14 ms·

Silicon valley has if anything made real estate more of an investment, look at fractional ownership schemes. The costs of transacting business through an agent

by iisan7 3y ago

Silicon valley has if anything made real estate more of an investment, look at fractional ownership schemes. The costs of transacting business through an agent is a holdover from another time when those costs weren't that significant given how infrequently a home would transact (and lower real prices). I agree realtors generally don't provide value for the money anymore. However, all else being equal, removing realtors will itself make it more profitable to invest in real estate.

klysm 3y ago
> removing realtors will itself make it more profitable to invest in real estate Perhaps this statement should be restricted to just say the costs of investing in real estate would be reduced. Small difference I know, but I think it’s an important distinction.
- matt-attack 3y ago
  They seem like equivalent statements. What was the point of rephrasing?
  - Mtinie 3y ago
    I suspect it’s because profits only exist in an “up” market while reduced costs provide benefits whether the market is up or down.
  - klysm 3y ago
    Profit is up to other factors. Lower costs means you need less revenue to make a profit, but of course it does not guarantee it
- koolba 3y ago
  Lower transaction costs lead to a more liquid market as the cost of entry and exit are both reduced. Every body wins except the middle men.
  - klysm 3y ago
    Agreed, but that doesn’t translate to profit universally.
- AnthonyMouse 3y ago
  > Perhaps this statement should be restricted to just say the costs of investing in real estate would be reduced. Small difference I know, but I think it’s an important distinction. It's especially important in this case because of the implications: One of the parties who "invest" in real estate is construction companies, who hold the real estate while they're building it. Lowering their costs makes them more profitable, so you get more construction -- which lowers housing costs by removing the realtor's vig and by the increase in the housing supply.
taeric 3y ago
I don't think fractional ownership is a silicon valley creation? What makes you say that? Similarly, how are real estate agents a guard on investing? I'm not convinced they are bad, mind you. Curious on your angle, though.
- gkfasdfasdf 3y ago
  Check out https://lofty.ai https://lofty.ai. Fractional, income-generating real estate, including the tax benefits (which you can't get with REIT).
  - rickydroll 3y ago
    lofty is simultaneously horrifying and attractive. Rent seeking is an abomination it is the only way to build a financial future. Work doesn't pay enough. I've often felt that trading stocks and real estate investing like this is benefiting from other people's debt. which raises the interesting question. If you were to live according to Dave Ramsey's debt is evil philosophy and everybody got rid of debt, where would you put your money to build for the future?
  - taeric 3y ago
    My question is more of why this is seen as SV making this more common. That there are starting to be some SV companies that are doing this is evidence, I suppose. They still seem to be in the vast minority of the companies that offer it, though. Feels like saying SV encourages payday loans, because there are some that exist there.
  - noSyncCloud 3y ago
    Fwiw, this is using USDC as a currency. Your deposits are automatically converted.
- surfmike 3y ago
  This company has been extending fractional ownership to a lot of communities in California. https://en.m.wikipedia.org/wiki/Pacaso https://en.m.wikipedia.org/wiki/Pacaso
poulsbohemian 3y ago
>I agree realtors generally don't provide value for the money anymore. However, all else being equal, removing realtors will itself make it more profitable to invest in real estate. I'm a Realtor, but I'm not here to turn this into a pissing match - if you believe that representation doesn't benefit you, then don't use a Realtor. In the same way, if you believe you can represent yourself successfully in court don't use a lawyer or if you can adequately assess your financial future, don't use a financial advisor. Expertise exists for a reason - because I can tell you a lot about water rights, land use, zoning, negotiations, market and pricing, and I can connect you with other professionals to meet your needs. Many people find those professional services to be worth their time and money. All that said - yes, I think we will see changes to the cost (commissions et al) of real estate services. But when I hear people talk about "normal" real estate transactions or comments like "you don't need an agent for residential" I know this person is either very new to real estate or very experienced. The newbie doesn't know what they don't know, and the experienced person likely has sufficient knowledge that they will only bring in an agent to supplement that knowledge. The majority of people do not transact enough real estate such that they may think they know more than they do.
- stickfigure 3y ago
  Many of my friends are real estate agents, and my observation is that most of them are not particularly educated in land use/zoning issues. Which is not to say that they don't add a lot of value in other ways, but there's no substitute for reading the zoning rules personally if you are thinking about construction. As an outside observer my impression is that the sell-side realtor provides a lot of value (especially if he/she has a small construction crew on standby) but the buy-side realtor contributes less. Also, the incentives are misaligned for the buy-side realtor - they get paid more the higher price you pay.
  - poulsbohemian 3y ago
    Every market is going to be different in terms of skill and standard of practice... in urban markets, people only selling residential, they may not need to know much about land use, but you are paying them for their market analytics and negotiating skills. In my market, to actually serve clients well, I need to know an absurd number of things as my people are dealing in land use, water rights, fencing, development, etc... Regarding being on sell vs buy side - the buy-side should be helping you make sure you don't use a foot gun. They should be helping identify any material issues with the property and/or sourcing experts who can help with risk mitigation. And, they should have savvy to help negotiate the strongest possible offer to your favor. Because of several national lawsuits, it is very likely that consumers will be negotiating a price for a buyer's agent's services and paying for it directly in the near future. That's a whole other topic and probably requires frosty beverages.

by iisan7 3y ago

klysm 3y ago

> removing realtors will itself make it more profitable to invest in real estate Perhaps this statement should be restricted to just say the costs of investing in real estate would be reduced. Small difference I know, but I think it’s an important distinction.

matt-attack 3y ago
They seem like equivalent statements. What was the point of rephrasing?
- Mtinie 3y ago
  I suspect it’s because profits only exist in an “up” market while reduced costs provide benefits whether the market is up or down.
- klysm 3y ago
  Profit is up to other factors. Lower costs means you need less revenue to make a profit, but of course it does not guarantee it
koolba 3y ago
Lower transaction costs lead to a more liquid market as the cost of entry and exit are both reduced. Every body wins except the middle men.
- klysm 3y ago
  Agreed, but that doesn’t translate to profit universally.
AnthonyMouse 3y ago
> Perhaps this statement should be restricted to just say the costs of investing in real estate would be reduced. Small difference I know, but I think it’s an important distinction. It's especially important in this case because of the implications: One of the parties who "invest" in real estate is construction companies, who hold the real estate while they're building it. Lowering their costs makes them more profitable, so you get more construction -- which lowers housing costs by removing the realtor's vig and by the increase in the housing supply.

taeric 3y ago

I don't think fractional ownership is a silicon valley creation? What makes you say that? Similarly, how are real estate agents a guard on investing? I'm not convinced they are bad, mind you. Curious on your angle, though.

gkfasdfasdf 3y ago
Check out https://lofty.ai https://lofty.ai. Fractional, income-generating real estate, including the tax benefits (which you can't get with REIT).
- rickydroll 3y ago
  lofty is simultaneously horrifying and attractive. Rent seeking is an abomination it is the only way to build a financial future. Work doesn't pay enough. I've often felt that trading stocks and real estate investing like this is benefiting from other people's debt. which raises the interesting question. If you were to live according to Dave Ramsey's debt is evil philosophy and everybody got rid of debt, where would you put your money to build for the future?
- taeric 3y ago
  My question is more of why this is seen as SV making this more common. That there are starting to be some SV companies that are doing this is evidence, I suppose. They still seem to be in the vast minority of the companies that offer it, though. Feels like saying SV encourages payday loans, because there are some that exist there.
- noSyncCloud 3y ago
  Fwiw, this is using USDC as a currency. Your deposits are automatically converted.
surfmike 3y ago
This company has been extending fractional ownership to a lot of communities in California. https://en.m.wikipedia.org/wiki/Pacaso https://en.m.wikipedia.org/wiki/Pacaso

poulsbohemian 3y ago

>I agree realtors generally don't provide value for the money anymore. However, all else being equal, removing realtors will itself make it more profitable to invest in real estate. I'm a Realtor, but I'm not here to turn this into a pissing match - if you believe that representation doesn't benefit you, then don't use a Realtor. In the same way, if you believe you can represent yourself successfully in court don't use a lawyer or if you can adequately assess your financial future, don't use a financial advisor. Expertise exists for a reason - because I can tell you a lot about water rights, land use, zoning, negotiations, market and pricing, and I can connect you with other professionals to meet your needs. Many people find those professional services to be worth their time and money. All that said - yes, I think we will see changes to the cost (commissions et al) of real estate services. But when I hear people talk about "normal" real estate transactions or comments like "you don't need an agent for residential" I know this person is either very new to real estate or very experienced. The newbie doesn't know what they don't know, and the experienced person likely has sufficient knowledge that they will only bring in an agent to supplement that knowledge. The majority of people do not transact enough real estate such that they may think they know more than they do.

stickfigure 3y ago
Many of my friends are real estate agents, and my observation is that most of them are not particularly educated in land use/zoning issues. Which is not to say that they don't add a lot of value in other ways, but there's no substitute for reading the zoning rules personally if you are thinking about construction. As an outside observer my impression is that the sell-side realtor provides a lot of value (especially if he/she has a small construction crew on standby) but the buy-side realtor contributes less. Also, the incentives are misaligned for the buy-side realtor - they get paid more the higher price you pay.
- poulsbohemian 3y ago
  Every market is going to be different in terms of skill and standard of practice... in urban markets, people only selling residential, they may not need to know much about land use, but you are paying them for their market analytics and negotiating skills. In my market, to actually serve clients well, I need to know an absurd number of things as my people are dealing in land use, water rights, fencing, development, etc... Regarding being on sell vs buy side - the buy-side should be helping you make sure you don't use a foot gun. They should be helping identify any material issues with the property and/or sourcing experts who can help with risk mitigation. And, they should have savvy to help negotiate the strongest possible offer to your favor. Because of several national lawsuits, it is very likely that consumers will be negotiating a price for a buyer's agent's services and paying for it directly in the near future. That's a whole other topic and probably requires frosty beverages.