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I'm not sure what to make of it but my little sister lives in Boise, ID, and has 3 AirBNB units. She goes to 'RE investor meetups' regularly and told me that th
by chasebank 4y ago
I'm not sure what to make of it but my little sister lives in Boise, ID, and has 3 AirBNB units. She goes to 'RE investor meetups' regularly and told me that the gist of the message is to take full HELOCs out and roll over into more property. She says she has the least # of units and everyone there has a minimum of 10s of units and a handful of people have hundreds, all purchased the same way. I have to imagine this doesn't end well but who knows.
- sbaidon94 4y agooh boy here we go again...
- hcurtiss 4y agoOne hot take -- If the fed loses appetite or ability to continue increasing interest rates, I think those carrying large amounts of debt on hard assets are going to look like geniuses in the face of runaway inflation.
- hnuser847 4y agoReal estate investors and even regular old homeowners have always looked liked geniuses for exactly this reason. When the dollar loses value every year, loans are cheap, mortgages are subsidized and largely purchased by the government, and the supply of new housing is constrained, the absolute smartest investment to make is in real estate.
- vanilla_nut 4y agoSeems like a housing price crash and AirBnB regulation would make them look a little bit less like geniuses, no? A lot of people have a hard time spending >$500k on very basic or even dilapidated homes across the USA. I'd enjoy seeing the speculators left holding the bag on massive losses if those prices return to normal AND they lose their main revenue stream.
- hnuser847 4y ago> Seems like a housing price crash and AirBnB regulation would make them look a little bit less like geniuses, no? Idk, I know of a ton of RE investors who would love prices to go down, precisely so that they can pick up more properties. And even if the town you're operating in outright bans AirBnBs, there are ways to pivot into other short-term rentals like furnished 3-month rentals for traveling nurse.
- uptownfunk 4y agoYes this is what my banker friend told me when he bought his house last year. The inflation will be a much greater discount to any premium he paid over asking.
- BaculumMeumEst 4y agoi wonder when redfin will start kicking themselves for abandoning their home buying spree
- cagey 4y ago> If the fed loses appetite or ability to continue increasing interest rates How does the Fed lose the ability to increase (or decrease) interest rates? I was under the impression that (ignoring the consequences of doing so), they can set them as they please.
- prottog 4y ago> (ignoring the consequences of doing so) There it is!
- jedberg 4y agoThe Fed chair is appointed by the President. He or she may decided it is better for their re-election to have rates go down and appoint someone who agrees, or they my pressure the Fed chair accordingly.
- chucksmash 4y agoThe Board of Governors is appointed by the President, and Governors can be dismissed by the President. If your increase is summarily reversed by the apparatchik board that replaces you, can you still be said to be capable of raising rates?
- deleted 4y ago[deleted]
- droopyEyelids 4y agoBlackrock owns a ton of rental property in the USA and I remember some report they put out when interest rates hit 6% that they were still bullish on the property market. Their explanation was that since 2008 housing has been built in the USA at half the rate needed to house everyone. Our population is still growing, and there are fewer units per person every year. Additionally, the interest rate makes construction loans more trouble the same way it makes buying an existing property more trouble, so there isn't any relief in sight. If thats true, and it is coming from blackrock, then it could still be reasonable to buy more property.
- tomrod 4y agoMy take is similar. There is transient supply constraint as people on the margin won't move either due to higher rates.
- phdp 4y agoBlackrock is not buying individual houses. Are you confusing them with Blackstone, who did own a unit that bought and rented single family homes?
- tristor 4y agoBlackstone is/was a division of BlackRock that got spun off as a separate entity.
- lotsofpulp 4y agoNot according to Wikipedia https://en.wikipedia.org/wiki/Blackstone_Inc https://en.wikipedia.org/wiki/Blackstone_Inc. https://simple.wikipedia.org/wiki/The_Blackstone_Group https://simple.wikipedia.org/wiki/The_Blackstone_Group
- phdp 4y agoBlackstone was never a division of Blackrock
- droopyEyelids 4y ago
- vanilla_nut 4y agoI understand the economic incentives in place, but as someone stuck on the rental train right now, it's so infuriating to hear these stories. All I want is to buy a house someplace I actually want to live and start building equity instead of burning money on rent. And this class of investors is ruining housing prices with insane price competition based on insane AirBnB revenue. I can only hope that multiple home ownership and AirBnB's externalized costs get regulated and taxed out of existence. There are a lot of young people with much less money than us tech workers who are barely scraping by and will never be able to own their own home or even afford starting a family if these trends continue. When there are millions of Americans who literally can't afford rent living on the street or in their cars, owning even a single "investment property" or vacation home or AirBnB is repugnant.
- notyourwork 4y ago> multiple home ownership There will always be the need for landlords in some circumstances. Not everyone wants to own a home and sometimes life dictates the need for flexibility. Where do you draw the line? I'm not sure what to think of it, but the idea of owning investments isn't going to dissolve any time soon and physical assets (homes) are one investment vehicle. Coming from a person who has rented for a long time, currently owns one home and does not rent.
- vanilla_nut 4y agoAgreed. But we could remove some of the economic incentive for investment properties and short-term rentals. No reason they should benefit so much from inflation AND rent. Drawing that line is a difficult one, but I think it's clear that right now there are way too many incentives towards rent-seeking to the point where it's actually hurting folks who don't rent-seek.
- notyourwork 4y ago[flagged]
- 4y ago
- jeffbee 4y agoIf you have the cash to acquire properties now, high interest rates are great for you because it runs off some buyers and depresses prices somewhat. You can expect to refinance them in the future.
- dilyevsky 4y agoThe downside is the spread on those mortgages is so huge precisely bc of refinance expectation
- nostromo 4y agoIf you bought property in the late 1970s, you had to wait until the 1990s to get a lower rate. When dealing with inflation, sometimes when rates go up, they stay there for an extended period.
- methodin 4y agoAirBNB has really compounded the problem - another reason houses are being treated as purely an investment by people who don't live in them. Even worse they are off the rental market.
- jollyllama 4y agoIdaho has been and continues to be an insanely hot market
- arrosenberg 4y agoIt mostly ends with Blackstone buying them all at a discount.
- AlwaysRock 4y agoHad a former coworker who was buying an apartment a month. Basically putting all profits into the mortgage for the next one. Seemed like she was printing money but I always wondered what would happen if the airbnb market slows down.
- mrexroad 4y agoNo offense to your sister, but I really wish profits from REIT or folks with multiple rentals were taxed 90+%, or at least progressively increase rate with each additional rental beyond.
- chasebank 4y agoHere's the thing, they're not profiting much at all, if any. The whole group believes RE can only go up, so when the value of the home increases, they yank out all the equity and dump it into another property. AirBNB just keeps them afloat.
- AnimalMuppet 4y agoAnd a bunch of people doing that means that the property prices keep going up. Nice self-reinforcing cycle - while it works. Once it fails, though, there's going to be panic selling as all those people get wiped out.
- JumpCrisscross 4y ago> take full HELOCs out and roll over into more property This is a leveraged bet on that region’s tourism. The local government approving a single large hotel would likely crater the market.
- kasey_junk 4y agoOr interest rates increasing faster than Airbnb price elasticity. A whole bunch of these Airbnb based re “investors” also don’t account for home prices going down in there models so will likely get very underwater very fast. I’m surprised it hasn’t happened yet and think this spring real estate season will be very enlightening.
- JumpCrisscross 4y ago> don’t account for home prices going down in there models so will likely get very underwater very fast If their cash flows remain positive, that’s just an accounting curiosity. The core bet is on tourism cash flows to Airbnbs in that area exceeding the cost of financing the properties.
- kasey_junk 4y agoI suppose HELOCs can’t get margin called so that’s probably right.
- frumper 4y agoAren't HELOCs traditionally variable rates? If so, they'd also be betting on interest rates not hovering up that cash flow as rates increase.
- JumpCrisscross 4y ago> they'd also be betting on interest rates not hovering up that cash flow as rates increase Correct. Though that isn't exposure to home prices going down per se.
- 4y ago
- bdcravens 4y agoIt works until it doesn't, but when it doesn't, it's disaster. When disaster hits, the buck usually gets passed. (Private profits, public losses)
- sharadov 4y agoThe interest on my BOA HELOC is about 8% now, not sure how borrowing at that rate makes any sense unless rental yield is about 10% and up ( which is insane!)