their rent, thereby giving landlords more income stability.
3. The 1031 exchange could go away
Real estate investors are privy to a number of tax breaks, one of which is the 1031 exchange. Also called a like-kind exchange, this loophole allows investors to unload one piece of real estate for another without paying capital gains taxes on that sale. These like-kind exchanges are estimated to account for as much as 20% of all commercial real estate deals nationally. Biden, however, has talked about eliminating the 1031 exchange. If that ends up happening, real estate investors could see their tax burdens skyrocket.
Investors need to sit back and wait
Clearly, Joe Biden's plans are a bit of a mixed bag for real estate investors. But one thing to remember is that once he takes office, Biden won't operate in a bubble. He'll still need the support of Senate lawmakers to institute tax code changes, so it may be quite some time until his proposals actually come to light -- if they happen at all. As such, real estate investors should keep Biden's proposals in mind, but shouldn't necessarily celebrate them, or panic, just yet.