4 ms·

You're running a business, and part of the deal is risk, including eating losses.

by dannyw 4y ago

scarface74 4y ago
It’s called a “risk premium”. If I know my chances of losing money is higher, I’m going to raise rents. How does that help anyone?
- Regnore 4y ago
  You won’t be able to infinitely increase your rent (renters can only afford so much), and other landlords with more tolerance for risk may not raise rents as much (or at all). Some landlords will exit the market which will lower the price of housing and transition some renters into owners.
  - scarface74 4y ago
    How will it lower the cost of housing by decreasing supply? Not everyone wants to or should buy a house. A house ties you down to one location makes mobility a lot harder when you want to change jobs and goes up your capital.
- rcpt 4y ago
  Or, and more likely imo, you'll be less willing to bid as much when you buy an investment property. Maybe we can agree that the price-to-rent ratio will decrease?
  - scarface74 4y ago
    It will increase as you will have less capital flowing in willing to increase supply.
    - rcpt 4y ago
      The supply of land is fixed. If we're talking about the US then most of what you pay for when you buy is the land. The current setup hasn't exactly been great at generating new housing. Juicing speculation increases nimbyism just as much as it increases developer interest.
      - scarface74 4y ago
        That is not true in most of the US. Yes the supply of land is fixed. But there is plenty of air. Who is going to make the investment to build up? Individuals buying land and building SFHs is not going to help as much as building multi unit housing. There is also plenty of affordable land in the US in flyover country.
        rcpt 4y ago
        > That is not true in most of the US Huh? Save for a small number of cities most of the nation is sprawling suburbia. 70% of Americans live in single family homes. Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world. > Build up Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea.
        scarface74 4y ago
        > Huh? Save for a small number of cities most of the nation is sprawling suburbia. 70% of Americans live in single family homes. That is not true. https://www.statista.com/topics/5144/single-family-homes-in-the-us/ https://www.statista.com/topics/5144/single-family-homes-in-... > Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world This is also not true. With an investment property you can depreciate the value of the building. But not land. It would reduce the tax incentives greatly if that were true. I’ve owned five properties in my life and the house “improvements” is always more valuable. Out of those five, two were new builds I had built from the ground up as primary residence. You can see the value of the unimproved land and compare it to the values of the houses built on top of it. The other three were investment properties where I could only depreciate “the improvements” - the amount attributed to the house In “sprawling suburbia”, builders can buy land cheaply and build hundreds of homes. > Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea. You realize any increase in cost is passed on to the tenants. How does that help affordable housing?

You're running a business, and part of the deal is risk, including eating losses.

by dannyw 4y ago

You're running a business, and part of the deal is risk, including eating losses.

It’s called a “risk premium”. If I know my chances of losing money is higher, I’m going to raise rents. How does that help anyone?

Regnore 4y ago
You won’t be able to infinitely increase your rent (renters can only afford so much), and other landlords with more tolerance for risk may not raise rents as much (or at all). Some landlords will exit the market which will lower the price of housing and transition some renters into owners.
- scarface74 4y ago
  How will it lower the cost of housing by decreasing supply? Not everyone wants to or should buy a house. A house ties you down to one location makes mobility a lot harder when you want to change jobs and goes up your capital.
rcpt 4y ago
Or, and more likely imo, you'll be less willing to bid as much when you buy an investment property. Maybe we can agree that the price-to-rent ratio will decrease?
- scarface74 4y ago
  It will increase as you will have less capital flowing in willing to increase supply.
  - rcpt 4y ago
    The supply of land is fixed. If we're talking about the US then most of what you pay for when you buy is the land. The current setup hasn't exactly been great at generating new housing. Juicing speculation increases nimbyism just as much as it increases developer interest.
    - scarface74 4y ago
      That is not true in most of the US. Yes the supply of land is fixed. But there is plenty of air. Who is going to make the investment to build up? Individuals buying land and building SFHs is not going to help as much as building multi unit housing. There is also plenty of affordable land in the US in flyover country.
      - rcpt 4y ago
        > That is not true in most of the US Huh? Save for a small number of cities most of the nation is sprawling suburbia. 70% of Americans live in single family homes. Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world. > Build up Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea.
        scarface74 4y ago
        > Huh? Save for a small number of cities most of the nation is sprawling suburbia. 70% of Americans live in single family homes. That is not true. https://www.statista.com/topics/5144/single-family-homes-in-the-us/ https://www.statista.com/topics/5144/single-family-homes-in-... > Most of what you pay for here is the land. And this is becoming ever more important because of agglomeration effects in the modern world This is also not true. With an investment property you can depreciate the value of the building. But not land. It would reduce the tax incentives greatly if that were true. I’ve owned five properties in my life and the house “improvements” is always more valuable. Out of those five, two were new builds I had built from the ground up as primary residence. You can see the value of the unimproved land and compare it to the values of the houses built on top of it. The other three were investment properties where I could only depreciate “the improvements” - the amount attributed to the house In “sprawling suburbia”, builders can buy land cheaply and build hundreds of homes. > Ok you're switching gears a bit here but I'll entertain anyway. If you want to build up the right solution is a Land Value Tax. Landlords of course hate this idea. You realize any increase in cost is passed on to the tenants. How does that help affordable housing?