7 ms·

Bob's first house wasn't an investment. He was covering his short position. Bob was born short. Bob's N+1th house is an investment.

mccorrinall 5y ago
While I like this comment since it’s concise and pretty accurate in some way, I’d like to point out that you don’t have to buy a house to cover your „short“ (a roof over your head). You can rent it instead. When buying a house, bob becomes heavily invested.
- pempem 5y ago
  This does ignore the fact that rents are also, in fact, going up. Before the interest rate rose most people could not afford their own place in most cities on minimum wage. In SF we've been living with roommates well into our 30s. Lovely but not exactly how it used to be generally. At the same time some of us salaried folks have gotten small windfalls this year, but most jobs haven't seen a comparable rise in salaries. All of this leads me to be on team taxation.
  - mccorrinall 5y ago
    I‘m from Europe and never been to SF, but imo taxation isn’t necessarily needed. Instead the „american dream“ should be adjusted. Not every human needs their own family home. Build more apartment complexes. I’ve recently seen in a youtube video by the NYT that there are actual lobbies against changing low density housing zones to high density housing zones: https://youtu.be/hNDgcjVGHIw?t=253 https://youtu.be/hNDgcjVGHIw?t=253 I’d recommend to give it a watch :) Imo the soviet apartment complexes are a good idea. I live in one as well (Germany), and I can afford rent without hassle.
    - mccorrinall 5y ago
      To be clear: the lobby against such high density buildings is the neighborhood itself.
    - ido 5y ago
      I also live in Germany and pay low rent, but keep in mind this is because the contract isn't new and rent/tenants rights are highly regulated in Germany. If you tried to rent a new apartment in Berlin/Hamburg/Munich/any of the attractive cities with jobs today you'd pay a lot more in rent than you do on an old contract.
    - lnsru 5y ago
      One must want to live in Soviet apartment complex. I saw them in ex Soviet Union states, I saw them and lived there in Germany. They were in better shape in Germany. But personally I like wealthier neighborhoods with more Germans living there.
  - clpm4j 5y ago
    I think it's all well and good to have discussions about taxation and interest rates, but as a fellow San Franciscan, I can't ignore the fact that I no longer find it unusual to learn that more than a few of my neighbors are making multiple millions of dollars per year. "Normal" jobs, even as a senior software engineer, can't compete with the wealth gap, regardless of the tax rate. I don't pretend to believe that there is a solution to this reality.
- brandmeyer 5y ago
  > You can rent it instead. Now you're paying a form of interest to borrow someone else's house on a floating rate. The price of the underlying asset continues to increase, which applies upward pressure on the cost to borrow the asset.
  - Zanni 5y ago
    When the market is overinflated, that's exactly what you should do. And the underlying asset doesn't necessarily increase. Further, the price of the house (underlying asset) doesn't raise rent (apply pressure on the cost to borrow the asset) unless the demand is already present. There are many real estate markets where rent is a bargain compared to home ownership.
    - nsomaru 5y ago
      Mumbai is a good example of rental yield not following property price. I use the yield to determine if a given property market is speculative or not because rent represents real utility (“yes I would like to live there at that price”)
      - carbocation 5y ago
        This is interesting. Can you elaborate about Mumbai?
      - naveen99 5y ago
        Rental yield in Mumbai: 2-3% https://www.commonfloor.com/guide/price-rent-ratio-grows-in-selected-urban-areas-26011 https://www.commonfloor.com/guide/price-rent-ratio-grows-in-...
      - seanmcdirmid 5y ago
        Beijing rental yield is 1.5% - 2% now officially, it is probably less in reality. Shanghai is around 3%. China and India probably share similar low rent yields in cities with more speculative real estate markets.
- tjr225 5y ago
  Bob only became heavily invested because the scummy landlords he rents from jack up the cost of his housing arbitrarily every year.
- sumedh 5y ago
  > You can rent it instead. and then the landlord can increase the rent by any amount and then Bob has to look for a house again.
  - chii 5y ago
    the landlord would only increase if they know that the market can bear that price - aka, you cannot find an equivalent (or at least very similar) place for cheaper.
  - seanmcdirmid 5y ago
    I lived in Beijing for 9 years and never thought "hey, my rent is too expensive!". I started paying 4000 RMB in 2007 and ended at 9,500 RMB in 2016 (on a slightly bigger place, in between I was at 6500-9000 on a much bigger place than what I ended at). Rental yields in Beijing are horrible (1-2%, the home I was paying 9000RMB a month on maybe would have gone for 7-8 million RMB at the time I was paying the rent), but most landlords didn't buy at current market prices.
- deleted 5y ago
  [deleted]
- nextos 5y ago
  I don't know about Bob, but I can explain my case. 10 years ago my first real job was a research assistant position in Copenhagen. Housing was very reasonably priced, and I could buy an apartment in the suburbs with just 3 years of salary. I rented a nice place with 1/4 of my salary. It was great. I then moved to Cambridge, and while the university is cool, real estate took most of my free income. It was a nightmare. More than 1/2 of my salary went to renting a small flat in the middle of nowhere. During the course of several years, my I had to move houses six times because landlords wanted more money, or because agents wanted to generate fees and the house actually sat empty without a tenant for pretty long. Now, looking back at Copenhagen, and mostly anywhere else in the EU, is a nightmare. Salaries paid by the government have barely increased because inflation is said to have been really low. But buying or renting is easily 2.5x more money. If you live alone, it's hard to make both ends meet.
  - chii 5y ago
    > buy an apartment in the suburbs with just 3 years of salary. I rented a nice place with 1/4 of my salary these numbers aren't directly comparable. The rent should be compared with the interest cost of the mortgage plus the capital cost of the deposit (which at minimum is the risk-free rate). So if you paid 1/4th of your salary as rent, but the apartment costs 3x of your salary, this means you're paying 1/12th of the cost of the apartment as rent, aka, an 8% rental yield. This is an amazingly good yield - greater than the stock market expected yield (of 7%-ish). No wonder investors would want to buy. The general consensus is that if the rental cost is greater than 5% of the property, you're better off paying the mortgage (and conversely, if the rental cost is less than 5%, then rent is cheaper, and invest the difference would yield more financial returns).
    - seanmcdirmid 5y ago
      This. If you rent a place for $1000/month that would sell for $1 million (the case usually in Beijing), a 1.2% yield (assuming no other costs, which isn't likely), things are really out of whack. Buying in Beijing never made sense, but landlords weren't banking on rents to make money anyways.
- ClumsyPilot 5y ago
  "You can rent it instead" That's a form of participating "in an inflated housing market". There us no difference, you just introduced landlord as a middlemab. the only way to opt out is living in a cave
  - ivalm 5y ago
    It participates, but you’re still short the house, so essentially it’s a bear on house price. In this analogy rent is borrowing fees.
  - tanbog5 5y ago
    You could squat
- SilasX 5y ago
  That would be equivalent to making the interest payments on the share loan you took out to enter the short position, not covering the short.
- Forbo 5y ago
  Landlords provide housing opportunities, much like ticket scalpers provide concert experiences.
  - Gigachad 5y ago
    Landlords and scalpers seem very much not equivalent. I would compare scalpers to property flippers. Someone who sees an asset for sale for less than its market value and purchases it with the intent to sell it very soon after. Landlords provide flexibility to the market. They take on the risks of owning. In a fully healthy system, it would still be very good to have landlords and rental properties, people would just pick them because they are the best option, rather than the only option.
- deleted 5y ago
  [deleted]
megablast 5y ago
And bob will have the same house. No one will take any rooms.
kortilla 5y ago
Bob’s first power plant wasn’t an investment. He was covering his short position. Boh was born short. Why do you think people need to own everything they use, lest they be short?
- rhdunn 5y ago
  If Bob is renting, then when the situation changes he risk losing a house over his head. That could be: 1. if the landlords decide no longer to rent the property (e.g. if they retire or move abroad); 2. if he is priced out of the current area due to increased rent; 3. if he retires and no longer has the monthly income to sustain paying rent; 4. if he gets a girlfriend or boyfriend and they want a bigger place, or if he has a child; 5. if he wants to modify the house in some way (e.g. change a room into a child's bedroom, or redo the kitchen/laundry area to add a new device, or replace the shower or boiler with a more eco/environmentally friendly one). Or are you saying that he should become homeless?
  - valenterry 5y ago
    > If Bob is renting, then when the situation changes he risk losing a house over his head I hope you don't want to claim here that buying a house means that you cannot ever "lose a house over your head"? Because that would be plain wrong. And if you just wanted to say that it reduces the chance, then you should have some good arguments. Also, some of your points are strange: > 4. if he gets a girlfriend or boyfriend and they want a bigger place Well then it's much easier to move to a different place, rather than buying a new house and selling the current one, don't you agree?

mccorrinall 5y ago

While I like this comment since it’s concise and pretty accurate in some way, I’d like to point out that you don’t have to buy a house to cover your „short“ (a roof over your head). You can rent it instead. When buying a house, bob becomes heavily invested.

pempem 5y ago
This does ignore the fact that rents are also, in fact, going up. Before the interest rate rose most people could not afford their own place in most cities on minimum wage. In SF we've been living with roommates well into our 30s. Lovely but not exactly how it used to be generally. At the same time some of us salaried folks have gotten small windfalls this year, but most jobs haven't seen a comparable rise in salaries. All of this leads me to be on team taxation.
- mccorrinall 5y ago
  I‘m from Europe and never been to SF, but imo taxation isn’t necessarily needed. Instead the „american dream“ should be adjusted. Not every human needs their own family home. Build more apartment complexes. I’ve recently seen in a youtube video by the NYT that there are actual lobbies against changing low density housing zones to high density housing zones: https://youtu.be/hNDgcjVGHIw?t=253 https://youtu.be/hNDgcjVGHIw?t=253 I’d recommend to give it a watch :) Imo the soviet apartment complexes are a good idea. I live in one as well (Germany), and I can afford rent without hassle.
  - mccorrinall 5y ago
    To be clear: the lobby against such high density buildings is the neighborhood itself.
  - ido 5y ago
    I also live in Germany and pay low rent, but keep in mind this is because the contract isn't new and rent/tenants rights are highly regulated in Germany. If you tried to rent a new apartment in Berlin/Hamburg/Munich/any of the attractive cities with jobs today you'd pay a lot more in rent than you do on an old contract.
  - lnsru 5y ago
    One must want to live in Soviet apartment complex. I saw them in ex Soviet Union states, I saw them and lived there in Germany. They were in better shape in Germany. But personally I like wealthier neighborhoods with more Germans living there.
- clpm4j 5y ago
  I think it's all well and good to have discussions about taxation and interest rates, but as a fellow San Franciscan, I can't ignore the fact that I no longer find it unusual to learn that more than a few of my neighbors are making multiple millions of dollars per year. "Normal" jobs, even as a senior software engineer, can't compete with the wealth gap, regardless of the tax rate. I don't pretend to believe that there is a solution to this reality.
brandmeyer 5y ago
> You can rent it instead. Now you're paying a form of interest to borrow someone else's house on a floating rate. The price of the underlying asset continues to increase, which applies upward pressure on the cost to borrow the asset.
- Zanni 5y ago
  When the market is overinflated, that's exactly what you should do. And the underlying asset doesn't necessarily increase. Further, the price of the house (underlying asset) doesn't raise rent (apply pressure on the cost to borrow the asset) unless the demand is already present. There are many real estate markets where rent is a bargain compared to home ownership.
  - nsomaru 5y ago
    Mumbai is a good example of rental yield not following property price. I use the yield to determine if a given property market is speculative or not because rent represents real utility (“yes I would like to live there at that price”)
    - carbocation 5y ago
      This is interesting. Can you elaborate about Mumbai?
    - naveen99 5y ago
      Rental yield in Mumbai: 2-3% https://www.commonfloor.com/guide/price-rent-ratio-grows-in-selected-urban-areas-26011 https://www.commonfloor.com/guide/price-rent-ratio-grows-in-...
    - seanmcdirmid 5y ago
      Beijing rental yield is 1.5% - 2% now officially, it is probably less in reality. Shanghai is around 3%. China and India probably share similar low rent yields in cities with more speculative real estate markets.
tjr225 5y ago
Bob only became heavily invested because the scummy landlords he rents from jack up the cost of his housing arbitrarily every year.
sumedh 5y ago
> You can rent it instead. and then the landlord can increase the rent by any amount and then Bob has to look for a house again.
- chii 5y ago
  the landlord would only increase if they know that the market can bear that price - aka, you cannot find an equivalent (or at least very similar) place for cheaper.
- seanmcdirmid 5y ago
  I lived in Beijing for 9 years and never thought "hey, my rent is too expensive!". I started paying 4000 RMB in 2007 and ended at 9,500 RMB in 2016 (on a slightly bigger place, in between I was at 6500-9000 on a much bigger place than what I ended at). Rental yields in Beijing are horrible (1-2%, the home I was paying 9000RMB a month on maybe would have gone for 7-8 million RMB at the time I was paying the rent), but most landlords didn't buy at current market prices.
deleted 5y ago
[deleted]
nextos 5y ago
I don't know about Bob, but I can explain my case. 10 years ago my first real job was a research assistant position in Copenhagen. Housing was very reasonably priced, and I could buy an apartment in the suburbs with just 3 years of salary. I rented a nice place with 1/4 of my salary. It was great. I then moved to Cambridge, and while the university is cool, real estate took most of my free income. It was a nightmare. More than 1/2 of my salary went to renting a small flat in the middle of nowhere. During the course of several years, my I had to move houses six times because landlords wanted more money, or because agents wanted to generate fees and the house actually sat empty without a tenant for pretty long. Now, looking back at Copenhagen, and mostly anywhere else in the EU, is a nightmare. Salaries paid by the government have barely increased because inflation is said to have been really low. But buying or renting is easily 2.5x more money. If you live alone, it's hard to make both ends meet.
- chii 5y ago
  > buy an apartment in the suburbs with just 3 years of salary. I rented a nice place with 1/4 of my salary these numbers aren't directly comparable. The rent should be compared with the interest cost of the mortgage plus the capital cost of the deposit (which at minimum is the risk-free rate). So if you paid 1/4th of your salary as rent, but the apartment costs 3x of your salary, this means you're paying 1/12th of the cost of the apartment as rent, aka, an 8% rental yield. This is an amazingly good yield - greater than the stock market expected yield (of 7%-ish). No wonder investors would want to buy. The general consensus is that if the rental cost is greater than 5% of the property, you're better off paying the mortgage (and conversely, if the rental cost is less than 5%, then rent is cheaper, and invest the difference would yield more financial returns).
  - seanmcdirmid 5y ago
    This. If you rent a place for $1000/month that would sell for $1 million (the case usually in Beijing), a 1.2% yield (assuming no other costs, which isn't likely), things are really out of whack. Buying in Beijing never made sense, but landlords weren't banking on rents to make money anyways.
ClumsyPilot 5y ago
"You can rent it instead" That's a form of participating "in an inflated housing market". There us no difference, you just introduced landlord as a middlemab. the only way to opt out is living in a cave
- ivalm 5y ago
  It participates, but you’re still short the house, so essentially it’s a bear on house price. In this analogy rent is borrowing fees.
- tanbog5 5y ago
  You could squat
SilasX 5y ago
That would be equivalent to making the interest payments on the share loan you took out to enter the short position, not covering the short.
Forbo 5y ago
Landlords provide housing opportunities, much like ticket scalpers provide concert experiences.
- Gigachad 5y ago
  Landlords and scalpers seem very much not equivalent. I would compare scalpers to property flippers. Someone who sees an asset for sale for less than its market value and purchases it with the intent to sell it very soon after. Landlords provide flexibility to the market. They take on the risks of owning. In a fully healthy system, it would still be very good to have landlords and rental properties, people would just pick them because they are the best option, rather than the only option.
deleted 5y ago
[deleted]

megablast 5y ago

And bob will have the same house. No one will take any rooms.

kortilla 5y ago

Bob’s first power plant wasn’t an investment. He was covering his short position. Boh was born short. Why do you think people need to own everything they use, lest they be short?

rhdunn 5y ago
If Bob is renting, then when the situation changes he risk losing a house over his head. That could be: 1. if the landlords decide no longer to rent the property (e.g. if they retire or move abroad); 2. if he is priced out of the current area due to increased rent; 3. if he retires and no longer has the monthly income to sustain paying rent; 4. if he gets a girlfriend or boyfriend and they want a bigger place, or if he has a child; 5. if he wants to modify the house in some way (e.g. change a room into a child's bedroom, or redo the kitchen/laundry area to add a new device, or replace the shower or boiler with a more eco/environmentally friendly one). Or are you saying that he should become homeless?
- valenterry 5y ago
  > If Bob is renting, then when the situation changes he risk losing a house over his head I hope you don't want to claim here that buying a house means that you cannot ever "lose a house over your head"? Because that would be plain wrong. And if you just wanted to say that it reduces the chance, then you should have some good arguments. Also, some of your points are strange: > 4. if he gets a girlfriend or boyfriend and they want a bigger place Well then it's much easier to move to a different place, rather than buying a new house and selling the current one, don't you agree?