Tucson Lease Report October 15-19, 2018

Tucson Lease Report October 15-19, 2018

The following commercial leases were reported to the Real Estate Daily News for the Tucson Lease Report from October 15 thru 19, 2018.

INDUSTRIAL – 5460 S. ARCADIA AVE., TUCSON
Innovative Transportation Solutions of Tucson, LLC dba Driver Provider, leased 6,734- square-feet at 5460 S. Arcadia Avenue, Suite 110, Tucson, Arizona.  David Blanchette with NAI Horizon handled this transaction for the landlord.

OFFICE – 2055 W. HOSPITAL DRIVE, TUCSON
Pulmonary Institute of Arizona, PC leased 6,086-square-feet at 2055 W. Hospital Drive, Suite 205, Tucson, Arizona.  Andrew Sternberg with NAI Horizon represented the tenant in this transaction.

RETAIL – 2626 N CAMPBELL AVE., TUCSON
Medicare Health Benefits leased a 2,704-square-foot office space located at 2626 North Campbell Avenue from Campbell Investments, LLC. Jeff Casper of CBRE’s Tucson Office represented the landlord and RE/MAX Commercial represented the tenant.

RETAIL – 11143 N. LA CANADA DR., ORO VALLEY
Sunrise Dental Equipment Sales and Services signed a lease for 1,310-square-feet at 11143 N. La Canada, Suite 101, in Oro Valley Center located south of the southwest corner of La Canada Drive and Naranja Drive, Oro Valley, AZ. Sunrise Dental Equipment Sales and Services was founded in 2008. They opened their new office September 15, 2018.  Craig Finfrock of Commercial Retail Advisors, LLC represented the landlord, W.J. Choi, LLC, and the tenant represented itself in this transaction.

RETAIL – 4951 E. GRANT RD., TUCSON
Staffing Solutions Southwest, Inc., a Georgia Corporation, leased a 1,093-square-foot retail space at Crossroads East Shopping Center, relocating the EmployBridge office to 4951 East Grant Road, #105. CBRE’s Nancy McClure of CBRE’s Tucson Office represented the landlord and Swearingen Realty Group, LLC, Dallas, Texas represented the tenant. EmployBridge is a workforce specialist staffing agency, opening their new location in early 2019. T

OFFICE – 921 S. CRAYCROFT RD., TUCSON
The Arizona Democratic Party has leased approximately 1,000-square-feet at 921 S Craycroft Rd. Tucson, AZ 85711. Juan Pantoja from Grimm Commercial, LLC represented the Landlord in this transaction. 




Keter Plastic Signs Two Leases at Fiesta Tech Center

Cushman & Wakefield Negotiates 323,370 SF Lease in Gilbert, AZ

PHOENIX, Arizona – Cushman & Wakefield announced today that Keter Plastic, one of the world’s leading manufacturers and marketers of resin-based household and garden consumer products, signed two leases at Fiesta Tech Center. The two leases are a combined 323,370-square-feet.

Pete Klees and James Harper of Cushman & Wakefield Phoenix successfully negotiated the lease on behalf of the tenant. Los-Angeles based Fiesta Venture, L.P. is the owner.

Keter Plastics leased 1300 N. Fiesta Boulevard for its manufacturing building and 1343 N. Colorado Street for its warehouse. Constructed in 1997, 1300 N. Fiesta Boulevard is 243,000-sqaure-feet and features all infrastructure for a plug-and-play plastic injection molding operation, 10 dock-high loading doors and eight at grade level, along with ample parking. In addition, Keter will be performing a $6 million renovation to the building to add additional injection molding equipment. Totaling 120,700-square-feet and built in 2016, 1343 N. Colorado Street offers ESFR sprinklers, 32 dock-high loading doors and 30’ clear height.

“We were introduced to Keter Plastic through a long-standing client and after initial discussions a long-term lease made the most sense. The former plastic injection plant was a perfect fit for the Israeli company who currently has 29 locations in Israel, Europe, Canada and the U.S.,” said Harper. “Between the two leases, Keter plans to add multiple jobs to the Gilbert market.”

Located in the Gilbert submarket, one of the fastest growing municipalities in the U.S., the two buildings are centrally located near two major freeways – the US 60 and Loop 202. The Metro Phoenix industrial market absorbed 2.6 million square feet in the second quarter of 2018. The Gilbert/Gateway submarket showed the most positive absorption with an occupancy growth of 585,000-square-feet for the quarter, according to Cushman & Wakefield research




Phoenix Lease Report October 15-19, 2018

Phoenix Leases Oct. 15-19, 2018

The following commercial leases were reported to the Real Estate Daily News for the Phoenix Lease Report from Oct. 15 thru 19, 2018.

INDUSTRIAL – 2817 N 37th AVE, PHOENIX
ABL Services, Inc. leased 11,111-square-feet at 2817 N. 37th Avenue, Phoenix, Arizona.  David Blanchette with NAI Horizon represented the tenant and Scott C. Smith with Lee & Associates Arizona represented the landlord in this transaction.

RETAIL – 8643 W KELTON LN, PEORIA
A lease for 3,229-square-feet in Arrowhead Commerce Center to Spotted Owl Pottery was recently consummated.  The location of the property is 8643 W. Kelton Lane in Peoria, AZ.  The owner of the center is Arrowhead Commerce Center Partners, LLC.  Jared Lively of Rein & Grossoehme CRE represented the Landlord and Natalie Jaffe of Phoenix West Commercial represented the Tenant on this transaction.

RETAIL – 3844 N 32ND STREET, PHOENIX
A lease for 3,038-square-feet in 32 Fairmount to F45 Fitness Training was recently consummated.  The location of the property is 3844 N. 32nd Street in Phoenix, AZ.  The owner of the center is KBP Realty Advisors, LLC.  Jared Lively of Rein & Grossoehme CRE represented the Landlord and Danielle Davis of LevRose Commercial represented the Tenant.

RETAIL – 8425 S EMERALD DR., TEMPE
A lease for 2,990-square-feet in Emerald Design Center to Remi Raine Bridal Boutique was recently consummated.  The location of the property is 8425 S. Emerald Drive in Tempe, AZ.  The owner of the center is PEART, LLC.  Jared Lively of Rein & Grossoehme CRE represented both the Landlord and the Tenant.

RETAIL – 7102 E BASELINE RD, MESA
A lease for 2,930-square-feet in Superstition Springs Plaza to Tuck & Tumble Kids Gym was recently consummated.  The location of the property is 7102 E. Baseline Rd in Mesa, AZ.  The owner of the center is Superstition Springs, LLC.  Jared Lively of Rein & Grossoehme CRE represented the Landlord and Zach Collins of Kobe Commercial represented the Tenant.

RETAIL – 3844 N 32ND ST., PHOENIX
A lease for 1,552-square-feet in 32 Fairmount to The Salon 32 was recently consummated.  The location of the property is 3844 N. 32nd Street in Phoenix, AZ.  The owner of the center is KBP Realty Advisors, LLC.  Jared Lively of Rein & Grossoehme CRE represented the Landlord and Chase McGarey of Southwest Retail Group represented the Tenant.

RETAIL – 3601 W CAMELBACK RD., PHOENIX
A lease for 1,000-square-feet in GC Plaza to Taqueria Mi Lindo Guanajuato was recently consummated.  The location of the property is 3601 W Camelback Rd. in Phoenix, AZ.  The owner of the center is JARM, LLC.  Nic Chavira of Rein and Grossoehme Commercial Real Estate represented the owner and the tenant.




County-funded affordable housing development in Tucson Opening

TUCSON, ARIZONA — Affordable housing can be hard to come by for seniors and veterans but an Oct. 24th ribbon-cutting at pair properties operated by TMM Family Services Inc. will provide more options in Midtown Tucson for both groups. The ceremony is scheduled for 10:30 a.m. at the project site, 3131 E. Lee Street, Tucson.

The complexes offer 20 apartments intended to accommodate veterans and low-income seniors who live with a care giver or family member. Ten units offer amenities for disabled residents. Both sites will allow easy access to the commercial dining hall, activity and learning centers and athletic facilities at the TMMFS main campus, 1550 N. Country Club Rd.

The Pima County Housing Center provided $545,000 in bond funding and an additional $405,000 in federal HOME funds toward the $3.3 million total cost of the venture.

“Adequate availability of affordable housing benefits not just the residents who receive a safe, decent and stable place to call home. It provides critical stability for the entire community,” Housing Center Director Marcos Ysmael said.

The close proximity to TMMFS headquarters will allow counselors to work with tenants to identify and address needs, including social service and medical referrals.

Invited guests for the Grand Opening include members of the Board of Supervisors, County Administration, Housing Commission and Bond Advisory Committee as well as representatives of the City of Tucson.

Media outlets which plan to attend should RSVP to TMMFS Vice President of Development & Community Relations Brooke Nowak by phone, 520-322-9557 x. 225, or email.

 




Phoenix Kidder Mathews healthcare team negotiates $3.4M sale of Civic Center Medical Plaza in South Scottsdale

PHOENIX, Ariz. – The Phoenix Kidder Mathews healthcare team announced the sale of 3271 N. Civic Center Plaza, a 16,919-square-foot medical office building in the South Scottsdale submarket. The asset commanded a sale price of $3.4 million ($200.96 per square foot).

The team of Senior Vice President Michael Dupuy and Vice President Rachael Thompson negotiated the sale on behalf of owner 6 Turns, LLC, a subsidiary of SEBO Enterprises, LLC.

Built in 1983, Civic Center Medical Plaza features eight suites that can easily be combined to create larger spaces. The one-story building is situated on 1.5 acres in South Scottsdale’s medical market which currently offers limited availability of larger spaces and has a scarcity of first-floor space. The asset is highly visible and sits directly across from HonorHealth Scottsdale Osborn Medical Center.

“I think the deal was good for the buyer, seller and the submarket,” Dupuy said. “The area will unquestionably benefit from having a renovated, Class A facility in the healthcare corridor connected with a top-notch provider.”

HonorHealth Osborn is a full-service, 337-bed hospital that offers services in trauma, orthopedics, neurosurgery, cardiovascular services, and critical care. Other services include those at Greenbaum Surgical Specialty Hospital, which focuses on general surgeries including ear, nose and throat; urology; and gynecology.

“The South Scottsdale market is in need of additional medical space, specifically larger blocks of space,” Thompson said. “Redevelopment of existing older buildings to accommodate this demand would be ideal.”

Amenities in proximity to Civic Center Medical Plaza include numerous multifamily communities as well as restaurants and retail establishments. The property is situated across from Scottsdale Stadium, spring training home of the San Francisco Giants.

The buyer, Dr. Remus Repta, was represented by Sheila Bale and Ryan O’Connor with Cushman & Wakefield.




Arizona’s First Real Estate Crowdfunding Company Announces New Investment Opportunity

PHOENIX, Arizona – On the heels of its first successfully funded project, Arizona-based real estate crowdfunding company Neighborhood Ventures has announced its second investment opportunity. Thanks to new laws that have opened up commercial real estate investment to non-accredited investors, Arizona residents can now invest a minimum of $1,000 in projects once available to only the wealthy.

Neighborhood Ventures is the first Arizona company to offer commercial real estate investment opportunities to non-accredited investors, founded in January 2018 by John Kobierowski and Jamison Manwaring.  The company’s new project, Venture on Marlette, is a 12-unit apartment complex with two and three-bedroom units located at 813 E Marlette in the popular Midtown Phoenix neighborhood in North Central Phoenix, on Marlette Avenue, west of 7th Street.

“Just 3 days after announcing the Venture on Marlette project to our current investors, we had over 50 investors participate and have already raised 1/3 of our target amount,” said Neighborhood Ventures co-founder Jamison Manwaring, a former technology analyst at Goldman Sachs and former VP of investor relations for Lifelock. “It’s clear there’s a strong demand for crowdfunding projects that let people invest in their communities.”

“Venture on Marlette is an ideal investment for multiple reasons,” says John Kobierowski, Neighborhood Ventures co-founder and managing partner of ABI Multifamily, a leading commercial brokerage in Phoenix. “Midtown Phoenix is quickly becoming an urban hotspot after undergoing remarkable rejuvenation with many new restaurant and retail venues. With a much-needed facelift and some modernizing touches, we will bring up the value of this ideally situated apartment complex.”

Neighborhood Ventures intends to renovate all 12 units over a period of six months, with plans to add new appliances in all units, and upgrade flooring, cabinetry, countertops, fixtures and common areas. Upon completion of the renovations, Neighborhood Ventures expects to bring all rents in line with the market and sell the Property within three years. The target preferred return for crowdfunding investors is 12% each year.

The company’s first investment opportunity, Venture on Wilson which closed in June 2018, is a 12-unit apartment project in downtown Tempe. A total of 104 people invested $500,000 in the purchase of this apartment complex near Tempe Town Lake. Remodeling is currently underway, with sale of the property slated for 2021.

Neighborhood Ventures offers a platform for non-accredited Arizona investors to invest in properties in their communities. For additional information, visit www.neighborhood.ventures




32nd Annual Beer Fest at Kino Sports Complex Oct. 20

Clear bag policy strictly enforced

PIMA COUNTY –  The 32nd Annual Great Tucson Beer Festival, presented by Sun Sounds, returns to the Kino North Complex Oct. 20 from 4:30 p.m. – 10 p.m. The festival includes over 50 participating brewers, free food samples from various local eateries, musical entertainment and more. Ticket holders, except those who purchase a designated driver admission, will have the opportunity to sample up to 24 beers. VIP admission starts at 4:30 p.m. and general admission at 6 p.m.

The Beer Festival draws a crowd of up to 6,000 people each year. The Kino North Complex will offer some event parking, however, once parking reaches max capacity staff will direct guests to the Kino Veterans Memorial Stadium parking lot located in the South Complex. To get across, guests can take a shuttle or use the pedestrian bridge over Ajo Way.

Tickets on sale online and at a couple of liquor stores in town. General admission tickets cost $40 and VIP $80, plus any applicable convenience fees. See Sun Sounds website for a complete list of ticket locations and more event details.

During this event, Kino Sports Complex will enforce its clear bag policy. Approved items include diaper bags, one-gallon freezer bags, clutch purses no larger than 4.5” x 5” and clear tote bags no larger than 12”x 6”x 12”. Security personnel will check all bags upon entry. For more information about the clear bag policy or to discuss special accommodations, call Kino Sports Complex at (520) 724-5466.




Pima County adopts new sustainability plan to reduce climate impacts, Here’s the County’s Plan

Old Pima County Courthouse

PIMA COUNTY – The Pima County Board of Supervisors voted 3-2 Oct. 16 to adopt a new seven-year sustainability plan that seeks to deepen Pima County’s commitment to environmental sustainability by adopting rigorous greenhouse gas reduction targets and expanding other sustainability efforts in numerous areas of the county. The plan is an update of previous sustainability plans and is the follow up to the climate resolutions adopted by the Board in the summer of 2017 that affirmed the County’s commitment to the Paris Climate Change Agreement.

The Supervisors first adopted a five-year sustainability plan in 2008, then again in 2013. Over the past four years alone, the County has saved approximately $14 million in avoided costs, including more than $8 million in energy costs, by emphasizing energy efficiency and scaling up renewable energy production.

The new plan will build on the success of previous iterations, which have been used as a model by other counties across the country for developing their own sustainability plans. The plan provides a roadmap for the county to integrate emerging low carbon technologies such as adding electric vehicles to the county fleet, and climate adaptation strategies to cool down our urban environment with green infrastructure and trees irrigated with rainwater. Since the Sonoran Desert Conservation Plan was established in 1999, the county has been a regional leader in conserving our natural resources and the Sustainable Action Plan is natural progression of these efforts.

Among the goals for the 2018-2025 plan are:

  • Reduce carbon emissions from County operations by 50 percent by 2025 in accordance with the Paris Climate Agreement.
  • Reduce the intensity of potable water use in County operations by 15 percent by 2025 and continue allocating reclaimed water for groundwater recharge.
  • Utilize the County’s on-going protection and restoration of extensive healthy landscapes as a strategy for climate mitigation and frontline adaptation by protecting native species and natural and cultural resources, installing green infrastructure and restoring riparian areas, and expanding support for local food systems.
  • Adopt mindful purchasing practices that are preferential toward environmentally-friendly (or “green”) office products and equipment and adopt mindful disposal practices that make landfills the destination of last resort.
  • Prepare Pima County employees for climate extremes through ongoing trainings.

The 2018-2015 Sustainable Action Plan for County Operations is available online or by request from the Office of Sustainability and Conservation.




Silicon Valley-based Founder Institute Launches Newest Accelerator Chapter in Tucson

Startup Launch Program Aims to Launch 20 Global Technology Companies per Year in Tucson

Tucson, Arizona  – The Founder Institute (www.fi.co), the world’s premier idea-stage accelerator and startup launch program, announced today that it is officially launching its newest chapter in Tucson. With plans to run two semesters annually, the Founder Institute aims to launch over 20 meaningful and enduring technology companies per year in Tucson. Applications to the program are open now, and anyone interested in working with Tucson’s top startup mentors to launch a technology company is welcome to apply to the Tucson Founder Institute at http://fi.co/join.

In order to celebrate the launch, the Tucson Founder Institute will host a series of free startup events for the general public, where attendees can learn how to build a company and learn more about the program. See the full list of events at http://fi.co/events.

“The goal of the Founder Institute is to empower the entrepreneurial talent in Tucson’s workforce to build technology companies through our part-time program,” says Adeo Ressi, Founder & CEO of the Founder Institute. “With the local expertise of the Director team and our proven, step-by-step curriculum, we believe launching 20-30 impactful technology companies per year in Tucson is not only possible but likely.”

For aspiring and early-stage entrepreneurs up to the challenge, the Founder Institute’s comprehensive step-by-step program provides the structure, mentor support, and global network of entrepreneurs needed to start an enduring company. The Founder Institute is the only program of its kind that focuses on people versus ideas, accepts founders with day jobs, and shares equity with all participants. Founder Institute Graduate companies include fast-rising startups across six continents like Udemy, Realty Mogul, Travelcar, goplaceit, Appota, and many more.

In addition, the Tucson 2019 program will include the Founder Institute’s newest company-building curriculum suitable to address the needs of advanced founders (MVP stage) as well as aspiring new entrepreneurs at the idea-stage – a project just released this year in collaboration with hundreds of startup leaders across the globe. The Tucson Chapter will be led by local startup leaders Justin Williams (Co-Director), Anthony Ford (Co-Director), Ashley Tsosie-Mahieu (Co-Director), and Aaron Gopp (Co-Director).

The Tucson Metropolitan Chamber of Commerce, Small Business Development Center, YWCA of southern Arizona, and Tucson Hispanic Chamber of Commerce have all partnered with Founder Institute to support the launch of the Tucson chapter.

Some of the dozens of local company CEO and Founder mentors who have expressed interest in helping Tucson Founder Institute participants include:

  • Jane Poynter: Founder & CEO, World View Enterprises
  • Taber MacCallum: Founder & CTO, World View Enterprises
  • Ryan George: Founder & CEO, Simpleview
  • Larry Mehren: CEO, Accelerate Diagnostics
  • Mara Aspinall: CEO, Health Catalysts (past President, Ventana Medical Systems)
  • Charlie Horn: Founder & CEO, ScriptSave
  • Grant Anderson: Founder & CEO, Paragon Space Development Corporation
  • Cindy Jordan: Founder & CEO, Pyx Health
  • Aaron Hutchinson: Founder & CEO, CropTrak
  • Sean Dessureault: Founder & CEO, MISOM
  • Yi-Chang Chiu: Founder & CEO, Metropia
  • Dan Dempsey: Founder & CEO, CoManage
  • Patrick Marcus: CEO, Marcus Engineering
  • Dennis Kenman: Co-Founder & COO, Tucson Embedded Systems
  • Nate Lipton: Founder & CEO, Growers House
  • Aaron Eden: Co-Founder & COO, Moves The Needle
  • John Jacobs: Founder & CEO, ArtFire.com

Anyone interested can apply to the Tucson Founder Institute at http://fi.co/join. Anyone who applies by the Early Application Deadline (2018-12-16) is eligible for a variety of scholarships – including the Female Founder Fellowship, which is offered to the best overall ranked woman founder applicant.

Learn more about the Founder Institute at http://fi.co.




VanTrust Real Estate hires Tammey Dugan as senior associate of finance

Tammey Dugan

Phoenix, Ariz. – VanTrust Real Estate, a full-service real estate development company with a regional focus and national scope, hired Tammey Dugan as senior finance associate at its Phoenix office. In the role, she will be working with local and regional offices to deliver fast and reliable financing solutions.

Experienced in real estate lending and credit structuring, Dugan worked at JPMorgan for more than 20 years, most recently as a senior underwriter in the firm’s Commercial Real Estate Group, before joining VanTrust. She also has experience in troubled asset management and disposition.

“Tammey will help bolster our financial flexibility and efficiency,” said Keith Earnest, executive vice president of VanTrust. “Her experience in our region will pay instant dividends.”

Dugan describes VanTrust as an amazing company with a talented group of people. “When the opportunity came up, I knew right away that VanTrust was going to be my new home,” she added.

Originally from Ohio, Dugan moved to Phoenix in 1995 and received her bachelor’s in business management from University of Phoenix. When she’s not working, Dugan enjoys traveling, hiking, and exploring the outdoors with her husband and two kids.

For more information on VanTrust’s team and projects, visit www.vantrustre.com.




Moms take the spotlight at Showcase Event Oct. 25

A Pima County program that helps low-income mothers build a better physical and financial future for themselves and their families is featured in an open-house style showcase event on Thursday, Oct. 25, noon to 5 p.m., at the Abrams Public Health Center.

Mothers in Arizona Moving Ahead — MAMA for short — is a grant-funded project that assists mothers and their children living in poverty. A partnership between the Pima County Health Department and the county’s Community Services, Employment and Training Department, the program enables mothers to attend “Getting Ahead” classes in a safe learning environment where they explore the impact of poverty on themselves, their families, and their communities, assess their own resources, and plan new future stories.

After the 50-hour class, moms enter “Circles of Care” where volunteers provide additional support for meeting their goals and overcoming barriers Throughout the process, the moms offer ideas for improving services and building a more prosperous community.

MAMA worked with five community partners who offered classes and supported the program: the Community Food Bank, The Haven, Amity and Dragonfly Village, La Frontera’s Rally Point, and Tucson Urban League.

The event will feature panels including MAMA participants reflecting on how the program has impacted them, community partners and allies sharing their experience, evaluators reviewing program outcomes, and experts on health equity discussing the importance of programs like MAMA to address social barriers that impede quality health for all.

The Oct. 25 event will include 13 videos created by participants about their lives and the program that can be viewed throughout the day, ongoing panels, and a “data room” to learn more about the program components. Program participants, staff and volunteers will be available to answer questions. Parking is free. Refreshments will be served.

Abrams Public Health Center is at 3950 S. Country Club Road. For more information, contact Bonnie Bazata at 520-724-3704 or bonnie.bazata@pima.gov.




New proposals in Trump’s Tax Plan for Rental Property

This guest post is from Onerent, a state of the art leasing & property management service.

Buying an investment property for rental under the new tax plan

Given the new proposed United States tax plan from the Trump administration, investing in real estate has some potential implications for a new investor. Most consider the changes extremely beneficial to first-time real estate investors in particular.

To cover the basics first, the existing tax structure allows for real estate investors to write-off all the expenses of owning and running a rental as those properties are considered a business operation. In addition, any interest on the mortgages for these investments along with any repair or management costs can be deducted pre-tax on the total income of the property so that the property owner is only taxed on the actual cash flow they’re earning from the investment.

None of these existing standards would change in the proposed tax-plan, but there are some new additions to look out for that could incentivize real estate investing and lower home sale prices.

Let’s take a look at how this plan can impact the industry and the externalities in the fine print.

Deductions for pass-through companies

Many experienced real estate investors will put the title of their investment property under a sole proprietorship, LLC, or S-corp for a variety of reasons including reduced risk in litigation, privacy, and tax benefits. These organizations are considered pass-through companies and they avoid double taxation rules of paying both individual and corporate taxes. Instead, taxes are just applied at the individual level.

The new tax plan proposes an additional deduction for pass-through companies. The plan adds a new 20% deduction on your net income after amortization and depreciation if you’re set up as a pass-through company. Alternatively, you may receive a 2.5% deduction on your property’s unadjusted basis–not including the value of the land.

To fully understand the value of the deduction, you need to understand the full amount of qualified business income and then consider the following breakdown. The deduction is the the sum of:

The lesser of:

  • Combined Qualified Business Income, or
  • 20% of the excess of: the taxable income divided by the sum of any net capital gain

And the lesser of:

  • 20% of the aggregate amount of the qualified cooperative dividends of the taxpayer, or
  • taxable income reduced by the net capital gain

So what is combined qualified business income?

Combined qualified business income is the lesser of:

20% of the qualified business income with respect to the qualified trade or business; or the greater of:

50% of the W-2 wages with respect to the qualified trade or business, or
The sum of 25% of the W-2 wages with respect to the qualified trade or business, plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property

What does this all mean for someone looking to invest in real estate?

Well, it essentially means it’s now more profitable to own income-generating real estate assets such as single-family rentals, apartments, or condos. Instead of paying the regular income tax rate, you can create an LLC for $800-$1,500 and take advantage of the new 20% “freebie” deduction for pass-through companies.

Deductions for owner-occupied housing

With the new tax plan comes some rules that may create a negative incentive for owner-occupied housing. For example, mortgage interest is now only deductible on the first $750,000 of acquisition debt for primary and secondary residences. Anyone who previously purchased a property will be grandfathered in and can continue to deduct their interest on up to $1,000,000 of debt.

That grandfathering clause may incentivize primary residence homeowners to stay in their residence longer, which could in turn reduce the supply of available housing for sale and subsequently, increase sales prices.

The tax plan also removes the deduction on home equity debt, unless the proceeds are used in a trade or business acquisition or to make improvements on a rental property.

This might be a financial strain on some individuals who would need the extra tax deduction on interest and therefore might slow down home purchase numbers. Jerry Howard, CEO of the National Association of Home Builders, estimated that 7 million homes would be excluded from the mortgage interest deduction.

There is a proposed limit on aggregate deductions as well. In the new plan, state and local taxes are limited to a $10,000 deduction–this includes state income and property taxes. This change is most impactful for those living in high-income, high-property-tax states such as California, New Jersey, Washington, and New York. The impact will be negative for high-earners in these states. For example, if you’re state income tax is $15,000 and property tax is $9,000, you can only earn a maximum deduction of $10,000 event though your state and local taxes add up to $24,000.

These changes could negatively impact primary residence homeowners and create an incentive for owners to sell their primary residence, invest in out-of-state rentals instead, and just rent near their employer locally. These changes create a tax-shelter for single-family rental investors and thus may drive a swell of new real estate investment purchases.

Other changes in the tax plan

While we are not covering everything here, there are a multitude of other changes in the GOP’s proposed tax plan that may apply to you personally to consider as well before investing. These changes are covered in more detail by Brandon Hall, CPA on the popular real estate investing blog, BiggerPockets. We recommend reading through the changes in the new tax brackets, standard deductions, child tax credit, and alternative minimum tax in particular.