4 ms·

Efficiency in markets usually at least implies closely following the truth, as I understand it. Is the risk higher at the low end of the market?

Simon_says 8y ago
That's my understanding, at least.
tlear 8y ago
In a huge way. People don’t pay, people trash the place, people leave and break contract to be never heard of again etc. On higher risk of any of those is negligible.
mruts 8y ago
If the risk wasn't higher, landlords wouldn't make more profit, would they?
sokoloff 8y ago
My family was a small-time landlord while I was growing up. We had more fires (plural) and totally thrashed rentals in 2 low-end houses (one SFR, one duplex) than I can remember. The SFR we had to totally rebuild twice over the course of perhaps 15 years. One tenant busted out every single piece of drywall because he was mad about being evicted after not paying rent for 6+ months. Another solved the problem of "please pickup any dog waste in the yard" with the genius plan of not letting the dog outside. Ever. The subfloors were soaked when she moved out. It wasn't just carpets that needed replacing, but all the way down to the joists and all the electric and HVAC outlets from rust. Non-payment is also a real thing. The time commitment is higher on the lower-end properties (chasing payments, higher turnover, more damage on turnover [often well beyond security deposit, especially since the tenants know they can skip the last month or two's rent because evictions take longer than that and maybe justify themselves "since the landlord already has the security deposit and we need to save up for the next place's deposits anyway...") People who think there are excessive profits in low-end rentals should totally disrupt that market by buying up all these cheap and easy-money properties and renting them out to undercut the market. Be ready to lose your ass financially, though.

Simon_says 8y ago

That's my understanding, at least.

tlear 8y ago

In a huge way. People don’t pay, people trash the place, people leave and break contract to be never heard of again etc. On higher risk of any of those is negligible.

mruts 8y ago

If the risk wasn't higher, landlords wouldn't make more profit, would they?

sokoloff 8y ago

My family was a small-time landlord while I was growing up. We had more fires (plural) and totally thrashed rentals in 2 low-end houses (one SFR, one duplex) than I can remember. The SFR we had to totally rebuild twice over the course of perhaps 15 years. One tenant busted out every single piece of drywall because he was mad about being evicted after not paying rent for 6+ months. Another solved the problem of "please pickup any dog waste in the yard" with the genius plan of not letting the dog outside. Ever. The subfloors were soaked when she moved out. It wasn't just carpets that needed replacing, but all the way down to the joists and all the electric and HVAC outlets from rust. Non-payment is also a real thing. The time commitment is higher on the lower-end properties (chasing payments, higher turnover, more damage on turnover [often well beyond security deposit, especially since the tenants know they can skip the last month or two's rent because evictions take longer than that and maybe justify themselves "since the landlord already has the security deposit and we need to save up for the next place's deposits anyway...") People who think there are excessive profits in low-end rentals should totally disrupt that market by buying up all these cheap and easy-money properties and renting them out to undercut the market. Be ready to lose your ass financially, though.