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> Landlords all over make approximately the same returns as one another In California long time landlords get Prop 13 tax cuts. New ones don't. They compete fo

by rcpt 7y ago

> Landlords all over make approximately the same returns as one another In California long time landlords get Prop 13 tax cuts. New ones don't. They compete for the same tenants and charge the same rent. Long time landlords have much bigger profit margins because of that law. Other states have property tax restrictions but I don't know as much about them.

AnthonyMouse 7y ago
> In California long time landlords get Prop 13 tax cuts. New ones don't. They compete for the same tenants and charge the same rent. "Long time landlords" and "new landlords" are not inherently different people, they're the same people at different points in time. It's like saying a landlord which has paid off the mortgage on their building makes more money because they don't have to make mortgage payments. The value of the future reduction in property taxes gets priced into the purchase -- but then so does the cost of higher property taxes at the beginning, since the government still needs a given amount of revenue. The thing Prop 13 really does is to discourage long-time landlords from selling the property at all, because the buyer will have to pay higher property tax than the seller which makes the property "worth more" to the seller, even if it's otherwise worth more to the buyer. For example, this can discourage development because the existing owner doesn't have the inclination or the capital for expansion but would demand enough for the property that it would make it unprofitable to a third party who would have to pay higher taxes.
- mlyle 7y ago
  > "Long time landlords" and "new landlords" are not inherently different people, they're the same people at different points in time. With the way you can inherit property and keep its valuation, there may be a class of "long-time landlords"-- individuals and organizations-- emerging in major cities. Especially, as you note, since Prop 13 discourages transactions.

by rcpt 7y ago

AnthonyMouse 7y ago

> In California long time landlords get Prop 13 tax cuts. New ones don't. They compete for the same tenants and charge the same rent. "Long time landlords" and "new landlords" are not inherently different people, they're the same people at different points in time. It's like saying a landlord which has paid off the mortgage on their building makes more money because they don't have to make mortgage payments. The value of the future reduction in property taxes gets priced into the purchase -- but then so does the cost of higher property taxes at the beginning, since the government still needs a given amount of revenue. The thing Prop 13 really does is to discourage long-time landlords from selling the property at all, because the buyer will have to pay higher property tax than the seller which makes the property "worth more" to the seller, even if it's otherwise worth more to the buyer. For example, this can discourage development because the existing owner doesn't have the inclination or the capital for expansion but would demand enough for the property that it would make it unprofitable to a third party who would have to pay higher taxes.

mlyle 7y ago
> "Long time landlords" and "new landlords" are not inherently different people, they're the same people at different points in time. With the way you can inherit property and keep its valuation, there may be a class of "long-time landlords"-- individuals and organizations-- emerging in major cities. Especially, as you note, since Prop 13 discourages transactions.