I don’t really understand the market failure happening with such a long term housing shortage. By definition there is excess demand for housing right? So it should make economic sense to build more.
When I ask people always say conspiratorial stuff like “they” maximize profit by keeping housing low but even if there was a conspiracy there should be individuals who are not part of the conspiracy who would profit from going against it.
So it has to be either regulatory or funding based, I think. But I don’t know of any recent regulations that would cause this nationwide, “zoning” is probably part of it but there was no one timeline for that, it’s super local. And funding has been free for a decade and a half and homebuilding has still been slow.
Look to other forms of scalping to see how this works at a smaller scale. Scalping isn’t done through conspiracy, but a bunch of small, self-interested actors reducing supply in the market to inflate prices.
On top of that there are actors that are more coordinated and not as small, like corporations that own hundreds of thousands of homes. These corporations can just coordinate internally (not conspiracy, business) and reduce supply to increase their own returns.
This works for smaller actors too though. As long as the number of houses owned is more than a couple, then it’s likely they’d profit from temporarily restricting supply, and locking in renters to leases for more money. They’ll try to slowly sell off their supply without “flooding” the market and hurting the value of their own supply, just like other scalpers.
Scalping isn’t the comparison though because 1, scalpers don’t reduce the total supply. Any scalper who refuses to sell a portion of their tickets, loses all the money they used to buy them, and the opportunity cost of selling them, and there’s no way it’s worth it for any given individual. The supply/demand differential they make money from is that the venues only have a certain number of seats.
Which brings me to 2, theres no equivalent of homebuilders in the scalper world. If some scalpers could generate new seats at the venue for roughly the cost they pay the venue for tickets, supply and demand would figure themselves out pretty quick.
Hard disagree on the last part there. For one, homebuilders again. Their business model is to build the houses and then sell them, if they joined the “sell houses slower” cartel it just means they earn less profit.
But really the whole idea you’re laying out, the math only works if everyone works together, so it becomes a prisoners dilemma. Because say there’s 20 companies slowing down house sales to maximize profit, there can always be a 21st who gets the benefit of the restricted supply from the 20, but they just sell as much as possible and become the most profitable of all. Maybe it’s in everyone’s interest to restrict supply, but it’s in any given company’s interest to sell as much as possible. So it has to be an as of yet unknown cartel of every home seller in the country and there’s just too many of them to have both: Either it includes everyone or it’s secret.
There are absolutely scalpers that reduce total supply. They’ll only list a couple of consoles that they scalp at a time even if they buy in massive bulk, and it’s all done on the pretense of a limited supply from the original seller that they’re artificially limiting past what the market would naturally do (by buying a ton of them up). Given a literally infinite supply, scalpers lack an ability to do anything. Put another way, when they can’t restrict supply, it’s not a viable strategy.
It’s not that they refuse to sell some of their supply, it’s a temporary restriction (all supply restrictions can be viewed as temporary because we don’t have total knowledge of future supply). The temporary restriction benefits them because they can start bidding wars over the reduced supply, and get a higher price per unit at the cost of getting the money over a longer period of time.
The exact same thing works for housing, when you have the same company renting out tons of units but also keeping tons of units in the same area off the market. It means the bidding wars for the smaller supply of units results in more money per unit (lower supply, same demand, means higher costs).
The concept of a prisoners dilemma here only works if houses are fungible, but they’re not. There are sometimes very similar units or even houses in a neighborhood in the same location, and these are almost fungible, but even in these contexts those nearly identical units in nearly identical locations are usually owned by a single entity (corporate or otherwise), so again there’s no prisoner’s dillema, they can restrict supply effectively to increase yield.
The time vs value calculation is different for housing too compared to smaller things like groceries. If you’re a grocery store, and your local distributor of apples lowers the price of apples, some of that will likely go to the customer because of local competition pushing prices down, and you have a constant supply tied to a constant demand of these (from a buyer’s perspective) essentially fungible things.
Houses are different because if you see the price of houses in your neighborhood drop by some significant amount, individual actors who may otherwise want to sell will actively choose to not list their house because they know the value will go back up, and so these actors are all incentivized to vastly limit supply if something in some area cuts the prices of houses (like a huge influx of new homes for example). These individual actors could be literal individuals or corporations.
I think landlords is kind of blanket statement. I think most rational people aren’t blaming the landlords who own a single family home and rent the basement suite. I think it’s more referred to companies gobbling up single family homes and rent gouging their tenants.
This is also Lemmy, so, you know, fuck cars, fuck trucks, fuck landlords, fuck Windows, fuck Google, fuck conservatives, fuck you, fuck me, etc etc
I want to add into your great list of fucks - fuck private seashores. These rich cunts bought out the entire east cost shore and only allow people into small private reservations. Fuck that.
And then people have to subsidize their flood insurance? Or help with storm recovery? Fuck that.
Thank God I live somewhere where I can work 32 hours per week as truck driver. I don’t even spend a quarter of my income on rent, have a healthy weed addiction and manage to save about 500 euro a month and that while being single.
The other 1/3rd goes to the feds, so they can pay for roads, social safety nets, nukes, drones, unconstitutional domestic surveillance programs, and Israeli genocide
Destitution? Definitely heading that way has been getting progressively worse for the last several years at least. Critical mass? Not yet previous generations are weak and people are idiots. I think radical thought is increasing especially among the younger generations.
I really wanna make a joke about Irish cream, Irish whiskey, and an Irish stout, but I feel like that could get me a visit from a dozen letters worth of government agencies
Tear down the military industrial complex. We’re sandwiched between oceans on the east and west, and friendly neighbors on the north and south. Nobody’s going to invade us. We don’t need the world’s largest military.
It’s not so simple, my mom purchased a property with her divorce settlement and the return on the investment can be good, but it can also be not as good. She remodeled an Oregon property in Salem and sold it for less than cost later. While she did get rent for it before she sold, she could have saved a lot of effort just buying dividend stocks.
Real estate can be a good investment, but it can be a poor one.
Also if your asking me to feel bad for someone trying to make a profit off acting as a middleman to a basic human need you’re barking up the wrong tree.
My mom is the landlord and remodeling houses IS her work. She was a stay at home mom until I grew up, that’s what she does for a living after she divorced my dad. She lives on the rent of her properties while she does each project
I do? But I also support laws that heavily tax owning secondary properties. Building more houses is not helpful if they just get purchased by landlords.
If being a landlord is profitable where do you think that profit comes from? Logically landlord’s need to be making housing more expensive so they can get their cut.
Return on investment. Not everyone has money to buy a house. Home prices being high keeps rents high. Increase housing supply and it will resolve the issue
And where does this return on investment come from?
To put it another way: if a law was passed that owning a property you don’t live on is going to become illegal, there would suddenly be a lot of cheap property on the market.
It comes from owning an investment. The stock market has similar returns to the real estate market.
But the real estate market doesn’t need to keep going up. For example, after the increase in supply of housing in Austin, the prices are down 16% off the 2022 peak
If this could be replicated for the whole country, it would improve the situation immediately.
I don’t understand the law you’re proposing. Would it apply to hotels? Do you need to live in the hotel you own? Apartment building? Hot spring resort? Ski lodge?
Only if they’re selling the house. Owning builds equity but you can’t live off that unless you sell the asset to get access to the money. In order to live off of it the profit has to come directly from the renters.
I don’t understand the law you’re proposing.
It was a hypothetical to prove a point, not an actual proposed law. I would propose a significant tax increase on any residential land a person owns but doesn’t live on. This would have no affect on hotels, resorts, lodges etc. because there is a well defined difference between commercial and residential. This would affect apartment buildings by heavily encouraging the owner to live in one of the apartments, which would also encourage them to keep everything in the building running smoothly.
There’s a limit to how many people are interested in staying in hotels in a city.
There’s also the zoning issues between residential and commercial.
There’s also the fact that it’s far easier to buy a residential home and rent it than it is to tear it down, build a hotel, hire staff, and operate an actual business.
I realize you have a knee jerk need to defend landlords and reject anything that interferes with them making a profit of other people’s basic need for shelter, but try to take a moment to think if your argument sounds in any way reasonable before just throwing it out there.
Look one of my siblings is doing the same thing. I’m happy I don’t have to worry about them financially, but I’m not going to say I wouldn’t prefer they made an honest living
My mom is too old to wash dishes in a restaurant, it’s really hard labor and she has carpal tunnel. She tried, it’s just not something a 60+ year old person is fit to do. So she can’t just sit on that money and do hard labor on the side. But drawing some plans and hiring contractors while painting some walls on her own time is something she can do
It shouldn’t be an investment at all. It should be used. It’s like saying water is a good investment. Sure, if you make it artificially scarce and are okay with a ton of people going without… Nestle.
I really wish other better brands would step up in making more consumable products for people with cancer(protein replacement drinks) or children though. It’s really rough when better options are very scarce.
Yup I get you. I managed to avoid nestle but I know I have a privileged life only because I don’t need particular things in my diet. I have vulnerable relatives where they cannot take such options to avoid nestle what with their situation. And I can’t judge them for it. But It’s not a pass on nestle. Nestle need to smarten the hell up. they have no excuses to be terrible.
I make an effort. The truth is there are s9 many things that are Nestle with no Nestle on the packaging due to the different layers of subsidiary companies. It’s practically impossible to completely avoid them without some smart phone app, database, etc (which may even be inaccurate) or a fuckin encyclopedic knowledge of the different brands lmao. Shits fucked, yo.
Right?!? I spend way too much time researching each product over actual use of the product. I had to deep dive to the level of “where is this product produced and who are their relatives and what is their mother’s maiden name??”
There used to be an app or site called “buycott” or something and you could set what you were trying to avoid(example: avoiding human rights violating companies, avoiding specific companies, morals of certain companies, etc.), and you could scan an item and it would tell you. I used it for a tiny bit years ago but didn’t stick with it. Not sure if it’s still around.
I dont know if I’m missing something, but I decided to look up nestle…
I use coffee mate coffee creamer, but its just coffee creamer. I use Purina dog food because a family member works there, but theres like 100 other dog food brands on chewy, I could use.
Idk what I’m supposed to be outraged about. What evil is there in coffee creamer and dog food? Am i missing something?
I mean i hate that americans buy wasteful bottled water when they dont need to, but that makes me more angry at Americans. Theres tons of bottled water brands.
Everyone here loves to complain about landlords without realizing that the majority of single family home landlords (not corporate landlords) are barely making it by too.
Banks are really the ones making criminal amounts of money. 1/3 of rent is typically interest payments. 1/3 of rent then goes to taxes.
For instance, I make $2,900/mo. from rent, but pay $2,800/mo. for the mortgage. I’ve spent over $8k this year alone on repairs and maintenance. But please continue to complain how landlords are constantly raking in cash. It’s typical for a homeowner to pay 1% of the cost of the property per year to maintain it. I will never see a positive cash flow until the mortgage is paid off in 25 years. The only benefit I get by continuing to own the property is the appreciation in equity and principle payments to the mortgage. At the end of the year we will have a -$7k cash flow and $5k equity appreciation. In a HCOL area, that $5k on paper is less than 3% of the area’s median yearly salary.
I feel for anyone out there who has a landlord that didn’t consider the hidden costs and the fact they should expect to runa negative cash flow, because it’s those landlords that also can’t afford to fix the house you might be renting.
Surely you must ignorant of the economic realities and risk of owning a home and how renting can actually be more lucrative depending on your circumstances.
For everyone like you there are who knows how many dozens sitting on inheritances. To be clear I am not against people making money, I am against assholes.
Look a long long time ago a housemate of mine just vanished. Me and the landlord were talking and we decided to put all his stuff neatly in the basement. He shows up a few months later, turns out he was in the hospital. Me and the landlord help him get all his stuff into a new unit. A little bit of work to not screw over a guy.
I agree, there are people who try to exploit the system, and those people deserve 100% of the hate. And I appreciate the nuance you bring to the discussion.
There are those that will villify small-time landlords for the gall to try to make an extra cent. Ultimately, small-time landlords provide a very valuable service, with extremely tight margins. Frankly, it is just barely worth it for us to keep that home. Because additional risks that go into it includes a tenant trashing the place, skipping out on rent, the property being vacant between renters, rental listing fees (which amounts to a month’s rent typically), and so on.
In return a tenant is able to enjoy a home that would otherwise be unaffordable to them, zero risk, and the flexibility to move without being stuck in one location. If someone is only going to live somewhere for less than 3 years, it will always be better to rent than to buy, and take the money saved renting and invest that into the market. The renter is this case will always make more money in return. Some markets around the country would require someone to live in that home for over 10 years before they break even over the advantage of renting.
The reality is building or buying a home is expensive and that cost has to be borne by someone. For this instance, sure, landlords can provide a service. Smaller landlords who are actually PEOPLE and not faceless corpos who don’t even show up for home tours anymore though? Fuck em, heads on pikes, all of em. Seriously I have not even SEEN a person I rent from.
There are some benefits to being a renter, for sure, but they need to be comparable to the benefits the owners are getting, and they’re not. It’s not worth paying more than you would to actually OWN a thing, just to be able to move at a moments notice.
From the sounds of your situation in another post, you’re making about 5k in equity and spending, after collecting rent, an additional 7k. This sounds about right TBH. I could see it going up until those numbers are equal, no more.
You are absolutely right on all accounts. I’m sorry you’ve had shitty landlords, I wish there was a better way to weed those people out, because as it stands, the balance of power is heavily in the favor of the landlord due to the micro-monopolistic nature of renting a place for years at a time.
Renting vs Buying is very dependent on your local market. I have friends in Ottawa that I’ve run the numbers for and it would literally never be profitable to purchase a home compared to continuing to rent. Some areas two years is the break even point. These days with high interest rates, the break even on buying vs renting is after about 5 or 6 years. I encourage anyone to check it out for themselves! :)
I could’ve have been clear, but my situation has a very slight net benefit for me, and since my tenants only plan to live in the are for two years, they are getting the better end of the deal. In the end though, there is a mutual benefit and that’s what a competitive market should tend towards (as opposed to the monopolistic nature of corporate apartment housing which encourages the opposite).
My point is that the people who hate all landlords instead of just the bad ones don’t understand the economic realities of housing. It’s actually the mom and pops that rent out their homes for a short period that make renting cheaper on average for the market as a whole. Mostly because they are imperfect businessmen/women and don’t understand the full cost of being a landlord before it’s too late. Instead, most mom and pop landlords are just hoping to break even.
I’m not against people making money, I’m against people making money hand over fist with the level of effort I exert taking my morning shit, off the backs of people trying to scrape by.
A regular guy who’s a landlord np. Once it becomes your primary investments vector and you’re NOT giving that little extra effort of moving stuff to the basement, once you stop being a person who is a landlord and just become Landlord, it’s shit.
You know what your tenant get for paying your mortgage? Jackshit.
If you are truly getting nothing by renting, buy a home instead. If you respond by saying ‘but I don’t want to, or can’t because of x’, that is what you are paying for as a renter.
Oh yes, it costs me $7k a year for the pleasure of managing a property, responding to all the tenants needs, the risk of paying for major future repairs, trusting the tenant to pay on time and in full (collections is practically impossible to enforce), dealing with vacancies while I still pay the mortgage, paying real estate agent fees which amounts to a month’s rent every time I get a new tenant. And that’s all for a house that I am not able to live in, and that I have locked up 20% of the house’s value for a down payment. It’s much more profitable just to let that money sit in the stock market instead.
But please tell me more about how you know better and that’s it’s all sunshine and rainbows for a non-corporate landlord.
You get a building that is worth more than you paid for, so that’s your payment.
On 25 years, you pay a fifth of the building price for it. And that is not accounting for the equity that the house gains over the years like we’ve seen during covid.
Here, let me play you the sad song on the smallest violin of the world.
On 25 years, you pay a fifth of the building price for it. And that is not accounting for the equity that the house gains over the years like we’ve seen during covid.
So does every other home owner. That benefit is not for just landlords.
I don’t understand the hatred for the risk return of being a landlord. Let’s assume you can double your money in the stock market every 7 years.
Compare real estate and stock ownership for 20k (100k house). In the market, 20k becomes 40k in 7 and 80k in 14, 160k in 21, and so on. That’s 215 total over 25 years. As long as appreciation is close to 3% it’s almost a wash after 25 years. The difference is as a landlord you have the risk of capital expenses requiring you to hold cash and the value of your time to run a rental.
If you want to assume you’ll double your money somewhere else, sell up and do it.
The fact is you’ve borrowed against an asset, the bank took the initial risk on your ability to pay but it’s secured against the asset.
The tenant is in a position they pay more per month than your mortgage payment simply based on a deposit around 20% of the property value.
You get to take on 20% of the risk of buying a house, the bank 80% of the risk, and the tenant pays you both for it.
I’m going to assume the average landlord, just as you assume average returns. Sod all work and maintenance done, no time spent. A property initially bought in good condition coasting on for 10 years with little input required.
Then sold on at a profit after the tenant has paid rent, paid into the landlords mortgage and their equity. Just before the rental value starts to reflect poor condition.
It’s bought by a house flipper in poor cosmetic condition, tenants kicked out, renovations done to the lowest standard to last about 10 years. House sold on for a small additional premium as ready to rent to a buy to let landlord.
I really hope the buy to let landlords end up at a wash or worse. The tenant pays into equity, the house flipper adds value by actually working on the property.
The landlord in between just acts as an easy risk for the bank to charge their interest against while taking the tenants money. The bank makes a healthy profit and the landlord gets a cut of the tenants earnings too, simply for reducing the banks net risk to near zero by putting in their 20%.
Without the landlords banks would have to lend to the tenant directly or not at all. The lower number of actual buyers would lower the price, so they’d actually probably end up lending the same amount against the asset. But they’d have to do more work to ensure the value of the property.
Economically a passive landlord’s main function is to assess value and bet on the right property for the bank. Without landlords the postcode algorithm would be all that’s left as home owners tend to overvalue their potential home. And it’s not enough information.
Landlords could be replaced by banks employing decent surveyors allowing them to offer that 100% mortgage without crashing the market. But they don’t because landlords give them an out.
If, in the current system, real estate investment wasn’t profitable, no company or landlord would buy to let.
The problem is that there is a housing crisis right now where rent is through the roof, buying is out of reach for a big chunk of the population and its getting worse.
The commodification of housing fucked us over.
And then, you have people like the OP I was replying to, that whines because he has to pay the fifth of the value of the building, while the tenant pays his mortgage+ taxes minus 100$ and then get pissy when he gets called out.
Again, the saddest song in the world with the smallest.of.the violin.
For us, it’s because work required that we temporarily relocate. But we plan to move back in a couple years and we really like our house.
For others it usually has to do with the fact that selling a home costs 10% of the home’s value after all fees are accounted for.
Then there is the other set of people who genuinely think the equity in a property is more lucrative than money in the stock market (depending on the market and timing, it could be, but it’s ultimately a bet).
But I could ask the same question of every single person bemoaning the existence of landlords. If it’s oh so easy to be a landlord, why don’t they just become a landlord?
Probably because they don’t have the capital necessary to become a landlord in the first place. If you have enough money, being a landlord requires literally no work at all.
For single family homes, I disagree. Property management is around 10% and you’re not going to build wealth quickly by giving that much off the top if you only operate a couple rentals.
I guess getting that initial capital required no work at all either.
Why don’t they just get that initial capital if it’s so easy.
Unless someone was born with money, the argument against non-corporate landlords (97.5% of single family homes are owned by non-institutional investors) is nonsensical, because those owners had to work for the initial capital.
Myself, I don’t. Being a landlord has quite a bit of risk from awful tenants as well as quite a bit of effort to make it work well. I have a job, don’t want another, and don’t want the additional risk; my investments are thus elsewhere.
You know what your tenant get for paying your mortgage?
A place to live? If you need to move, all you have to do is break the lease? I agree that rental rates are artificially high, but to act like there is no value in renting is silly.
House for $105k that needs flooring and some appliances, so let’s call it $125k. There’s a choice. You probably don’t want to move to Oklahoma though.
There are trade offs for wanting to live near a city or somewhere popular or close to family. Yeah rental rates suck and home prices are climbing, and soon the cheap homes in the Midwest will start to keep up with the other states.
Sounds like you have a highly subsidized mortgage. That’s why you’re being downvoted. Investments are supposed to have risk. The risk of not making a profit is what you take on when you purchase real estate as an investment. It is not a renters problem whether you are profitable or not.
The only benefit I get by continuing to own the property is the appreciation in equity and principle payments to the mortgage.
Sounds like you’re still getting a sweet deal then. Once the mortgage is paid off you will own property outright that you paid very little for compared to it’s value.
My landlord keeps getting violations from the HOA, and the HOA is straight up making rules up. I can’t sue the HOA for this (which is 100% what needs to happen to get them to stop), because there’s a legal layer between the owner and the tenant…
So yes, shit is broken. He refuses to call them out or take legal action against their harassment of my family. This is really obvious stuff, too. The latest violation involves them accusing me of having open flame torches on my patio. I own solar powered LED lanterns. They want to fine my landlord $100 for this.
I told him I won’t pay it. They are charging HIM, not me, and there’s nothing in my lease or the HOA’s CC&R’s saying I can’t own solar lanterns.
This guy has violated state, federal, and city laws over the last half a decade. He’s also a slumlord that never fixes anything. He once made me wait a year to get my front door handle repaired (sure, I could have fought that, but then he’d have just raised my rent.)
I hope he gets fined, and I hope he fucks around, because I’ve got an attorney ready.
I’m not saying to never take shit from your landlords, everyone… But at some point you have to stand up and tell them to fuck off. Rent is out of control in many cities right now, but that’s not an excuse for the often abusive landlord-tenant systems. Landlords should NOT exist.
since some people are not in a position to buy land and need to borrow it.
Some people have no desire to buy land, and want to borrow it. More than half the people I know (and I’m in my 40s now) have no desire to hold the liability of needing to sell a property to be able to move halfway across the country or world. They don’t “own” their, so they see having to literally own it as a problem. And they are willing to pay more in rent than a mortgage (which happens regularly in some areas around me).
There are shit landlords, and there are decent landlords. I think half the problem is that while some areas have great protection for poor renters, they often don’t have great holistic renter protections. In my state, for example, government-subsidized rentals have the most apartment quality regulations. But after that, you’re expected to leverage your rent to force action… without actually withholding it in any way somehow. And small business rentals? Even worse. I have a buddy who runs a breakfast joint. The heating system in the building died, so the landlord said “well if you want to stay open in the winter you should fix that”. So he installed a minisplit and the other business in the building had to close for the winter. Ultimately, both businesses started withholding rent (against lawyer’s advice) and he finally caved and called his renters “cheap bastards” as he got heating installed (and it was like a comedy that the heating company walked out on him twice for his after-contract renegotiations).
I’m ok with someone owning and renting out a building. But it should be somewhere near the level of quality the renter would maintain the place if they owned it.
If there’s more need to sell land then land prices will inevitably go down. Then everything gets better. At that point, we can afford to have multiple properties while trying to sell.
I just bought a house from a guy who had been renting it out for thirty years and I’m now in the process of fixing all the shit he neglected during that time. I can’t believe that anyone was willing to rent this place for any amount of money, let alone the $1300/mo he had been getting for it. The kitchen ceiling was sagging down a foot in two places and held up literally only by the paint and caulk, thanks to mice - I got showered with mouse poop and urine-soaked ceiling tile material when I demo’ed it. The electrical outlets were all partially blocked by the baseboard radiators, which was probably a good thing because they were all ungrounded 1940s-era receptacles with the hot and neutral wires hooked up in reverse. One light switch caused the circuit breaker to trip as soon as I flipped it. Not a single door in the house could actually be closed (not even the front door) so I had to reset the hinges; one door looked like he had tried to fix the problem using a beaver with dental problems.
He sold the house as “rental ready” and I’m five months into the renovation now. I like to think the house appreciates my being here.
That’s normal. The idea is you buy the house with a mortgage to then lease (let) out to tenants. The tenants then pay you rent equal to the mortgage plus a bit extra on top, which you use to pay the mortgage and make a profit.
The rent is rent. It doesn’t have to cover the mortgage all the time. It’s not like someone rent is locked in for 30 years. And some bigger businesses will take the hit knowing the appreciation of the house will catch up or know they will buy a majority of the houses in the area and then raise rent that way to eventually be higher than the mortgage.
Around here, it’s not really linked. The heat of the apartment market is directly tied to the projected ROI, based on the demand of rental properties and the demand of rent itself. Like Bitcoin mining, sometimes the ROI gets really low or even negative in the short- or medium-term. The friction between the two factors tend to warm or cool one of the markets, but it takes times.
Consider/remember this. Many landlords aren’t paying a mortgage, and don’t need to tie rent to “a house’s value at the time of purchase”. They still profit when rent is below the average mortgage, or if rent is well above it. The only thing they care about is maximizing profits regardless of how full/empty their units are. Similarly on the renting side is lifestyle renters. They don’t rent “because I can’t afford a mortgage”. They rent because they don’t want to be tied down. They aren’t ready to settle and might or might not move 1000 miles next year.
Those two categories are fairly numerous, and both present forces that influence the rental market independently from the purchase market. It means that places with less long-term demand like Detroit, Philly, or Houston have ownership TCO far lower than rent rates. Flip-side, there are just as many cities on the other side of the spectrum. The average rent in Austin is $2000/mo cheaper than mortgage payments on a starter home. In San Francisco, that difference is almost $3000/mo.
A common landlord technique is putting a minimum down payment on a house and having their renters pay off the morgage. I think the above commenter is saying that it should not be allowed to get a massive loan on a house that you aren’t going to live in.
People (talking mom & pop) should not be able to purchase a home simply for the purpose of renting it out.
I agree with that.
The problem is the reason people do that is because of a few things.
The ROI is absolutely retarded. My last house (I live in don’t rent) I made 800k in 10 years. That’s insane. Find me an index that turns 500k into 1.3mil in 10 years
Passive income if you don’t do shit that landlords should be doing like regular maintenance.
S&P 500 did better than that in the last 10 years. I really hate that housing has gone the way it has, because on average it’s not as insanely profitable comparable to other asset classes as people make it out to be, it’s pretty comparable.
I wish it wasn’t comparable though, because we’re just parking a ton of cash to do nothing with it.
True except it’s a little different than equity investments because of the ease of leverage. No one is going to loan me a half million dollars to invest in the S&P500 but they’ll have no problem giving me a house to rent out (if I can prove income).
The bourgeoisie loves this one neat trick: just let a few of the poors own a little something, and they’ll fight off the rest of the poors without even needing to be told.
Seriously though, anyone want to sell out a generation for a bit of land and monies? I mean, you’ll never be able to pay for unnecessary things with just values and integrity
I will go to my grave that society writ large is broken. It’s not just the rich. Everyone has become a selfish turd out to get a buck on the backs of everyone else. The difference is that some of us are self-aware enough to see it in ourselves.
It’s depressing if you don’t step back and laugh at it all.
I was literally just thinking about this on my way home yesterday. Society is completely broken, there is no us only ME. this is especially terrible in the United States where we fetishize “rugged individualism.” You don’t care for anyone but yourself. Look out for #1…
So when the choice is “money for me” or “consider my impact on my surroundings” the result is “lmfao consider others? It would be stupid for me to not make this money at the expense of others.”
Every shitty self serving decision made for ones own profit is the “smart thing” to do, even if it was literally destroying the entire town around you. I hate it.
Yes and I charge well under market value (like $500 under what I could get) and my tenant does not have to live on the street. Would you rather I kick her out or let her live in my house for free?
You are trying to pass the idea that society is already broken so everybody should just do what the fuck they want. Your are part of the side of society that is actually broken, so all your tirade sounds pretty hypocritical.
I don’t think the mom and pops are really the problem (in fact, this is I think one of the few viable ways for regular people to actually get ahead) but all of the things surrounding housing. One can get place renting for $2k, but can’t get approved for that mortgage amount even with tons of history showing it’s paid. Corporations owning massive amounts of property are also a much bigger problem. Appealing to an individual (mom and pop) is generally a lot easier than to try to appeal to a corp in which you’re just Lessee #4949857 who’s spreadsheet tells them to squeeze you for more money because.
Past that, I’d also argue renters need much more support when it comes to their rights because quite a lot of the things that people are posting here as anecdotes to why their landlords are shitty are already illegal, it’s just extremely difficult to get anything done about it. I’d suggest also that there was some regulatory body (if one doesn’t exist already) responsible for certifying housing/landlords because then at least shit would get fixed once a year.
My only half-decent experience renting was a blue-collar mom and pop who leveraged their own home to buy a second home to rent, that they rented significantly under market value. If anything, we should be trying to setup more systems that allow this outcome (they fucked me on the deposit though, but that’s the part about renter’s rights.)
One can get place renting for $2k, but can’t get approved for that mortgage amount even with tons of history showing it’s paid
I think the issue there is that there’s more risk to mortgage companies than “tons of history showing it’s paid”. There’s a reason they use complicated equations instead of interviews to make decisions related to risk. Questions that don’t directly relate to someone being unable to pay mortgage:
Will they take action that reduces the property value enough to put them underwater
If they choose to walk away for some reason, what percent of our investment do we get back?
And with the rest of the equation, home ownership is higher risk than renting because a tenant isn’t responsible for damage and repairs. If, for example, peeling asbestos gets discovered and you have to move out to fix it to the tune of $10,000 or more, will that homeowner be able to afford it? Will they just walk out and start renting somewhere? There’s a lot of things not covered by homeowners insurance that can financially devastate a homeowner, and the mortgagee (bank) might notice an income disruption that a renter would not.
And #3 - redundancy so a family member doesn’t end up homeless. I have family that does fairly well for itself. When their first kid turned 18, they bought a rental house in case she needed it someday. When their second kid turned 18, they bought a rental house in case he needed it someday.
So they own two buildings “for the purpose of renting it out”. Building number 2 is now perma-“rented” to kid number 2 because he needed it.
Also, bullet point #1. The NDQ typical long-term return is approximately 11%. Due to recent bubble bursts, it’s down to 10.4%. Importantly, that’s almost exactly 1.3mil in 10 years from 500k. Everything I’ve ever read and learned from investing or investors repeats that rental real-estate is a stable investment, not an aggressive one.
Good points and I don’t feel like counterpointing a lot of it because I’m tired.
I will say though on the returns. I used the 10 years in my house as an example but recall that was not a steady increase. Normally housing should be well below an index. What happened say the last 4 years was that the price of my house went from about 700k to 1.3mil. the 10 year example masks what I was saying. Houses had to 100% be returning more than an index the last 5 years otherwise how do you explain the rampant greed? Corporations AND individuals have been drunk on overleveraging on the residential market. They’re not doing that for index rate returns otherwise they’d be in an RRSP.
I never understood this sentiment. For single family homes the market sets the price. It’s not like when you buy a house and use it for a rental all of sudden it’s cheaper or more expensive in some way. You could make a price/demand argument but then again the underlying demand is housing not money hungry landlords. If there was not an underlying housing demand, no one would rent and it would fail as an investment.
How does the community serve those who want to rent? Apartments? Now that is where we can agree. Apartment valuation is calculated on operations not on the market. The only way to raise value of an apartment is to raise rent (or reduce expenses in some way but at some point you can only do so much). At least with SFH you have appreciation that landlords can factor in for return.
Lastly, 2 of my rentals were foreclosures. If anything I’m performing the city a service by buying these properties and adding value. If you had to choose, would you rather live next to a vacant house or a rental?
To answer your question, it’s fair for a renter to not build equity because they don’t pay for upkeep or have the risk associated with the loan. You have to put skin in the game at some point.
Edit: there are some good points for the other side of the argument if you keep reading. I don’t know what the answer is but I’m not convinced that restrictions or to disincentivize rental operations is the answer.
Apartment valuation is calculated on operations not on the market
Apartment valuation in my area spiked until the ROI crossed 10+ years. People stopped buying apartment buildings for a while except as owner-occupied with renters to assist. But in my area, none of those reach anywhere near a net-zero mortgage. The market absolutely still has an effect on valuation in most areas.
But two towns over, people are selling apartment buildings with 2-3 year ROIs, and they’re being swept up by one of a small handful of investors. Building maintenance is terrible, and there’s very little interest in the legal risk of being slumlords except those who are already slumlords over 40-50 buildings or more.
never understood this sentiment. For single family homes the market sets the price. It’s not like when you buy a house and use it for a rental all of sudden it’s cheaper or more expensive in some way. You could make a price/demand argument but then again the underlying demand is housing not money hungry landlords. If there was not an underlying housing demand, no one would rent and it would fail as an investment.
Close. You’re right there’s no profit without demand. Now, consider what happens when certain entities with way more money than most of us comes along and decides they want to induce artificial scarcity by buying up and leaving empty a ton of houses.
Lastly, 2 of my rentals were foreclosures. If anything I’m performing the city a service by buying these properties and adding value. If you had to choose, would you rather live next to a vacant house or a rental?
They both kinda suck. I’d rather live next to someone who is invested in the property.
To answer your question, it’s fair for a renter to not build equity because they don’t pay for upkeep or have the risk associated with the loan. You have to put skin in the game at some point.
I could agree with this if rent was pegged to a percentage of the mortgage value. The issue is that the landlord makes a purchase and now owes, let’s say, 1k/mo for everything. Rent, taxes, fees, etc.
They want to rent that place out, great. Maximum rent should be LESS THAN that 1k, because the landlord is already getting theirs, they’re getting equity, and the only thing they have to do is upkeep they’d have to do regardless.
I beleive housing should be a privately owned venture, at least for suburb housing where the entire plot is included. Outside of that social schemes should purchase/build properties for rental purposes.
Like you said, the housing market is in demand. But how much of that demand is manufactured by landlords purchasing more property to rent versus real buyers looking to buy-to-occupy?
Your argument for cost of maintenance is part of the equation, however the rent costs should be the cost of maintenance and upkeep with a modest margin for investment. However that’s not the case. Landlords want to take their cake and eat it. Rent is now the cost of the mortgage, AND maintenance/upkeep AND profit. Its a win for landlords and a lose for renters. If the renter is capable of paying the inflated rental costs on a regular, then they should be owning their own home. The current status-quo is unfair.
Just FYI, I am a home owner. I know the costs of mortgages, the risks that are involved and the maintenance costs of keeping a home running.
I have seen the amount paid in property taxes in USA via Zillow and… It is HUGE. No surpries that rents are so high. Rent have to cover minimum taxes, maintenance and part of house value. These expenses set the minimum value of a rent. But why you have so high property taxes? Cause enterprieses and billionaires don’t pay taxes and cause they put their huge capitals also in real estate, raising the prices. The problem is that real estate is a right ( house ), but also an asset.
People called me crazy when I didn’t like the fact that they wanted free public transit and for all the bus costs to be put into people’s property taxes. My only argument was those that actually need free bus fare, will be unable to continue affording their places they rent because property tax will go up. They will end up paying the same, if not more in the long run…all for free transit. People couldn’t grasp it and resorted to verbally attacking me. Lol I still laugh.
Transit ideally should be partly funded in the reduced road cost. Less so for buses, but imaging you linked exurbs and outer suburbs to the city by rail and a simple one lane each way road, instead of a five lane each way highway
I think the best solution is tax brackets for houses, like we do income. 0.1% for anything under 200,000, .4% under 500,000, and so on. Get that transit fund from those that won’t use it anyways but rely on the labor of others to fund their mansions.
I am really not against the idea. The only thing I would say is maybe try it first on areas that are already losing money on mass transit. That way we could massively increase usage. If you are not making money on something stop pretending that you are. NYC system is almost break even so leave that one for last.
I think it is nice when they do break even. It does cost money and effort to run them. I agree it is not essential that they do but it is nice. Cities have budget crisis if their system is running at cost or near it the chances of it losing funding is lower.
Taxes do not set the minimum price of rent, supply and demand do that. A real estate investment can still make money even if rental income is less that taxes and maintenance because land appreciates in value over time. This is why the rich invest in it, and why we should tax them where they can’t evade it.
I have seen the amount paid in property taxes in USA via Zillow and… It is HUGE
A snake eating its own tail. Lenders keep cranking out cheap loans, inflating the money supply. Buyers keep bidding up prices, inflating the cost of housing. Municipal governments need the extra cash to fight the endless “crime wave” that mysteriously crests every election cycle, so they’re always ratcheting up their spending for larger and more comically overequipped police departments. And then we’ve got another big economic downturn, so its time to lower interest rates and send out a new wave of cheap loans.
Nobody can afford to have housing prices go down. Just look at what that did to the economy in 2008.
Cause enterprieses and billionaires don’t pay taxes and cause they put their huge capitals also in real estate, raising the prices.
The threat of capital flight (which would leave you with a large number of unpaid and extremely irate police officers) means you can’t risk upsetting the ultra-wealthy.
And besides, their job isn’t to pay taxes, its to create jobs. They employ people in your town and then the employees pay the taxes. The employees get to see their housing prices rise, so they grumble but don’t complain too much. And then you have more money to hire more cops to protect against the latest Crime Wave that just so happens to be paired with a wave of housing foreclosures from lay-offs. So its time to clear the streets, re-list the houses at a higher price, and issue new mortgages with another wave of subprime loans.
If you really want to spice things up, maybe we denominate all our accounts in bitcoin, so we can really start speculating.
Taxes are astronomical because prices are inflated because of buy-to-rent.
Taxes on single-family residential properties should be like 50% of land value annually for third-homes and up or homes owned by non-human entities. Make it so fucking expensive to own extra houses that they get unloaded cheap to people who will actually live in them, and at the same time reduce the taxable value of the land because it’s selling cheap.
Property tax is like 2-3% of the property value in my area, the comment you are reply to is just suggesting making it 50% of the value of the plot annually for people who are buying their third property or commercial buyers.
Lemmings: In reality it’s class warfare. It’s the ultra rich vs everyone else.
Also lemmings: Fuck Landlords, fuck the brainwashed Republicans, fuck police, fuck liberals, quit trying to take my parks away, fuck the homeless, I should be able to live anywhere I want, you can’t own property!
Literally everyone that is WFH is employed by a tech giant with a high 6 figure salary intended for San Fran market standards, but choosing to live in a shack out in the boonies pocketing the difference. This is definitely stable, viable and repeatable for everyone in America. Go make bank y’all.
Edit: Geez, do I need the /s? Most companies caught onto this shit like 6 months into the pandemic and do cost-of-living salary adjustments for WFH now. Damn near no one is “making bank by moving” any more.
Shit, here I am in the plains states with a WFH job for a firm the next state over, seriously considering moving my family to a more expensive state with less shitty politics. (Or Europe, depending on where I could get a digital nomad visa.) I’ve got some real concerns about what happens after the elections and I don’t feel particularly comfortable being here, with the way that my family looks and my politics are.
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