We wanted to share some insights on how we think the upcoming presidential election could potentially affect the real estate market. Considering the differing policies and approaches of both the Democratic and Republican parties, the outcome of this election has the potential to present a combination of opportunities and challenges.
Just so you know, these are just our opinions and certainly should not be used to make investment decisions. In this political climate things change quickly so what we think might happen may not at all!
Scenario 1: A Republican Win
Let’s examine what a Republican win in the next election, namely what a Trump and Vance duo may entail.
Deregulation and Tax Cuts
A key aspect of a Trump-Vance win would likely be continuing policies focused on deregulation and tax cuts. This could mean lower operational costs and enhanced profitability. Reduced corporate taxes might translate into more disposable income for property owners, which could be reinvested into upgrading properties or expanding portfolios.
Impact on Rental Demand
Lower taxes and a more business-friendly environment could boost economic growth and increase disposable income for renters, potentially driving up demand and prices for rental units. This could significantly boost rental income and overall profitability for the industry and our portfolio.
However, there’s also a risk that local governments, especially in states like California might counter federal policies with their own stricter regulations and higher taxes. This could create a challenging landscape giving varying regulatory environments. Additionally, changes in immigration policies could affect population growth in the Southwest, impacting rental demand.
Real Estate Market Dynamics
With deregulation, we might see an increase in real estate development, leading to more supply in the market. This could be beneficial in high-demand areas, helping to balance supply and demand. However, an oversupply could also pressure rental prices.
Infrastructure and Economic Policies
The Trump administration has shown interest in infrastructure projects, which could benefit the real estate market. Improved infrastructure can make certain areas more desirable, boosting property values and rental demand. When combined with a focus on economic expansion, these measures may strengthen the labor market and increase demand for rental properties.
Balancing Costs and Benefits
While lower taxes and deregulation can boost profitability, we must also consider potential increases in state and local taxes or regulations as a counterbalance. Staying agile and adaptable will be key to navigating these changes.
Scenario 2: A Democrat Win
Now, given the possibility of Harris and Walz assuming office, it is likely that we will witness notable changes in housing policies. They are likely to advocate for more affordable housing and stronger tenant protections. This could mean expanded Section 8 housing vouchers, more funding for public housing projects, and even national rent control standards.
Affordable Housing and Tenant Protections
Many people believe that more affordable housing and tenant protections are beneficial, but what does this mean for investors? Well, stricter regulations and potential rent caps could limit rental income growth. But here’s the flip side: these measures could also increase demand for multifamily housing. If more people can afford to rent, occupancy rates could go up, helping to keep income streams steady.
Consider it like this: While rent controls may limit rent increases, it is important to acknowledge that they can also decrease vacant rental properties due to increased accessibility for potential tenants. Plus, having national standards might bring more predictability to investments, which is always a good thing.
Acquisition Opportunities
Here’s where it gets interesting. Given the new policies, there is a possibility that there might be opportunities to acquire more assets at reduced costs as the market adapts to more stringent regulations. It’s a bit of a silver lining—while some areas may experience lower profit margins, there could be long-term gains from acquiring properties at better prices.
Economic Stability and Job Growth
The Harris-Walz administration is expected to focus heavily on social programs and also infrastructure investments. Think of better childcare, improved healthcare, and significant upgrades to infrastructure. These initiatives have the potential to have a positive impact on job growth and economic stability, which is fantastic news for rental markets. With increased job opportunities and a stronger economy, there is a growing demand for rental properties.
Balancing Costs and Benefits
However, it’s not all smooth sailing. Increased corporate taxes and the costs associated with regulatory compliance could impact overall profitability. It’s crucial to balance these additional costs with the benefits of a potentially more stable and demand-driven rental market.
Adapting to the Political Landscape
Whether it’s a Democratic or Republican win, it’s important for any real estate business to stay flexible and responsive. Aligning investment strategies with affordable housing initiatives could benefit a Democratic administration. This approach could help the real estate industry to capitalize on the growing demand and potential government incentives. To optimize efficiency and profitability, it would be beneficial to prioritize tax breaks and deregulation opportunities within a Republican administration.
Key Strategies Moving Forward
Here are some strategies we have identified, some implemented and others ready in order to navigate these political changes:
Final Thoughts
Getting through the political landscape can be quite a challenge, but with the right information and a willingness to adapt, its possible to reduce risks and take advantage of opportunities. Whether it’s through new acquisitions, regulatory adjustments, or leveraging economic policies, our goal is to keep our investment portfolio resilient and growing.
We’d love to hear your thoughts on this. How do you think the upcoming elections will impact our industry? Let’s continue the conversation in the comments below!
Take care and stay tuned for more updates.
Best, Travis Hook
CIO & Founder
