6 ms·

I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. Also, once they o

I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. Also, once they own such property, they could rent it for the time when they are away. They could make a lot of money this way. In the first case, people are giving away money for nothing. In the second case, people refuse to take money. Why do they do that?

samatman 10y ago
It's because money has marginal utility[0]. The 0.001% spend tens of millions a year, each, on this kind of pointless status signaling, and think nothing of conveniences that could pay all expenses for, say, a dozen families of four, for a year (or a decade). [0]: https://en.wikipedia.org/wiki/Marginal_utility https://en.wikipedia.org/wiki/Marginal_utility
spoonie 10y ago
If the house is also an investment, they can make money by buying rather than renting it. This is part of the problem with so much speculation and housing being treated as an investment: you earn potentially greater returns by buying a house, so everyone starts doing it and th values keep going up. As to why they don't rent it out when they aren't in town, I can think of a few reasons: they don't want the risk of items in the house being damaged, they don't want "other people" in their house, they like visiting on short notice (even if it's only a few times a year) which isn't compatible with renting.
- gregpilling 10y ago
  There is also magnification on the investment with leverage, and it can be a good hedge against inflation. Condsider a property that costs $1,000,000 which you may be able to finance 75% of. You have $250k invested, but it is the whole value that appreciates. So in a competitive market like Paris, perhaps that $1M house is worth $1.75M in 10 years. Now you have earned $750,000 for your $250,000 investment in 10 years. All the while having something relatively safe, and fun to use. If it was inflation that caused the increase in home value, then you are covered for that too, much better than keeping cash in a CD or savings account.
  - jfk13 10y ago
    > Now you have earned $750,000 Minus the interest you're paying on the $750K you borrowed in the first place. If that interest outstrips the appreciation of the asset, you lose.
  - pcmaffey 10y ago
    Assuming this was paid off in 10 years, you'd pay 250k in interest. A 500k return is 10% annual. Still good, but not world beating. Also property ownership comes with its own costs (taxes, upkeep, time, etc). A worthy investment all the same, but its not all rainbows and butterflies.
lossolo 10y ago
Because they couldn't say then while socializing ".. in MY home in France..", some use it for investment (but only few). If everyone around you have something and talks about something like it's some kind of achievement and just having that thing gives them higher social status then you want that also.
imgabe 10y ago
I think it is a place to park money. Homes in highly desirable areas tend to maintain their value and usually increase over time. If you're sitting on hundreds of millions or billions of dollars, you can't just stick it all in a savings account or an index fund. It has to go somewhere. Real estate is one place. Consider a $20 million Manhattan apartment. Even if it has a "management fee" of $5k per month (not uncommon), that's still only 0.3% per year. Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. Ultimately I think it will be self-defeating. If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there.
- vegabook 10y ago
  It is also a function of inflation. Chronic negative real interest rates and quantitative easing across the developed world, used to prop up banks, disincentize traditional savings vehicles such as bonds, while property is usually a good inflation hedge that is less risky than stocks.
- arkades 10y ago
  > If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there. Already happening in some places. The average rent of a 1BR in Manhattan leveled off a couple years ago, roughly equal to the average 1BR in Brooklyn. All but the most successful young professionals have fled the city for the boroughs; the artists fled ahead of them, so all the fun night life that used to make NYC so exciting is already out in Queens (for a while it was in Brooklyn, but I think a lot has been pushed out there already, too). NYC, now, is a lot more dead by comparison. It's still fun for tourists, and the place to be for the sort of evening life that is either more expensive (fine dining) or less capable of flight to the outer boroughs (museums), but if you're a local...
- deleted 10y ago
  [deleted]
- mafribe 10y ago
  Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. And yet, renting it out or AirBnBing it would be what? +$10k per month? There are not many people rich enough not to care about foregoing that much money every month.
kchoudhu 10y ago
Yes, but the house won't be just so if I rent it for a day or two. We ended up buying a house so that we can use it for eight weeks every year when we're back in the US so that we can feel like we're in a home for the duration of our stay and not interloping on someone else's home. From our point of view, it's a valid use case.
sigstoat 10y ago
> Also, once they own such property, they could rent it for the time when they are away. being a landlord is a pain in the ass, even if you hire a property management company.
gozur88 10y ago
Renters are a hassle, and they have a lot of legal protections. Where I live it's hard to kick them out even if they stop paying, and if they trash the place you could be out a lot of money. I wouldn't rent my vacation home out unless I needed the money.
- IvanK_net 10y ago
  "legal protections of renters" ... maybe, in other words, it means, that government makes renting extremely unfavorable and complicated. In that case, the government is responsible for empty apartments. They try to solve the problem without realising what is the source of the problem. Or maybe we need some service for that, which would include insurance and everything, and will just pay owners the money without worrying about anything.
  - gozur88 10y ago
    For insurance to be workable you need to be able to collect more in premiums than you pay out in claims. I suspect we'd already be seeing something like that if the numbers worked.
coldtea 10y ago
>I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. Because either (a) they don't care for it being cheaper, they have plenty of money to spare (I know several such people), or (b) they still have money, but not enough that they don't care about renting vs buying and living vacant. But they see the vacant house as a stable-ish investment on that property (I also know of this latter category). Both cases don't care to go through the hassle of renting the house to others. >In the first case, people are giving away money for nothing. In the second case, people refuse to take money. Why do they do that? Both of these are concerns of middle/working class people like us. Not the concerns of people that make lotsa money (e.g. 500.000 to several million per year). And above them, they are people who can afford to have whole castles sitting, waiting for them empty with full staff working there in several places in the world and not think twice about it.
refurb 10y ago
They are doing it for flexibility. My wife's uncle and his wife do this. They own 3 homes in the bay area. An apartment in the city, a house in Marin and a condo near Monterey. They are well off, but not filthy rich (~$5M in net worth including real estate, which is high, but they are both retired after working good paying jobs). They don't rent any of them out since they like the flexibility to decide at the last minute where they want to spend the night. They did luck out and buy these homes when prices were depressed.
toast0 10y ago
> Also, once they own such property, they could rent it for the time when they are away. They could make a lot of money this way. And they could make a lot of aggravation this way if they get a nightmare tenant.
byoung2 10y ago
I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. My wife and I own a condo in the Philippines which we use 1 month out of the year. Why buy when we could just rent or get a timeshare? This place is ours forever, it has already appreciated 50% over what we paid 4 years ago, it is always available when we need it, and we got to decorate it the way we wanted.
- IvanK_net 10y ago
  Did you try to offer that condo to your friends or relatives, so they can use it sometimes, too? Maybe this condo can make you more money, than you could imagine. I understand, that it would bother you to find renters and to worry about your house, but maybe we just need some special service for that.
  - byoung2 10y ago
    Did you try to offer that condo to your friends or relatives, so they can use it sometimes, too? My wife's relatives in the Philippines have the key, and they stay there occasionally to use the resort-style pool and cabanas, and a few friends from the UK or Australia who visited the Philippines stayed there. We could make money through AirBnB or longer-term rentals, and in fact the condo management company facilitates that with concierge, checkin/checkout, cleaning, airport transer services, etc, but the rent we would get (~$300-600 after expenses) isn't enough to justify the extra wear and tear on the condo.
VLM 10y ago
Normally people would own gold and keep it in a nice safe deposit box, but times are never normal, and the government does not have dozens of programs focused on public-private partnerships to make more gold, government backed loans to buy gold, and define percentage of goldowners as a bean counting metric goal which somehow implies success. Something to think about is all countries sell citizenship rights some more explicitly than others, but all do it, and going rate in the 1st world is about a half million on the balance sheet of a new company, and all you need to do is form a SMLLC and have it purchase the million dollar condo, then you're in on an investment visa and its pretty easy to prove your corporation has an asset of a million bucks, its right there in the tax records. Now the government hopes that people who come in on an entrepreneur VISA actually open a real business, but its hard to prove who's a real businessman vs an incompetent businessman, so anyone going thru the documented motions gets in. Anyway at least some million dollar empty condos are the visual manifestation of the weirdest naturalization ritual in the history of humanity. All countries have wide open visa policies if you're a businessmen willing to invest a large enough amount of money, all of them.

samatman 10y ago

It's because money has marginal utility[0]. The 0.001% spend tens of millions a year, each, on this kind of pointless status signaling, and think nothing of conveniences that could pay all expenses for, say, a dozen families of four, for a year (or a decade). [0]: https://en.wikipedia.org/wiki/Marginal_utility https://en.wikipedia.org/wiki/Marginal_utility

spoonie 10y ago

If the house is also an investment, they can make money by buying rather than renting it. This is part of the problem with so much speculation and housing being treated as an investment: you earn potentially greater returns by buying a house, so everyone starts doing it and th values keep going up. As to why they don't rent it out when they aren't in town, I can think of a few reasons: they don't want the risk of items in the house being damaged, they don't want "other people" in their house, they like visiting on short notice (even if it's only a few times a year) which isn't compatible with renting.

gregpilling 10y ago
There is also magnification on the investment with leverage, and it can be a good hedge against inflation. Condsider a property that costs $1,000,000 which you may be able to finance 75% of. You have $250k invested, but it is the whole value that appreciates. So in a competitive market like Paris, perhaps that $1M house is worth $1.75M in 10 years. Now you have earned $750,000 for your $250,000 investment in 10 years. All the while having something relatively safe, and fun to use. If it was inflation that caused the increase in home value, then you are covered for that too, much better than keeping cash in a CD or savings account.
- jfk13 10y ago
  > Now you have earned $750,000 Minus the interest you're paying on the $750K you borrowed in the first place. If that interest outstrips the appreciation of the asset, you lose.
- pcmaffey 10y ago
  Assuming this was paid off in 10 years, you'd pay 250k in interest. A 500k return is 10% annual. Still good, but not world beating. Also property ownership comes with its own costs (taxes, upkeep, time, etc). A worthy investment all the same, but its not all rainbows and butterflies.

lossolo 10y ago

Because they couldn't say then while socializing ".. in MY home in France..", some use it for investment (but only few). If everyone around you have something and talks about something like it's some kind of achievement and just having that thing gives them higher social status then you want that also.

imgabe 10y ago

I think it is a place to park money. Homes in highly desirable areas tend to maintain their value and usually increase over time. If you're sitting on hundreds of millions or billions of dollars, you can't just stick it all in a savings account or an index fund. It has to go somewhere. Real estate is one place. Consider a $20 million Manhattan apartment. Even if it has a "management fee" of $5k per month (not uncommon), that's still only 0.3% per year. Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. Ultimately I think it will be self-defeating. If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there.

vegabook 10y ago
It is also a function of inflation. Chronic negative real interest rates and quantitative easing across the developed world, used to prop up banks, disincentize traditional savings vehicles such as bonds, while property is usually a good inflation hedge that is less risky than stocks.
arkades 10y ago
> If too many people do this, the vibrancy of the city that makes the real estate valuable in the first place will disappear, because nobody will be able to afford to live there. Already happening in some places. The average rent of a 1BR in Manhattan leveled off a couple years ago, roughly equal to the average 1BR in Brooklyn. All but the most successful young professionals have fled the city for the boroughs; the artists fled ahead of them, so all the fun night life that used to make NYC so exciting is already out in Queens (for a while it was in Brooklyn, but I think a lot has been pushed out there already, too). NYC, now, is a lot more dead by comparison. It's still fun for tourists, and the place to be for the sort of evening life that is either more expensive (fine dining) or less capable of flight to the outer boroughs (museums), but if you're a local...
deleted 10y ago
[deleted]
mafribe 10y ago
Far less than you'd pay to a hedge fund or other investment manager to hold on to the money. And yet, renting it out or AirBnBing it would be what? +$10k per month? There are not many people rich enough not to care about foregoing that much money every month.

kchoudhu 10y ago

Yes, but the house won't be just so if I rent it for a day or two. We ended up buying a house so that we can use it for eight weeks every year when we're back in the US so that we can feel like we're in a home for the duration of our stay and not interloping on someone else's home. From our point of view, it's a valid use case.

sigstoat 10y ago

> Also, once they own such property, they could rent it for the time when they are away. being a landlord is a pain in the ass, even if you hire a property management company.

gozur88 10y ago

Renters are a hassle, and they have a lot of legal protections. Where I live it's hard to kick them out even if they stop paying, and if they trash the place you could be out a lot of money. I wouldn't rent my vacation home out unless I needed the money.

IvanK_net 10y ago
"legal protections of renters" ... maybe, in other words, it means, that government makes renting extremely unfavorable and complicated. In that case, the government is responsible for empty apartments. They try to solve the problem without realising what is the source of the problem. Or maybe we need some service for that, which would include insurance and everything, and will just pay owners the money without worrying about anything.
- gozur88 10y ago
  For insurance to be workable you need to be able to collect more in premiums than you pay out in claims. I suspect we'd already be seeing something like that if the numbers worked.

coldtea 10y ago

>I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. Because either (a) they don't care for it being cheaper, they have plenty of money to spare (I know several such people), or (b) they still have money, but not enough that they don't care about renting vs buying and living vacant. But they see the vacant house as a stable-ish investment on that property (I also know of this latter category). Both cases don't care to go through the hassle of renting the house to others. >In the first case, people are giving away money for nothing. In the second case, people refuse to take money. Why do they do that? Both of these are concerns of middle/working class people like us. Not the concerns of people that make lotsa money (e.g. 500.000 to several million per year). And above them, they are people who can afford to have whole castles sitting, waiting for them empty with full staff working there in several places in the world and not think twice about it.

refurb 10y ago

They are doing it for flexibility. My wife's uncle and his wife do this. They own 3 homes in the bay area. An apartment in the city, a house in Marin and a condo near Monterey. They are well off, but not filthy rich (~$5M in net worth including real estate, which is high, but they are both retired after working good paying jobs). They don't rent any of them out since they like the flexibility to decide at the last minute where they want to spend the night. They did luck out and buy these homes when prices were depressed.

toast0 10y ago

> Also, once they own such property, they could rent it for the time when they are away. They could make a lot of money this way. And they could make a lot of aggravation this way if they get a nightmare tenant.

byoung2 10y ago

I don't understand, why owners buy such vacant homes, which they use twice a year. Renting the same house for two days would be much cheaper. My wife and I own a condo in the Philippines which we use 1 month out of the year. Why buy when we could just rent or get a timeshare? This place is ours forever, it has already appreciated 50% over what we paid 4 years ago, it is always available when we need it, and we got to decorate it the way we wanted.

IvanK_net 10y ago
Did you try to offer that condo to your friends or relatives, so they can use it sometimes, too? Maybe this condo can make you more money, than you could imagine. I understand, that it would bother you to find renters and to worry about your house, but maybe we just need some special service for that.
- byoung2 10y ago
  Did you try to offer that condo to your friends or relatives, so they can use it sometimes, too? My wife's relatives in the Philippines have the key, and they stay there occasionally to use the resort-style pool and cabanas, and a few friends from the UK or Australia who visited the Philippines stayed there. We could make money through AirBnB or longer-term rentals, and in fact the condo management company facilitates that with concierge, checkin/checkout, cleaning, airport transer services, etc, but the rent we would get (~$300-600 after expenses) isn't enough to justify the extra wear and tear on the condo.

VLM 10y ago

Normally people would own gold and keep it in a nice safe deposit box, but times are never normal, and the government does not have dozens of programs focused on public-private partnerships to make more gold, government backed loans to buy gold, and define percentage of goldowners as a bean counting metric goal which somehow implies success. Something to think about is all countries sell citizenship rights some more explicitly than others, but all do it, and going rate in the 1st world is about a half million on the balance sheet of a new company, and all you need to do is form a SMLLC and have it purchase the million dollar condo, then you're in on an investment visa and its pretty easy to prove your corporation has an asset of a million bucks, its right there in the tax records. Now the government hopes that people who come in on an entrepreneur VISA actually open a real business, but its hard to prove who's a real businessman vs an incompetent businessman, so anyone going thru the documented motions gets in. Anyway at least some million dollar empty condos are the visual manifestation of the weirdest naturalization ritual in the history of humanity. All countries have wide open visa policies if you're a businessmen willing to invest a large enough amount of money, all of them.