8 ms·

Property is a fascinating asset-class. Is there anything else where amateur investors are so encouraged to take the plunge? Just look at TV shows about it: http

by adgasf 10y ago

Property is a fascinating asset-class. Is there anything else where amateur investors are so encouraged to take the plunge? Just look at TV shows about it: https://www.google.co.uk/search?q=tv+show+house+renovation https://www.google.co.uk/search?q=tv+show+house+renovation

jessriedel 10y ago
The story I've heard is that if you look at the possible large investments available to a normal person, buying real estate involves the most local knowledge and least technical skills. This means that unsophisticated investors are much more competitive at real estate than they are at, say, investing in auto-repair shops.
- patio11 10y ago
  I also wouldn't discount the trivially available 5X (or higher) leverage and tax benefits. If SaaS businesses were like houses you could buy ~$30k in MRR for $200k down with the other $800k at 2% APR fixed over 30 years... a proposition which would not be untempting to many people on HN.
- branchless 10y ago
  The least skills? Sounds like they should get minimum wage. My landlord works for about 10 hours a year. Parasites need land value taxing.
  - sokoloff 10y ago
    Land value taxes will end up being paid by the tenant. The landlord will only handle the money. The tenant, as the one "consuming" the land for that term is the one who ought to pay the tax for the value of the land. It's only when the land is unoccupied that the owner/landlord will pay (which is also perfectly fair). With apologies to Henry Ford: https://www.brainyquote.com/quotes/quotes/h/henryford122318.html https://www.brainyquote.com/quotes/quotes/h/henryford122318....
    - branchless 10y ago
      Totally wrong. You can't pass on land value tax, prices are set by the ability to pay and taxing the landlord does not increase the ability of the tenant to pay. You don't know how prices are set.
      - sokoloff 10y ago
        Who do you think pays the real estate taxes now in an occupied rental? Where does the money come from? Why are those answers different (or the same)?
        branchless 10y ago
        You have the same idea on how prices are set as children do.
        sokoloff 10y ago
        Yes, even my children can understand this.
        branchless 10y ago
        I guess George and Friedman were behind your kids then: http://www.wealthandwant.com/HG/why_the_landowner_cannot_shift.html http://www.wealthandwant.com/HG/why_the_landowner_cannot_shi... http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val... Friedman prefers it: https://www.youtube.com/watch?v=yS7Jb58hcsc https://www.youtube.com/watch?v=yS7Jb58hcsc
        sokoloff 10y ago
        I substantially agree with Friedman that taxing the unimproved value of land is the least bad tax, but I see no evidence to suggest that he thinks it will be paid effectively by the legal owner of the property (the landlord) rather than passing it along to the beneficial user of the property (the tenant). It would seem strange indeed that the user would pay the tax if they owned the house, but would avoid entirely the effect of the tax if they rented the property and the landlord would pay the tax entirely, passing along none of it to the tenant. I have serious doubts that either of us will convince the other on this topic. With that, I wish you well and if you wish to never own property, may you entirely avoid the effects of land value taxes.
paulpauper 10y ago
Real estate is one of the best ways to make long-term wealth. Homes in many regions of California have increased 3-4x since 1996. Unless you bought at a really bad time (2005-2007) almost anyone who holds real estate comes out ahead in 10 years vs. renting. Renting is a really lousy deal in the long-run and as possibly the short-run due to the very high deposits required on some properties, which lock the renter for very long periods and the rent increase always exceeds inflation. Avoid foreign real estate though unless you are very careful
- idiot_stick 10y ago
  >Real estate is one of the best ways to make long-term wealth The long-run real returns to real estate are essentially zero. TINSTAAFL. The only reason it's "profitable" for the average person is because the financial system allows for easy leverage (home mortgages). Take away that subsidization and real estate is just another asset class with no advantages. >Homes in many regions of California have increased 3-4x since 1996 And many random stocks have increased 3-4x since 1996. So what?
  - pg314 10y ago
    If the long-run real returns are zero, they will also be zero with leverage (assuming you can borrow at a zero real intrest rate). Leverage is only an advantage if your return is higher than your cost of borrowing.
    - idiot_stick 10y ago
      >Leverage is only an advantage if your return is higher than your cost of borrowing. Which it is for housing, and many other investments. Only the bank won't lend you $500,000, backed by the government, to buy stocks. My qualm with the OP was the implication that real-estate has outsized returns. Unless you're taking advantage of a home mortgage, there's nothing significant about real-estate returns. Of course most of us here are of the generation that saw nothing but rising house price (except for that one time where they didn't, but that's an anomaly, right?)
- 10y ago
branchless 10y ago
Lending against land is how we create money. The entire system sees all productivity gains flow to land owners. It's killing the West.

by adgasf 10y ago

jessriedel 10y ago

The story I've heard is that if you look at the possible large investments available to a normal person, buying real estate involves the most local knowledge and least technical skills. This means that unsophisticated investors are much more competitive at real estate than they are at, say, investing in auto-repair shops.

patio11 10y ago
I also wouldn't discount the trivially available 5X (or higher) leverage and tax benefits. If SaaS businesses were like houses you could buy ~$30k in MRR for $200k down with the other $800k at 2% APR fixed over 30 years... a proposition which would not be untempting to many people on HN.
branchless 10y ago
The least skills? Sounds like they should get minimum wage. My landlord works for about 10 hours a year. Parasites need land value taxing.
- sokoloff 10y ago
  Land value taxes will end up being paid by the tenant. The landlord will only handle the money. The tenant, as the one "consuming" the land for that term is the one who ought to pay the tax for the value of the land. It's only when the land is unoccupied that the owner/landlord will pay (which is also perfectly fair). With apologies to Henry Ford: https://www.brainyquote.com/quotes/quotes/h/henryford122318.html https://www.brainyquote.com/quotes/quotes/h/henryford122318....
  - branchless 10y ago
    Totally wrong. You can't pass on land value tax, prices are set by the ability to pay and taxing the landlord does not increase the ability of the tenant to pay. You don't know how prices are set.
    - sokoloff 10y ago
      Who do you think pays the real estate taxes now in an occupied rental? Where does the money come from? Why are those answers different (or the same)?
      - branchless 10y ago
        You have the same idea on how prices are set as children do.
        sokoloff 10y ago
        Yes, even my children can understand this.
        branchless 10y ago
        I guess George and Friedman were behind your kids then: http://www.wealthandwant.com/HG/why_the_landowner_cannot_shift.html http://www.wealthandwant.com/HG/why_the_landowner_cannot_shi... http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val... Friedman prefers it: https://www.youtube.com/watch?v=yS7Jb58hcsc https://www.youtube.com/watch?v=yS7Jb58hcsc
        sokoloff 10y ago
        I substantially agree with Friedman that taxing the unimproved value of land is the least bad tax, but I see no evidence to suggest that he thinks it will be paid effectively by the legal owner of the property (the landlord) rather than passing it along to the beneficial user of the property (the tenant). It would seem strange indeed that the user would pay the tax if they owned the house, but would avoid entirely the effect of the tax if they rented the property and the landlord would pay the tax entirely, passing along none of it to the tenant. I have serious doubts that either of us will convince the other on this topic. With that, I wish you well and if you wish to never own property, may you entirely avoid the effects of land value taxes.

paulpauper 10y ago

Real estate is one of the best ways to make long-term wealth. Homes in many regions of California have increased 3-4x since 1996. Unless you bought at a really bad time (2005-2007) almost anyone who holds real estate comes out ahead in 10 years vs. renting. Renting is a really lousy deal in the long-run and as possibly the short-run due to the very high deposits required on some properties, which lock the renter for very long periods and the rent increase always exceeds inflation. Avoid foreign real estate though unless you are very careful

idiot_stick 10y ago
>Real estate is one of the best ways to make long-term wealth The long-run real returns to real estate are essentially zero. TINSTAAFL. The only reason it's "profitable" for the average person is because the financial system allows for easy leverage (home mortgages). Take away that subsidization and real estate is just another asset class with no advantages. >Homes in many regions of California have increased 3-4x since 1996 And many random stocks have increased 3-4x since 1996. So what?
- pg314 10y ago
  If the long-run real returns are zero, they will also be zero with leverage (assuming you can borrow at a zero real intrest rate). Leverage is only an advantage if your return is higher than your cost of borrowing.
  - idiot_stick 10y ago
    >Leverage is only an advantage if your return is higher than your cost of borrowing. Which it is for housing, and many other investments. Only the bank won't lend you $500,000, backed by the government, to buy stocks. My qualm with the OP was the implication that real-estate has outsized returns. Unless you're taking advantage of a home mortgage, there's nothing significant about real-estate returns. Of course most of us here are of the generation that saw nothing but rising house price (except for that one time where they didn't, but that's an anomaly, right?)
10y ago

branchless 10y ago

Lending against land is how we create money. The entire system sees all productivity gains flow to land owners. It's killing the West.