5 ms·

The first lady cited in the story is overextended and if I am supposed to feel bad for her, I don't. She took a risk in taking out 1.2 million in mortgages and

• rrivers 6y ago
  Second statement is an oversimplification of many in that scenario; e.g. my mother. Single Mom for 30 years, built a career, bought a house in her mid 40s. 2008 recession erased her career, unemployed for 5 years after, now rebuilding. Still has a mortgage on her townhouse. Let's not assume poor decision making when there are plenty of factors outside of the average blue collar workers control that directly impacted their ability to to the right thing.
  • SketchySeaBeast 6y ago
    This doesn't seem to be her case though - she owns "27 low-income apartments" - I don't know if those are buildings or just apartments, but 1.2 million in mortgages owed after 2 months is insane if it's just 27 individual apartments. And she only made $24,0000 last year on all that? These numbers are just insane to me. Edit: Ah, 1.2 million total, not currently owing.
    • richthegeek 6y ago
      Her total mortgate exposure is $1.2m, not her currently owed amount. $24k is a yield of only 2% so yeah she's on razor thin margins... which does explain why she's immediately in jeopardy from the slightest economic wobble (not that this is a slight wobble).
      • SketchySeaBeast 6y ago
        Ah, that makes way more sense. Thanks! Me read bad sometimes.
      • akgoel 6y ago
        This really becomes a question of leverage. If she only put down 20%, then her return on invested capital is 10%.
    • intortus 6y ago
      Probably $27k of income per month with $29k of expenses, implying a $1.2M loan due in a few years? Just speculating.
    • klmadfejno 6y ago
      Being a landlord is much less profitable than intuition would lead you to assume.
      • sokoloff 6y ago
        Indeed. I find the people who complain most loudly about how easy and profitable it is to be a landlord generally have no first-hand experience on the topic.
      • refurb 6y ago
        Indeed! Just talk to professional landlord about cap rates. Generally you aim for 10%+ cap rates, which are exceeding difficult to find with the exception of a few markets. If your cap rate is less than 10%, you’re on thin margins and a new roof would probably push you into the red.
        • lotsofpulp 6y ago
          It’s definitely work and a lot of risk unless you were gifted property in a high demand urban area or vacation hotspot. Putting your money in VOO or a bunch of FAANG stock will prob net you a lot more for a lot less work based on how the government needs to keep the equity markets appreciating. Real estate purchased decades ago in hot spots might be easy money, but buying it these days is just for diversification of assets for me.
    • treis 6y ago
      She's probably not counting appreciation and principle reduction. Her 1.2 million in mortgages is probably on ~2 millionish in property. Last year she probably saw their value go up a few percent while paying down 40k in principle. Her profit is probably in the 6 figures and the 24k is cash flow.
      • SketchySeaBeast 6y ago
        Hopefully. She's probably just considering the profit that enables her to eat.
    • thrower123 6y ago
      There are a lot of games you can play with the IRS to reduce the amount of profit that you show from rental properties. You can count depreciation, property taxes, mortgage payments, utilities, maintenance, improvements, and a whole host of other expenses. Particularly with depreciation thrown in, it's not uncommon for small-time landlords to show losses on their rentals. But even if it's low-income housing in Connecticut, that's got to be close to $500-1000/month in rent per unit. Accounting for some amount of delinquency or vacancy, that's still $150k-$300k in revenue, and I think I'm being conservative. Something doesn't add up with this story.
      • shuckles 6y ago
        Everything you listed count as legitimate expenses.
        • thrower123 6y ago
          I know, I am a landlord. Depreciation, as it is normally calculated, is somewhat nonsense on properties, especially over the past decade as they have increased by leaps and bounds in value.
          • zaroth 6y ago
            Not to mention the depreciation has to be recaptured at the time of sale.
            • AjithAntony 6y ago
              Not if you die first!
          • shuckles 6y ago
            You are depreciating the built structure, not the land. It’s land values which increase.
            • thrower123 6y ago
  • dwater 6y ago
    The quoted scenario is about a second home purchased as an investment property. They likely have a great deal of equity in that home as well as their primary residence. If they do not have much equity in their investment property, they have either been extracting money from it for 24 years or failed to manage it as a business. They are not in the same class as "average blue collar workers", many of whom do not own even their primary residence.
  • fred_is_fred 6y ago
    Anyone who owns a 2nd home in Boulder is not a blue collar worker.
    • Nasrudith 6y ago
      That conflates type of work with payment. Plumbers or other specalties like say underwater welders can make quite a bit of money and those certainly are blue collar jobs. Not common mind you but still blue collar.
  • donmcronald 6y ago
    I'm pretty sure the townhouse they're talking about is a second income property. And the lady with 27 units that claims to make $24k/year is ignoring the equity building in her properties. If she ends up with $2 million of property after 20 years she's ignoring $100k/year. Lots of business owners, farmers, landlords, etc. give the same sob story and conveniently forget they're going to end up with multi-million dollar properties, farms, businesses by the time they retire. I can see how it's tough with no cash flow right now, but how is that any different than your mom ending up unemployed? Excluding the current situation, no one cares about normal people losing their jobs, but now that the business / landlord class is in a negative cashflow situation we should all be thinking of them.
• klmadfejno 6y ago
  It's tricky. One person takes out a loan to start a small business and it fails due the virus. Another takes out a loan to purchase properties and be a landlord who also gets wiped out. Economic rent is a societal problem. But landlords aren't actually reaping in the profits most of the time, and it might be argued that they're providing useful services to people. On the other hand, most go into it with the hope of just sitting on stuff and making passive income for low amounts of work. If landlords are doing societal good, it's mostly accidental, and at best a local maxima of a well function system. I'd say in the scheme of suffering going on right now this doesn't feel like the most deserving of sympathy. Taking out huge loans is a risk. As a society, this is not a good way for members to build wealth. But they're not villains by any means.
  • fred_is_fred 6y ago
    I agree with your assessment - they are not villains, but they also don't need a bailout from me or you, because they took a risk in making the investment. It should not be a guarantee because if it is we may as well just let the government me the landlord.
  • sokoloff 6y ago
    I think it's more than "might be argued" that providing housing to people seeking a rented place to live is a useful service to people.
  • ethanbond 6y ago
    What’s tricky? The small business owner employs people. The landlord merely purchases the right to keep productivity off of valuable land. Agreed that they are not villains, but nor should we act like they’re doing some service. No one pays their rent because they believe their landlord is adding value. They pay it for access to the jobs, amenities, services that the community (not the landlord) provides.
    • zaroth 6y ago
      You pay rent in return for the right of use of the property. Generally you do this because you either do not have the necessary credit to obtain your own property, can not afford the transaction costs of buying/selling a property in your desired timeframe, or simply want the convenience of not having to maintain it yourself. None of this is really the point. Generally when people pay for a service, if they stop paying, the company is allowed to stop providing the service. Eviction laws already impose a higher bar on “stopping service” in the case of rental housing, but an outright moratorium on evictions is just another way the government response to COVID wipes out small/independent business for the benefit of mega corporations. No one should be forced by government decree to offer their property or services for free. I’m sure at some point there is a Constitutional issue to be argued.
• tren-hard 6y ago
  This whole story is written into a narrative to weep for landlords. 24 properties and can't pay mortgages, does she owe money on all 24 properties... or could she sell some of them she owns and reduce her debt load maybe? > Many landlords operate on thin margins, typically 9 cents for every $1. What kind of horseshit figure is this!? Someone tell me what they mean, do landlords have a 9% profit margin on a static piece of property and that isn't enough still? > Many landlords aren’t any better off than their tenants and certainly aren’t rich enough to credibly pull off a bow tie, says Jan Lee, who manages two buildings in New York’s Chinatown that his family has owned for nearly a century. Owns 2 properties in the most ridiculous real estate market in the US but doesn't make money, ok. Oh wait, it's that he can't pay property taxes this year, even though he hasn't had a mortgage for 70 years and is coming out of a 10 year bull run.
  • cko 6y ago
    There is a popular strategy known as 'BRRRR' where the investor uses capital from a refinance to buy another unit, and so on. It's a fast way to pick up and rehab lots of units. In my opinion if you were to do this, you should sell a few properties here or there to have 6-12 months of cash reserves on each property.
• lobotryas 6y ago
  Do you feel bad for people who lost their job because of COVID? What dummies! They should have picked a pandemic-proof job or just “learned to code”! If you do feel bad for them, then your statement just exposes your own bias and hypocrisy, my dude. Landlords are people too.