A Rush to Judgement

“Innovative” is the word Governor Kate Brown uses to describe the rent control bill being rushed through the Oregon Legislature.  “Innovative” is defined as “original, new, fresh, unorthodox, off center, unfamiliar and experimental.”  All words which put the fear of god into capital and capitalists.

Wherever and whenever money is invested, investors must be compensated for assuming more risk.  As the potential for loss increases, prospective returns must increase in a commensurate manner.  Uncertainty is a principal component of risk in any market.  In my opinion it is a safe bet then that the “innovative” (read unfamiliar and experimental) legislation about to be signed into law will increase the cost of investing and doing business in Oregon.

The old saying, “The road to hell is paved with good intentions” comes to mind.  I am sure the intentions of our democratic legislators and governor are good.  How can being pro-family and affordable housing be anything but.  However, in hindsight the cascade of new rules and regulations impacting housing and those who provide it have done anything but make it more affordable.

By constantly moving the goal posts, the powers that be introduce a degree of uncertainty into the Oregon housing market that simply doesn’t exist other places.  To assume the additional risk incumbent in this, developers must charge more for their product.  Therefore, the aforementioned bill is likely to have exactly the opposite of it’s intended effect.  Less housing will be built and what is extant will cost more.

It’s not an accident that high tax blue states with burdensome regulatory environments and levies have the highest cost of living and often the lowest quality of life.  Whether it’s California, New York, New Jersey, Illinois or Oregon investors appear increasingly eager to move elsewhere and are questioning whether they “are getting value for their government dollar.”  Crumbling infrastructure, the poor quality of public education and problematic service delivery exacerbate this.  These environments do not generally result in better or happier residents.

Whether the urban planning mafia likes it or not, the homeless blight that now afflicts downtown Portland and other West Coast cities is the direct by-product of a generations worth of failed “innovative” ideas and planning.  Fortunately, real estate investors can “vote with their feet” by moving their money to low/no tax landlord friendly red states.

A recent Gallup poll (Gallup polling 2/19/2019 WSJ/Steven Malanga) indicates that seven of the eight states with the highest percentage of people who want to move elsewhere are blue and solidly Democratic.  Guess where they’re going:  Arizona, Texas, Nevada, Florida.  All these states figure prominently in our current list of DST offerings.

Surprisingly enough, they also rank among the top states in the U.S. with regard to infrastructure.  Texas, a no income tax state and consistently ranked among the best places to do business in the nation (California being the worst) is ranked as having the best infrastructure (highways, airports, schools, etc.) – Gallup polling 2/19/2019 WSJ.

So it would seem that in the Sunbelt, you pay less and get more.  If our blue state, progressive politicians can’t figure this out, investors certainly have.  As a real estate investor with the vehicle of DST available to you from a selection and management standpoint, you are foolish not to move your money to where the folks are going.


This material and views are prepared solely by the author and does not necessarily represent the views of the its affiliates. Statements concerning financial market trends are based on current market trend, which will fluctuate. Projections are inherently limited and should not be relied upon as an indicator of future results. Historical figures and performance are not indicative of future results. This is for informational purposes only and does not constitute an offer to buy or sell any investment.

DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. There are risks associated with investing in Delaware Statutory Trust (DST) and real estate investment properties including, but not limited to, loss of entire principal, declining market value, tenant vacancies and illiquidity. Diversification does not guarantee profits or guarantee protection against losses. Potential cash flows/returns/appreciation are not guaranteed and could be lower than anticipated.

Because investors situations and objectives vary this information is not intended to indicate suitability for any particular investor. This information is not meant to be interpreted as tax or legal advice.  


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