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I recently joined a real estate group, and the kinds of things I'm seeing there are beyond explanation. People have basically come to understanding that house

by zeusk 4y ago

I recently joined a real estate group, and the kinds of things I'm seeing there are beyond explanation. People have basically come to understanding that house prices only go up, they use exotic financing and stupid leverage (BRRR method) to keep buying "assets" and jacking up their rental yield which then re-prices the asset so they can take an even bigger loan to buy more "assets". Recently someone in the group asked how they could afford a house in Seattle and most answers resonated around buying houses in midwest/lcol areas and jacking up rent/renovating to take out further financing and keep buying properties till you can afford to buy a house in the hcol area. This has to end, with FED inflicting pain on the stupid leveraged folks. Homes should be for people to live in, not to purely speculate and grow their money.

heavyset_go 4y ago
This is the same musical chairs of loans that the short term rental market uses.
zamfi 4y ago
> Homes should be for people to live in, not to purely speculate and grow their money Wait, if those speculating investors have “rental yield” then doesn’t that imply people are living in those homes?
- zeusk 4y ago
  The investor's objective is to maximize yield, not minimize homelessness or keep affordability in check. In that, if they don't find a renter for their jacked up rent - they "renovate" the property - get a higher appraisal and sell it to the next schmuck. Housing can’t both be a good investment and be affordable. You can't make economic decisions on the basis that real estate will always grow more than income or even real gdp forever. Which is what these group of investors are doing.
  - zamfi 4y ago
    > Housing can’t both be a good investment and be affordable This gets repeated a ton, but isn’t true unless you assume density never increases. Buying a SFH and replacing it with a 4-plex would be profitable in almost every market — were it allowed, which it almost never is in the US. In that alternate universe, the SFH owner makes money, the developer makes money, and the new units in the new building can be affordable.
    - concordDance 4y ago
      Wouldn't they also be oppressively small and bad for mental health (which is already pretty bad compared to fifty years ago)?
      - zamfi 4y ago
        No, it would be a taller building. American new construction has doubled in size (in terms of sqft/unit) over the past 50 years. If “oppressively small” were the problem, things should have gotten better, not worse?

by zeusk 4y ago

heavyset_go 4y ago

This is the same musical chairs of loans that the short term rental market uses.

zamfi 4y ago

> Homes should be for people to live in, not to purely speculate and grow their money Wait, if those speculating investors have “rental yield” then doesn’t that imply people are living in those homes?

zeusk 4y ago
The investor's objective is to maximize yield, not minimize homelessness or keep affordability in check. In that, if they don't find a renter for their jacked up rent - they "renovate" the property - get a higher appraisal and sell it to the next schmuck. Housing can’t both be a good investment and be affordable. You can't make economic decisions on the basis that real estate will always grow more than income or even real gdp forever. Which is what these group of investors are doing.
- zamfi 4y ago
  > Housing can’t both be a good investment and be affordable This gets repeated a ton, but isn’t true unless you assume density never increases. Buying a SFH and replacing it with a 4-plex would be profitable in almost every market — were it allowed, which it almost never is in the US. In that alternate universe, the SFH owner makes money, the developer makes money, and the new units in the new building can be affordable.
  - concordDance 4y ago
    Wouldn't they also be oppressively small and bad for mental health (which is already pretty bad compared to fifty years ago)?
    - zamfi 4y ago
      No, it would be a taller building. American new construction has doubled in size (in terms of sqft/unit) over the past 50 years. If “oppressively small” were the problem, things should have gotten better, not worse?