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Buying property as a foreign investor is mostly an attempt to store your money in a pretty stable product. If you were to let renters use that property and the

by y4mi 9y ago

Buying property as a foreign investor is mostly an attempt to store your money in a pretty stable product. If you were to let renters use that property and they don't take care of it properly, you'd have lost a lot of money. It's often just not worth the effort for these people.

seanmcdirmid 9y ago
Depends on the property tax rate. That is definitely true in china where there is no property tax, but less true in the west given that high property taxes act to effectively deprecate your property yearly. If they sit on the property for 10 years and the rate is 1%, that is 10% gone, and it only gets worse as the property appreciates (well, outside of California). Property tax acts as a stick to put property to productive use rather than just sit on it, otherwise the USA property market might be as dysfunctional as china’s.
- usaar333 9y ago
  Do China's 70 year land leases not function as an equivalent to a property tax?
  - seanmcdirmid 9y ago
    Not really, because everyone assumes they will be easily and cheaply rolled over like they were done in Wenzhou a few years ago. It is expected that the Chinese government will eventually abandon the land lease system and replace it with a property tax one. But they won't do so until the current bubble pops.
michaelchisari 9y ago
There's also the upkeep and management costs of being a landlord. If you're a foreign investor, you have no interest in that. So you can either outsource it to a third party, deeply cutting into your rental revenue (and also being on the hook for any repairs required)... Or you just sit and hold it. Maybe send in a cleaning and maintenance crew every once in a while to keep the dust at bay. Much less headache than renting.
- mercer 9y ago
  On top of that there's some pretty stringent protection of renters which can cause major headaches down the road. Personally I'm inclined to be in favor of these protections, but I can also understand a wealthy investor wanting to take the hit of leaving the place empty to avoid these kinds of troubles.

by y4mi 9y ago

seanmcdirmid 9y ago

Depends on the property tax rate. That is definitely true in china where there is no property tax, but less true in the west given that high property taxes act to effectively deprecate your property yearly. If they sit on the property for 10 years and the rate is 1%, that is 10% gone, and it only gets worse as the property appreciates (well, outside of California). Property tax acts as a stick to put property to productive use rather than just sit on it, otherwise the USA property market might be as dysfunctional as china’s.

usaar333 9y ago
Do China's 70 year land leases not function as an equivalent to a property tax?
- seanmcdirmid 9y ago
  Not really, because everyone assumes they will be easily and cheaply rolled over like they were done in Wenzhou a few years ago. It is expected that the Chinese government will eventually abandon the land lease system and replace it with a property tax one. But they won't do so until the current bubble pops.

michaelchisari 9y ago

There's also the upkeep and management costs of being a landlord. If you're a foreign investor, you have no interest in that. So you can either outsource it to a third party, deeply cutting into your rental revenue (and also being on the hook for any repairs required)... Or you just sit and hold it. Maybe send in a cleaning and maintenance crew every once in a while to keep the dust at bay. Much less headache than renting.

mercer 9y ago
On top of that there's some pretty stringent protection of renters which can cause major headaches down the road. Personally I'm inclined to be in favor of these protections, but I can also understand a wealthy investor wanting to take the hit of leaving the place empty to avoid these kinds of troubles.