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TFA also makes another good point but somehow makes it sound evil; In low-cost cities, landlord profit rates rise steeply alongside neighborhood poverty. But i

by zaroth 8y ago

TFA also makes another good point but somehow makes it sound evil; In low-cost cities, landlord profit rates rise steeply alongside neighborhood poverty. But in expensive cities, the reverse is true. In expensive cities, landlords make money through appreciation and gentrification (which is bad enough for the poor). In lower-cost, more economically hard-hit cities, they make it on the backs of the poor. If the home value is flat or even falling, then of course the rent will have to be higher to provide the necessary return on capital to bother owning the rental property in the first place! It’s not like capital is required to be deployed to rental stock in certain proportions. There is whole world of potential investments, and based on their risk and return will have a whole world of dollars competing for them. Rental units that appreciate fast enough are just held vacant in some markets, so much so that Vancouver had to abundantly tax it to try to stop it. Rental property appreciation is an absolutely key variable in the profitability calculation. In many markets it totally dominates the equation over the actual rental income figure.

mhuffman 8y ago
There is a sense it this new socio-political climate that we live in, that people should not invest to actually make money, but only use what money they have to make other people's lives easier or better. I am not saying that this is a terrible goal, but it is wildly unrealistic for people that are not billionaires. Sadly, however, this ends up in accusations of exploitation, both because of these (imo unreasonable) thoughts, but also because there is a wild lack of economic literacy.
- pmiller2 8y ago
  > wildly unrealistic for people that are not billionaires. Bullshit. Someone with an invested net worth of $10M exclusive of home value can generate an income of $300k using a conservative safe withdrawal rate of 3%. Anyone making $300k as an individual with a paid off home has more than enough money to be comfortable anywhere in the country, with no real need to invest further. $10M net worth is a large, but not absurd amount, but even if my numbers were somehow off by an order of magnitude, we’re far from billionaire territory.
  - mhuffman 8y ago
    > wildly unrealistic for people that are not billionaires. >> Bullshit. Ok, "wildly unrealistic for people that are not double-digit millionaires!". My intent was that it was a small amount of people in that group.
    - pmiller2 8y ago
      True, but you can cut those numbers by ~50% and still be very comfortable in most, if not all places in the US. According to https://dqydj.com/net-worth-percentile-calculator-united-states/ https://dqydj.com/net-worth-percentile-calculator-united-sta... there are over 3 million households with a net worth over $4.5M. Relatively speaking, that is a small number, but, collectively, the good those people could do if they came together would be immense. Of course, this will never happen.
pytester 8y ago
>of course the rent will have to be higher to provide the necessary return on capital Rent is set by supply and demand. There's no law - economic or otherwise - saying that it is necessary for landlords or anybody else to yield a return on capital. In reality if the value of a home is falling or flat landlords do often try to raise rents in order to recoup losses and sometimes this leads to even greater losses as tenants leave and it goes unrented. It's a psychological trap caused by a feeling of entitlement to profit. This "nightmare" has kind of faded in to distant memory as most governments around the world have decided to provide indirect wealth transfers to property owners via QE and low interest rates. In the last 10 years even an idiot could probably have made capital gains in most housing markets thanks to the government assistance lavished on them. >Rental units that appreciate fast enough are just held vacant in some markets, so much so that Vancouver had to abundantly tax it to try to stop it. Vancouver is as much about foreign money trying to find a home as it is about capital investments. A Chinese investor is often okay with a depreciation in capital provided they have A) assurances that their capital is not at risk of confiscation by the Chinese state and B) that they have a place to run away to in case some shit goes down in China. The headache of renting out the apartment along with the instinctive desire to own something "brand new and untouched" means that they often leave these gold bar proxies/emergency safe houses empty.
- FireBeyond 8y ago
  > it is necessary for landlords or anybody else to yield a return on capital. In my town there is a proposal afoot called The Missing Middle,to improve availability of medium density / multi family dwellings. A vocal group is furious. Furor that the economic impact study showed that their current and predicted home values over the next ten years is expected to decrease from an 11% year over year increase, to a 7% year over year increase (still). The very definition of feeling entitled to profits.
  - bunderbunder 8y ago
    This also highlights a simple, mathematically inevitable truth: Homes cannot be both affordable and a good investment at the same time.

by zaroth 8y ago

mhuffman 8y ago

There is a sense it this new socio-political climate that we live in, that people should not invest to actually make money, but only use what money they have to make other people's lives easier or better. I am not saying that this is a terrible goal, but it is wildly unrealistic for people that are not billionaires. Sadly, however, this ends up in accusations of exploitation, both because of these (imo unreasonable) thoughts, but also because there is a wild lack of economic literacy.

pmiller2 8y ago
> wildly unrealistic for people that are not billionaires. Bullshit. Someone with an invested net worth of $10M exclusive of home value can generate an income of $300k using a conservative safe withdrawal rate of 3%. Anyone making $300k as an individual with a paid off home has more than enough money to be comfortable anywhere in the country, with no real need to invest further. $10M net worth is a large, but not absurd amount, but even if my numbers were somehow off by an order of magnitude, we’re far from billionaire territory.
- mhuffman 8y ago
  > wildly unrealistic for people that are not billionaires. >> Bullshit. Ok, "wildly unrealistic for people that are not double-digit millionaires!". My intent was that it was a small amount of people in that group.
  - pmiller2 8y ago
    True, but you can cut those numbers by ~50% and still be very comfortable in most, if not all places in the US. According to https://dqydj.com/net-worth-percentile-calculator-united-states/ https://dqydj.com/net-worth-percentile-calculator-united-sta... there are over 3 million households with a net worth over $4.5M. Relatively speaking, that is a small number, but, collectively, the good those people could do if they came together would be immense. Of course, this will never happen.

pytester 8y ago

>of course the rent will have to be higher to provide the necessary return on capital Rent is set by supply and demand. There's no law - economic or otherwise - saying that it is necessary for landlords or anybody else to yield a return on capital. In reality if the value of a home is falling or flat landlords do often try to raise rents in order to recoup losses and sometimes this leads to even greater losses as tenants leave and it goes unrented. It's a psychological trap caused by a feeling of entitlement to profit. This "nightmare" has kind of faded in to distant memory as most governments around the world have decided to provide indirect wealth transfers to property owners via QE and low interest rates. In the last 10 years even an idiot could probably have made capital gains in most housing markets thanks to the government assistance lavished on them. >Rental units that appreciate fast enough are just held vacant in some markets, so much so that Vancouver had to abundantly tax it to try to stop it. Vancouver is as much about foreign money trying to find a home as it is about capital investments. A Chinese investor is often okay with a depreciation in capital provided they have A) assurances that their capital is not at risk of confiscation by the Chinese state and B) that they have a place to run away to in case some shit goes down in China. The headache of renting out the apartment along with the instinctive desire to own something "brand new and untouched" means that they often leave these gold bar proxies/emergency safe houses empty.

FireBeyond 8y ago
> it is necessary for landlords or anybody else to yield a return on capital. In my town there is a proposal afoot called The Missing Middle,to improve availability of medium density / multi family dwellings. A vocal group is furious. Furor that the economic impact study showed that their current and predicted home values over the next ten years is expected to decrease from an 11% year over year increase, to a 7% year over year increase (still). The very definition of feeling entitled to profits.
- bunderbunder 8y ago
  This also highlights a simple, mathematically inevitable truth: Homes cannot be both affordable and a good investment at the same time.