4 ms·

If you buy a residential property only to rent it out, it is not housing for you, it is solely an investment.

twblalock 4y ago
It's also housing for the people who live in it. Imagine a world without landlords. It's way worse than the one we live in now. It's a world where you cannot rent, you can only choose between buying or being homeless. Landlords provide housing and most of them don't make a ton of money out of it. They hope for future appreciation of the property, which they can only realize if they sell, and their monthly income often doesn't cover the cost of ownership.
- DaiPlusPlus 4y ago
  How would you consider public/council/local-authority housing then? They certainly don’t own the property as an investment - especially as oftentimes thise properties cannot legally be sold anyway.
  - twblalock 4y ago
    That just means the government is your landlord.
- flangola7 4y ago
  There could be options beyond rent buy or be homeless. But a number of steps would be required, such as growing up and taking the boot out of our throat.
- actually_a_dog 4y ago
  A world where you cannot rent is also one where there isn't a huge class of people who own more housing units than they could possibly live in.
  - twblalock 4y ago
    Please identify this "huge class of people" who own more housing than they can possibly live in. I don't believe they exist. If you are referring to corporate owners of apartment buildings, that's one thing. But to say there is a huge class of people who are landlords is just unrealistic. Very few people own more than one home, and even fewer people own more than two.
    - actually_a_dog 4y ago
      You don't believe individual landlords exist? They have a whole, entire subreddit, r/Landlord. Voilà, quod erat demonstrandum. To wit: > Of the approximately 50 million rental housing units in the United States, around 41% of the rental units are owned by mom and pop landlords, also known as individual investor landlords. That means approximately 20.5 million units are overseen by mom and pop landlords. https://getflex.com/blog/landlord-statistics/ https://getflex.com/blog/landlord-statistics/ Also, from the same site, the average landlord has 3 properties. That means there are more than 6 million individual landlords in the US. I'm not going to nitpick whether that's "huge" or not; the point is proven.
      - twblalock 4y ago
        > Also, from the same site, the average landlord has 3 properties. That means there are more than 6 million individual landlords in the US. In a population of 330 million. That's ~1.8% of the population. Hardly a "huge class".
        actually_a_dog 4y ago
        I'm not going to debate whether enough people to fill multiple major cities is a "huge" class or not. Go nitpick someone else if that's your only point.
- crote 4y ago
  Landlords don't provide housing, property developers do. Most people who currently rent don't want landlord. You already make that point yourself: the alternative for them is being homeless, because they are unable to buy due to high housing prices and restrictions on getting mortgages. In many cases the landlord are making boatloads of money, simply by being the middleman between tenant and bank. They are not the selfless charities you are making them out to be.
  - twblalock 4y ago
    Most landlords actually spend more than they make, and they hope the long-term appreciation on the property will make up for the expenses. Property developers only build things because they know they can rent them out directly or sell them to landlords who will. None of this exists without a market that will demand it.
    - 29083011397778 4y ago
      We still don't need landlords. Water is a requirement, so my government has built out the infrastructure, and provides the service at near-cost. Same with power, insurance, licensing for firearms and motor vehicles, public transit, and more. Why is housing different in your mind? Or is this an American view that everything must be a "free" market? Note that the government doesn't need to be the sole provider of housing, but allowing the government to compete with private industry hardly seems unreasonable.
      - twblalock 4y ago
        If the government provided your housing, the government would be your landlord. Is that really preferable to your landlord being an individual you can sue in court? There is no world without landlords.
        defrost 4y ago
        If a state housing commission fails to deliver contracted services then of course they can be taken to court - they are far less likely to dodge and avoid in the manner a truly bad individual landlord can. They're also there to provide housing services to all including the most needy that many landlords might reject. See (for example): https://www.housing.wa.gov.au https://www.housing.wa.gov.au
- LikesPwsh 4y ago
  If letting was illegal the cost of housing would move to reflect that. Possibly to the point where a mortgage would be cheaper and easier than a rental is currently. Governments could set themselves up as a monopoly landlord for those people unable to afford even cheap homes.
  - twblalock 4y ago
    > Governments could set themselves up as a monopoly landlord If you wanted to make the current situation worse, congratulations, you have found a solution! Now you can't get out of your rent because your landlord is the damn government!
- KingMachiavelli 4y ago
  That's just not the case even though the net cash flow makes it seem like landlords are often just breaking even. If a tenants rent only covered the the monthly mortgage, that's still a 5.5% ROI assuming 20% down, 30 year mortgage. Accounting for interest rates, then the ROI is 5.5-(R*0.8)% returns. But rents go up yearly to match market rents so the actual returns are closer to 15-22% (though it tends to scale poorly which is why REITs pay so little IMO). Even after accounting for loan interest & costs, real estate is a very attractive 8%-15% investment with very favorable tax incentives. E.g. gains gan be deferred as long as they are invested in other real estate, positive cash flow is typically tax free due to depreciation of property - despite it's market value going up!.
  - WalterBright 4y ago
    Once you sell, though, that depreciated value becomes your cost basis for capital gains, and then you get socko'ed with taxes.
    - KingMachiavelli 4y ago
      IRC Section 1031 lets you transfer the cost basis as long as you reinvest in real estate and inherited assets get stepped up cost basis. As long as you stay invested in real estate (and the tax laws don't change), you could get an entire lifetime of appreciation tax free all while having positive cash flow.

It's also housing for the people who live in it. Imagine a world without landlords. It's way worse than the one we live in now. It's a world where you cannot rent, you can only choose between buying or being homeless. Landlords provide housing and most of them don't make a ton of money out of it. They hope for future appreciation of the property, which they can only realize if they sell, and their monthly income often doesn't cover the cost of ownership.

DaiPlusPlus 4y ago
How would you consider public/council/local-authority housing then? They certainly don’t own the property as an investment - especially as oftentimes thise properties cannot legally be sold anyway.
- twblalock 4y ago
  That just means the government is your landlord.
flangola7 4y ago
There could be options beyond rent buy or be homeless. But a number of steps would be required, such as growing up and taking the boot out of our throat.
actually_a_dog 4y ago
A world where you cannot rent is also one where there isn't a huge class of people who own more housing units than they could possibly live in.
- twblalock 4y ago
  Please identify this "huge class of people" who own more housing than they can possibly live in. I don't believe they exist. If you are referring to corporate owners of apartment buildings, that's one thing. But to say there is a huge class of people who are landlords is just unrealistic. Very few people own more than one home, and even fewer people own more than two.
  - actually_a_dog 4y ago
    You don't believe individual landlords exist? They have a whole, entire subreddit, r/Landlord. Voilà, quod erat demonstrandum. To wit: > Of the approximately 50 million rental housing units in the United States, around 41% of the rental units are owned by mom and pop landlords, also known as individual investor landlords. That means approximately 20.5 million units are overseen by mom and pop landlords. https://getflex.com/blog/landlord-statistics/ https://getflex.com/blog/landlord-statistics/ Also, from the same site, the average landlord has 3 properties. That means there are more than 6 million individual landlords in the US. I'm not going to nitpick whether that's "huge" or not; the point is proven.
    - twblalock 4y ago
      > Also, from the same site, the average landlord has 3 properties. That means there are more than 6 million individual landlords in the US. In a population of 330 million. That's ~1.8% of the population. Hardly a "huge class".
      - actually_a_dog 4y ago
        I'm not going to debate whether enough people to fill multiple major cities is a "huge" class or not. Go nitpick someone else if that's your only point.
crote 4y ago
Landlords don't provide housing, property developers do. Most people who currently rent don't want landlord. You already make that point yourself: the alternative for them is being homeless, because they are unable to buy due to high housing prices and restrictions on getting mortgages. In many cases the landlord are making boatloads of money, simply by being the middleman between tenant and bank. They are not the selfless charities you are making them out to be.
- twblalock 4y ago
  Most landlords actually spend more than they make, and they hope the long-term appreciation on the property will make up for the expenses. Property developers only build things because they know they can rent them out directly or sell them to landlords who will. None of this exists without a market that will demand it.
  - 29083011397778 4y ago
    We still don't need landlords. Water is a requirement, so my government has built out the infrastructure, and provides the service at near-cost. Same with power, insurance, licensing for firearms and motor vehicles, public transit, and more. Why is housing different in your mind? Or is this an American view that everything must be a "free" market? Note that the government doesn't need to be the sole provider of housing, but allowing the government to compete with private industry hardly seems unreasonable.
    - twblalock 4y ago
      If the government provided your housing, the government would be your landlord. Is that really preferable to your landlord being an individual you can sue in court? There is no world without landlords.
      - defrost 4y ago
        If a state housing commission fails to deliver contracted services then of course they can be taken to court - they are far less likely to dodge and avoid in the manner a truly bad individual landlord can. They're also there to provide housing services to all including the most needy that many landlords might reject. See (for example): https://www.housing.wa.gov.au https://www.housing.wa.gov.au
LikesPwsh 4y ago
If letting was illegal the cost of housing would move to reflect that. Possibly to the point where a mortgage would be cheaper and easier than a rental is currently. Governments could set themselves up as a monopoly landlord for those people unable to afford even cheap homes.
- twblalock 4y ago
  > Governments could set themselves up as a monopoly landlord If you wanted to make the current situation worse, congratulations, you have found a solution! Now you can't get out of your rent because your landlord is the damn government!
KingMachiavelli 4y ago
That's just not the case even though the net cash flow makes it seem like landlords are often just breaking even. If a tenants rent only covered the the monthly mortgage, that's still a 5.5% ROI assuming 20% down, 30 year mortgage. Accounting for interest rates, then the ROI is 5.5-(R*0.8)% returns. But rents go up yearly to match market rents so the actual returns are closer to 15-22% (though it tends to scale poorly which is why REITs pay so little IMO). Even after accounting for loan interest & costs, real estate is a very attractive 8%-15% investment with very favorable tax incentives. E.g. gains gan be deferred as long as they are invested in other real estate, positive cash flow is typically tax free due to depreciation of property - despite it's market value going up!.
- WalterBright 4y ago
  Once you sell, though, that depreciated value becomes your cost basis for capital gains, and then you get socko'ed with taxes.
  - KingMachiavelli 4y ago
    IRC Section 1031 lets you transfer the cost basis as long as you reinvest in real estate and inherited assets get stepped up cost basis. As long as you stay invested in real estate (and the tax laws don't change), you could get an entire lifetime of appreciation tax free all while having positive cash flow.