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What data do you have to support your concern about creation of hereditary wealth? Why do you believe that property management is somehow special as compared wi

by gbacon 9y ago

What data do you have to support your concern about creation of hereditary wealth? Why do you believe that property management is somehow special as compared with other businesses whose profitability is tied to a single person?

ameister14 9y ago
>What data do you have to support your concern about creation of hereditary wealth? The history of Ireland, France, and the UK to start. >Why do you believe that property management is somehow special as compared with other businesses whose profitability is tied to a single person? It's quite simple. If you own land and other people manage it, you just collect a paycheck from the land without any impact on its profitability. You can die and pass it to your kids and the profit stays the same and goes to the same place. If you own a company that is completely dependent on you for profit, when you die the company stops being profitable. If you pass it to your kids and they are incompetent, they eventually lose the business.
- kodablah 9y ago
  > It's quite simple. If you own land and other people manage it, you just collect a paycheck from the land without any impact on its profitability. In many places in the US, due to property taxes and other things, land is a burden that you will spend your paycheck on, not collect it from (until you sell). Granted if you are using the land for something profitable you might collect on it, but rarely is that use passive (often only if you have mineral rights, even e.g. landlords in the multifamily industry have to work to maintain livability conditions). Using others to manage the land rarely maintains an inherent value to keep you wealthy, at least in the US.
  - EADGBE 9y ago
    > Using others to manage the land rarely maintains an inherent value to keep you wealthy, at least in the US. Property maintenance contracts aren't nearly as expensive as you might think they are. Even with a mortgage, property taxes, maintenance cost and equipment upgrades, one can still come out on top with a profit margin. *This experience is based off of single-family units, though I may have misunderstood your "land".
    - kodablah 9y ago
      > one can still come out on top with a profit margin Agreed, but that's rarely extreme wealth. The GP seems to point towards a more feudal situation which, at least on this side of the pond, doesn't seem to exist. And while land may be a primary inheritance mechanism, most significant gains are realized only after sale.
      - ameister14 9y ago
        That's not accurate in my experience. I know about a dozen families that have multi-generational wealth maintained in large part through physical property holding and rent/leasing. They are all in cities, though; Cincinnati, Miami, NYC and LA - perhaps that's the difference?
grasshopperpurp 9y ago
>Inheritance Matters. An estimated 35 to 45 percent of wealth is inherited rather than self-made, according to Kopczuk’s review of the literature. Not addressing the property management point, but this (from 2015) addresses hereditary wealth https://www.brookings.edu/blog/social-mobility-memos/2015/01/30/wealth-inheritance-and-social-mobility/ https://www.brookings.edu/blog/social-mobility-memos/2015/01...
heymijo 9y ago
Thanks for asking this gbacon. It's a question that came to mind for me as well and one that ameister's big picture response below satisfies.

by gbacon 9y ago

ameister14 9y ago

>What data do you have to support your concern about creation of hereditary wealth? The history of Ireland, France, and the UK to start. >Why do you believe that property management is somehow special as compared with other businesses whose profitability is tied to a single person? It's quite simple. If you own land and other people manage it, you just collect a paycheck from the land without any impact on its profitability. You can die and pass it to your kids and the profit stays the same and goes to the same place. If you own a company that is completely dependent on you for profit, when you die the company stops being profitable. If you pass it to your kids and they are incompetent, they eventually lose the business.

kodablah 9y ago
> It's quite simple. If you own land and other people manage it, you just collect a paycheck from the land without any impact on its profitability. In many places in the US, due to property taxes and other things, land is a burden that you will spend your paycheck on, not collect it from (until you sell). Granted if you are using the land for something profitable you might collect on it, but rarely is that use passive (often only if you have mineral rights, even e.g. landlords in the multifamily industry have to work to maintain livability conditions). Using others to manage the land rarely maintains an inherent value to keep you wealthy, at least in the US.
- EADGBE 9y ago
  > Using others to manage the land rarely maintains an inherent value to keep you wealthy, at least in the US. Property maintenance contracts aren't nearly as expensive as you might think they are. Even with a mortgage, property taxes, maintenance cost and equipment upgrades, one can still come out on top with a profit margin. *This experience is based off of single-family units, though I may have misunderstood your "land".
  - kodablah 9y ago
    > one can still come out on top with a profit margin Agreed, but that's rarely extreme wealth. The GP seems to point towards a more feudal situation which, at least on this side of the pond, doesn't seem to exist. And while land may be a primary inheritance mechanism, most significant gains are realized only after sale.
    - ameister14 9y ago
      That's not accurate in my experience. I know about a dozen families that have multi-generational wealth maintained in large part through physical property holding and rent/leasing. They are all in cities, though; Cincinnati, Miami, NYC and LA - perhaps that's the difference?

grasshopperpurp 9y ago

>Inheritance Matters. An estimated 35 to 45 percent of wealth is inherited rather than self-made, according to Kopczuk’s review of the literature. Not addressing the property management point, but this (from 2015) addresses hereditary wealth https://www.brookings.edu/blog/social-mobility-memos/2015/01/30/wealth-inheritance-and-social-mobility/ https://www.brookings.edu/blog/social-mobility-memos/2015/01...

heymijo 9y ago

Thanks for asking this gbacon. It's a question that came to mind for me as well and one that ameister's big picture response below satisfies.