4 ms·

>> A home lying empty has a negative return (due to maintenance and operating costs, still have to water lawns, repair weather damage, etc). A home being rented

>> A home lying empty has a negative return (due to maintenance and operating costs, still have to water lawns, repair weather damage, etc). A home being rented has a higher return. There is simply no reason from an investors perspective to leave a home empty unless you can't find a renter who will cover their costs, or you are trying to sell it. Maybe it depends on WHERE the property is. Your perspective doesn't ring true with e.g. a flat in a major city (London for example). No lawns to take care of our weather damage to deal with. Really very little to zero maintenance. Rent it and you have lots of laws to comply with, agencies to deal with, appliances and furniture to install, and when things break you pay for them. Also, renters are going to create a lot of wear and tear and their deposit is unlikely to cover it (and with laws around deposits every penny needs to be accounted for which isn't easy with general wear and tear).

valuearb 9y ago
Then your argument is with rental regulations. But it's absurd to think that even with the most restrictive regulations that apartments that would rent for thousands of dollars per month can't be rented profitably.
- VLM 9y ago
  Why is it absurd, if you put numbers to it? I make 95%th percentile income. I live in a 95th percentile house deep in the burbs. I'm in a lifestyle where a 95th percentile urban apartment is completely uninteresting to me, my numerous neighbors agree. To maximize return all condo construction downtown has been ultra luxury out of my income range, but for the sake of argument, we'll claim its affordable by a mere 95th percenter, but if I don't want to live there, it doesn't matter if there is available rental property nor does it matter if there's 5, 10, or 15 condo towers at the same price currently under construction. There's enough of a local pyramid of incomes such that most of my fellow 95%ers are already living in the burbs and no amount of urban construction will get us downtown. So there are a lot of empty condos downtown, kind of like 2007 all over again but for a different reason. Building something to a specific rental cost, does not obligate people to live in it, or earn enough money to pay for it. Its like the classic micro vs macro economic effect of education argument. On a micro scale all individuals benefit from more education it always raises an individuals quality of life. On a macro scale requiring education in excess of the job reqs merely ties up labor and capital in unproductive activity, it lowers everyone's quality of life. What government policy should be, perhaps to bulldoze the schools, should naturally be the opposite of parental individual advice, to attend college. Likewise on an individual case basis constructing the most expensive possible condo is always financially most individually rewarding, yet the same act on a city wide basis the result is horrible and awful. I could build a nice condo for a SV google employee to live in, at SV google salary. The 2000 mile commute means its useless. The point isn't the commute itself, the point is if you don't build what people want, it doesn't matter if an abstract mathematical number implies the rent should be perfect, they're just not going to rent. There is a side issue that census figures seem to imply there's 5-10 million people in or above my household income percentile so lets call it 3 million families for the sake of argument. Lets say there's 6 million residences at or above my percentile of income. Lets say all urban condo construction to the level of 1 million residences per year is at a floor of my income (actually higher than my income, plenty of places I can't afford). If there's only 3 million families at my level of wealth across the entire country, and 6 million residences in the form of recently constructed condos and mcmansions and real homes too, there's simply gonna be a lot of empty real estate and more every year. As long as the banks are willing to fund it, more will be constructed. The fed will manipulate things to keep it affordable to keep employment high. I'm not necessarily offended. I my dads generation Detroit made cars engineered to rust and fall apart in two years, which was incredibly environmentally wasteful, while their houses were constructed to last centuries. My generation makes residences no one can afford to live in that take only a decade to fall apart whereas our cars are engineered to operate longer than the house are designed to stand. I'm sure there are abandoned mcmansions that are unlivable today that are younger than my wifes car which stubbornly refuses to break.
  - jdmichal 9y ago
    I think the argument is that, in such an overstock situation, the suppliers should be dropping their price to match demand. Of course, such action has all sorts of barriers in the real world, especially if there are investors behind it. Who wants to vote to lose money, as opposed to the low-cost action of simply waiting (and hoping) for a buyer?
    - VLM 9y ago
      If the economy were expanding one strategy would be to wait for the pool of buyers to enlarge enough to buy in. But since its not, in general, on average, across the country...
- throwaway2048 9y ago
  see my reply to you here https://news.ycombinator.com/item?id=14239444 https://news.ycombinator.com/item?id=14239444 You are operating under the assumption that people are buying these properties for the sake of long term investment. That is the classical model of real estate investment, its no longer what is occuring at scale.

valuearb 9y ago

Then your argument is with rental regulations. But it's absurd to think that even with the most restrictive regulations that apartments that would rent for thousands of dollars per month can't be rented profitably.

VLM 9y ago
Why is it absurd, if you put numbers to it? I make 95%th percentile income. I live in a 95th percentile house deep in the burbs. I'm in a lifestyle where a 95th percentile urban apartment is completely uninteresting to me, my numerous neighbors agree. To maximize return all condo construction downtown has been ultra luxury out of my income range, but for the sake of argument, we'll claim its affordable by a mere 95th percenter, but if I don't want to live there, it doesn't matter if there is available rental property nor does it matter if there's 5, 10, or 15 condo towers at the same price currently under construction. There's enough of a local pyramid of incomes such that most of my fellow 95%ers are already living in the burbs and no amount of urban construction will get us downtown. So there are a lot of empty condos downtown, kind of like 2007 all over again but for a different reason. Building something to a specific rental cost, does not obligate people to live in it, or earn enough money to pay for it. Its like the classic micro vs macro economic effect of education argument. On a micro scale all individuals benefit from more education it always raises an individuals quality of life. On a macro scale requiring education in excess of the job reqs merely ties up labor and capital in unproductive activity, it lowers everyone's quality of life. What government policy should be, perhaps to bulldoze the schools, should naturally be the opposite of parental individual advice, to attend college. Likewise on an individual case basis constructing the most expensive possible condo is always financially most individually rewarding, yet the same act on a city wide basis the result is horrible and awful. I could build a nice condo for a SV google employee to live in, at SV google salary. The 2000 mile commute means its useless. The point isn't the commute itself, the point is if you don't build what people want, it doesn't matter if an abstract mathematical number implies the rent should be perfect, they're just not going to rent. There is a side issue that census figures seem to imply there's 5-10 million people in or above my household income percentile so lets call it 3 million families for the sake of argument. Lets say there's 6 million residences at or above my percentile of income. Lets say all urban condo construction to the level of 1 million residences per year is at a floor of my income (actually higher than my income, plenty of places I can't afford). If there's only 3 million families at my level of wealth across the entire country, and 6 million residences in the form of recently constructed condos and mcmansions and real homes too, there's simply gonna be a lot of empty real estate and more every year. As long as the banks are willing to fund it, more will be constructed. The fed will manipulate things to keep it affordable to keep employment high. I'm not necessarily offended. I my dads generation Detroit made cars engineered to rust and fall apart in two years, which was incredibly environmentally wasteful, while their houses were constructed to last centuries. My generation makes residences no one can afford to live in that take only a decade to fall apart whereas our cars are engineered to operate longer than the house are designed to stand. I'm sure there are abandoned mcmansions that are unlivable today that are younger than my wifes car which stubbornly refuses to break.
- jdmichal 9y ago
  I think the argument is that, in such an overstock situation, the suppliers should be dropping their price to match demand. Of course, such action has all sorts of barriers in the real world, especially if there are investors behind it. Who wants to vote to lose money, as opposed to the low-cost action of simply waiting (and hoping) for a buyer?
  - VLM 9y ago
    If the economy were expanding one strategy would be to wait for the pool of buyers to enlarge enough to buy in. But since its not, in general, on average, across the country...
throwaway2048 9y ago
see my reply to you here https://news.ycombinator.com/item?id=14239444 https://news.ycombinator.com/item?id=14239444 You are operating under the assumption that people are buying these properties for the sake of long term investment. That is the classical model of real estate investment, its no longer what is occuring at scale.