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Want a House Like This? Prepare for a Bidding War with Investors
- Kaotique 7y agoThe dream of owning a house, owning a car, owning land is disappearing with more and more lease contracts, investors scooping up everything with large sums of money. Our society is fastly moving towards a feudal system. It will not take long until everything is owned by rich overlords.
- eli_gottlieb 7y agoAnd this is why everyone my age jokes about eating the rich. (Ha ha, only serious!)
- whatshisface 7y agoWhat should these rich people do? Quit buying houses? Sit on their money? Buy yachts instead? You could argue that buying and renting out houses directly helps the proletariat, because it lowers rent.
- eli_gottlieb 7y agoThey could quit buying houses, buy yachts (which, at the very least, are a consumer industry), or, you know, just give the money away. Or they could, and I know this will come as a shock, pay taxes.
- ravenstine 7y agoHow much taxes do you think rich people already pay? https://www.cnbc.com/2013/12/11/the-rich-do-not-pay-the-most-taxes-they-pay-all-the-taxes.html https://www.cnbc.com/2013/12/11/the-rich-do-not-pay-the-most... https://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/ https://www.pewresearch.org/fact-tank/2016/04/13/high-income...
- eli_gottlieb 7y ago> How much taxes do you think rich people already pay? Sufficiently little that they're still buying up whole neighborhoods to rent-seek on people's basic needs, so, not nearly enough. If the rich don't want to pay "all" the taxes, they can let us shift to an economic model in which they don't take home "all" the money.
- maxxxxx 7y agoHow about paying their employees better?
- Junk_Collector 7y agoIdeally they would invest in the production of something new rather than trying to corner a limited market to engage in literal rent-seeking. I'm not anti-real estate investment by any means and own a few properties of my own but I think it has all gotten a bit silly and needs a cold shower.
- whatshisface 7y agoIf they buy houses and prices go up, doesn't that incentivize building?
- owyn 7y agoNot necessarily. It seems to incentivize more buying. If real estate prices keep going up and actually building anything new is too much work why bother?
- whatshisface 7y ago>actually building anything new is too much work why bother If prices rise above the cost of building a house, you could make money by paying someone else to build a house, no work required.
- deleted 7y ago[deleted]
- JustSomeNobody 7y ago> The dream of owning a house, owning a car, owning land is disappearing with more and more lease contracts, investors scooping up everything with large sums of money. > Our society is fastly moving towards a feudal system. It will not take long until everything is owned by rich overlords. I'm quite sure this was a known side effect to QE and governments dumping enormous amounts of cash into the markets.
- quxbar 7y agoThis doesn't look like another housing bubble AT ALL.
- maxxxxx 7y agoIt depends. If the investors have the money and no crazy loans it just means that the lower price range is not available for the individual buyer anymore.
- deleted 7y ago[deleted]
- 1123581321 7y agoIt sounds like individual buyers could use a service that purchases homes in cash for them and then handles financing. I also wonder if a wholesale buying club would be viable in these markets.
- jedimastert 7y agoI thought that was the idea behind the current bank-mortgage-realtor system?
- 1123581321 7y agoIt is, but closing a mortgage is more time-consuming than the buyer handing over a check and requires some delay. There is also a chance that a mortgage sale won’t close.
- instaheat 7y agoGreed and the basic human desire for making income will make this very difficult. Wholesalers as they exist in the market already make it difficult as it is. There are so many bad ones. Even if there were a service that was "for the people" and bought homes for cash, the property would still have to be fixed up. If the buyer was OK with a fixer up property AS IS it is hard for the Investor to sit on that financing, they can't wait for 30 years to get paid. They'd have to sell the note - and who is going to buy it? Certainly not Fannie/Freddie depending on how "bad" the place is according to their standards. It's just not economically viable to have all that money in play even if the interest rate is higher.
- echelon 7y agoEverything on the Beltline is gold. Atlanta is very car-centric, but the Beltline corridor that surrounds the city is a pedestrian / cyclist heaven. Atlanta is already one of the greenest cities in the world - there are so many trees you'd be hard pressed to find a comparison. The Beltline exemplifies this - there's a park every single mile you walk. Businesses, restaurants, bars, and residences have sprung up along the entire track. Each bend has a bit of the flavor of its neighborhood. Entire weekends can be spent on the Beltline. They're expanding trails out and into the suburbs. The Palasades, a hilly oasis by the Chattahoochee river. The Silver Comet bike trail even goes all the way to Alabama. The Beltline has reinvigorated the entire city of Atlanta and captivated the minds of urban planners around the world. If I had the capital, I would be buying so many homes here.
- beauzero 7y agoThis is also happening south of Carrollton, GA for small 10-25 acre "farms". Cheapest "state" university in Georgia (UWG, Comp. Sci, Nursing). We thought we were finding a reasonable quiet area that would never appreciate (or at least not much) just outside of Atlanta. Airport is 40 minutes away, we both do remote work (me 3 days/week, wife 5 days week). Unfortunately this year the area has exploded. Homes in the 200k-300k range are selling quickly (used to be 12-18 month sales cycle). Most new homes are in the 400-500k range with 5 acres...still ok but they don't even have barns or out buildings. Soon this area is going to be out of most peoples' price ranges as well. Property has gone from 3.5k per acre for lots under 15 acres to 8-10k an acre and looks to go even higher. Carrollton was a hidden gem. The only thing keeping it from exploding is that internet access can be limited depending upon the area.
- powvans 7y agoI think it goes to show how starved most American's are for public space. I'm all for the Beltline and looking forward to it being completed in my own neighborhood, but you could also look at it and see it as a simple sidewalk. People come from far and wide to enjoy this amazing sidewalk where you can stroll and patronize businesses without cars harrying you. Imagine being able to walk with your children without the constant fear that you will all be run over at any moment! I love the Beltline and all that it's doing for my little corner of Atlanta, but I can't help but feel bittersweet about it. One of the major negatives besides gentrification is that it does increase car traffic. The neighborhoods are becoming denser and the new folks are still bringing their cars. Lots of people drive in from far lung suburbs to enjoy the Beltline and that creates more traffic too. Hopefully the model will be reproduced in more places.
- thatfrenchguy 7y ago> Angel Oak announced it had completed a $90 million securitization of similar fix-and-flip loans — meaning it had packaged the loans and sold slices of them to other investors Sounds like another effect of the way-too-low interest rates, and an interesting crisis to come.
- pnutjam 7y agowinner, winner, chicken dinner. This is all due to money chasing returns it can't get due to low interest rates.
- instaheat 7y agofix-and-flip loans have extremely short terms meaning of course they have to be refinanced/paid off typically within a year. This represents relatively low risk but also yielding minimal returns. It's an interesting securitization to be sure, but I don't know about this doom and gloom crisis scenario you are speaking about. Long term buy and hold type loans meant for investors are typically based the on debt service coverage ratio meaning the tenant's rents need to cover the mortgage payment by a certain %. These are hovering around ~%8 which usually makes for a pretty thin margin on a cash flow basis. As with any investment, if you are banking on appreciation and that is all you've got, I'd worry. Perhaps not so much so in the booming area this article references - UNLESS funding dries up for all the hot commodities coming in.
- JohnJamesRambo 7y agoI can’t even afford NY Times to read the damn article.
- godelmachine 7y agoThis was my last free article :D You can afford a free VPN or Firefox Focus or ignonito mode :) One is these should work :P
- instaheat 7y agoI may be biased (I'm a Real Estate Investor) but Investors aren't the vultures that some people make them out to be. We are putting beautiful homes back out on the market. Sure, this is pricing out people who would have been keen on making improvements over time instead of realizing payments on this all at once - but the end result is if people are willing to pay, there will continue to be a market.
- Spooky23 7y agoIt’s more about the ridiculously favorable tax treatment which is the subsidy that makes your business possible.
- driverdan 7y agoThere is no "ridiculously favorable tax treatment" for flipping, only long term ownership.
- gnicholas 7y agoThere is section 1031, which allows the deferral of gains for years or decades if the investor purchases a qualifying replacement property.
- djrogers 7y agoGenerally speaking, flippers don't qualify for 1031 exchanges. "In Barker v. U.S., a property purchased solely to exchange for other property was determined to not meet the “held for” requirement. Accordingly, if it is clear the intent was resale and not investment, then the transaction is ineligible for a 1031 tax deferred exchange." - https://www.sundincpa.com/1031-exchange-flipping-houses/ https://www.sundincpa.com/1031-exchange-flipping-houses/
- gnicholas 7y agoThe linked source indicates the complexity of this test. I'm sure plenty of flippers take advantage of 1031, even if they sometimes are challenged by the IRS.
- BeetleB 7y agoThe article is pretty light on details, and doesn't do a good job of separating out the different categories of real estate investing. It's easy for the reader to confuse one category with another. Turnkey investing - where companies have worked it all out for you and you merely deal with the cash end of it - is usually not profitable for the investor. If you hang out around RE investors, they'll caution you on how it seems very alluring because you don't need much knowledge and someone else is managing everything else. But these companies need to make a profit, and so you'll get less of the pie - and they have every incentive to make a deal look better than it is. The exception is in up and coming neighborhoods. The article mentions this, but doesn't go into detail: Many of the houses being sold were never on the market. Aggressive marketers contact existing owners and ask if they want to sell, and some small percentage of owners will agree (need cash quickly, etc). Had this not happened, the houses would still not be available as the owner did not intend to put them on the market. It's like complaining that I am screwing up the used car market by asking people if they want to sell their car. When someone makes $40K+ on a flip, it's almost always the case that the house was in a bad enough shape that a bank wouldn't finance it. So once again, had they not bought and flipped the house, none of the people profiled in the article would have been able to buy it anyway (nor would they want to, being in bad shape and all). They're not stealing houses to make a good profit. They are making it easier for people to buy that house, while they make a profit. It's not a zero sum game. Almost all flippers hope to sell at market price, and probably at least half list the house at slightly below market price as they need to sell fast. Why? Because most flippers are not using much of their own money. They'll get a hard money loan at, say, 10 or 12% interest to buy the property, and possibly also to fund the repair. Every month they have the house is costing them big bucks. They aim to fix and sell fast to minimize their interest payments. So it's not a case that they are aiming to inflate housing prices. Quite the contrary, it often works out better for them to sell it quicker at a slightly lower than market price. Now when it comes to investors sweeping up houses and renting them - yeah, that could be a long term problem. But really: As someone who has an idea on how real estate investing works, my criticism is that one can read this whole article and still not have much of an idea.
- instaheat 7y agoAll of it is extremely interesting to me as a RE Investor. You hit the nail on the head. We are putting a product out there that would have never existed in the first place. Here is where the article misses: No matter what, your numbers have to be right. I'm a firm believer in the invisible hand. If, as an Investor, you set your market rent too high - you may never find tenants. That's just one example. Investors aren't the problem. Wholesalers (part of the group of Aggressive marketers) play a role in driving up prices taking aggressive finders fees (called Assignment Fees) for finding the properties for investors. Thing is, if they price their assignment fee too high, they may never find an Investor (flipper) to assign their contract to. Once again, market dictates it. If there is no meat left on the bone for the flipper to create their end product (based on current Retail comps) then they'll get stuck with the contract and a large majority can't close the deal on their own. Just join a wholesaler group on Facebook and you'll see the amount of inexperienced people trying to make a buck.
- csours 7y agoI bought a house like this in Austin. I paid a $15,000 premium to beat a cash offer. My real estate agent was incredulous.
- TSiege 7y agoBuild. More. Places. To. Live.
- Loughla 7y agoMove. Somewhere. Else. I'm not trying to be hateful, but those are both very real solutions.
- mrguyorama 7y agoI had to move 5 hours south to get a job. Funny thing, that means living in the most expensive city of the State. The alternative was basically eternal welfare, like the rest of the north of the state
- maxerickson 7y agoThe US has terrible zoning. Somewhere else often isn't any different.
- JustSomeNobody 7y agoTried.Can't.Find.Work.And.Managers.Want.Butts.In.Seats.So.Remote.Is.Out.
- enraged_camel 7y agoYour solution isn't very realistic at all, because good jobs in most industries tend to be consolidated in specific geographic areas.
- human20190310 7y agoOr move in next door, tear down the house, build a 4-unit, and rent out three of them. If the influence of NIMBY really was limited to the BY (backyard) these issues would be moot. The frustration is that owners are attempting to control land that they did not purchase.
- BeetleB 7y ago>Or move in next door, tear down the house, build a 4-unit, and rent out three of them. Depends on zoning laws. In my state, this was not allowed until legislation came about this year allowing it. You could not have a multifamily property in a single family residential neighborhood - not even a duplex.
- pickle-wizard 7y agoI bought my house in Austin 4 years ago. I was looking toward to the low end of the market around the 140K to 150K price point. I found that I kept getting outbid by the investors. They would come in and offer a cash deal and a closing in 7 days. I just couldn't compete with a 30 day closing and a financing contingency. I ended up having to up my range to 200K. Once I did that I wasn't competing with the investors. Which over 30 years I guess spending the extra 50K isn't that big of a deal. I still ended up buying below my means. However I know several who that would price them out of the market.
- tvanantwerp 7y agoI've lived in Northern Virginia, and I've seen all-cash bidding wars for houses worth north of a million. I'm glad you were able to get to a price point where you weren't competing with flippers. Where I am, I can't see myself ever reaching the point where I can make an accepted bid on anything.
- dmix 7y agoInteresting... NYTimes used a play button instead of autoplaying the top video graphic. IIRC they used to autoplay in their more advanced media articles. I'm curious if the graphics team has some UX insight into this.
- deleted 7y ago[deleted]