6 ms·

That's bullshit; being a landlord is a lot of labor. Buildings don't magically maintain themselves. It is true that there is a disconnect between the labor an

That's bullshit; being a landlord is a lot of labor. Buildings don't magically maintain themselves. It is true that there is a disconnect between the labor and the income; being a landlord in a desirable area isn't more labor than being a landlord in a less desirable area (in fact it can be less!).

swatcoder 3y ago
Smith is speaking about the core business of owning and letting use of land (or some other finite resource) itself. The improvements that one might speculatively build on the land and then need to maintain or alter over time is actually a different, secondary business which can be seen as more labor-based, as you note.
michaelmrose 3y ago
Flipping burgers and making french fries is a lot of labor. When you aren't up to your elbows in grease you are up to your elbows in some cleaning up between rushes and the pay is low so if you want to live you better have a second gig. Your check between your 2 jobs only says 55 hours a week but in reality between community and preparing for work and lunch breaks you are out of the house at least 65 hours a week or about 3400 hours. It eats your entire life! Conversely being a landlord isn't even really a job. Once every 3 years you spend a few hours overseeing the skilled labor needed to do any repairs and updates and a few more hours interviewing 2-4 tenants and in between you mostly cash checks or fire off a few angry letters if the tenant gets behind. Spending less than 20 hours per year per unit. An average mom and pop owns 1-3 units and works less in a year what a low wage worker works in a week.
- RHSeeger 3y ago
  I currently own a house. I spend a fair amount of time and money on the maintenance of that house. When I rented, my landlord spent that time and money. Now, admittedly, the (normal) money came out of my rent.. but the time sure doesn't. And when the boiler went in the base of one of the place I rented, the landlord had to have it replaced. That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent. There is more risk in being a landlord than there is in owning a house, because you have to deal with all the risk of owning a house AND the risk of your tenant being a problem.
  - drewcoo 3y ago
    > And when the boiler went in the base of one of the place I rented, the landlord had to have it replaced. That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent. Boilers go out. That's expected. It's predictable. The only risk involved is landlord-created risk, playing Russian roulette with the boiler, hoping it won't fail yet because that means earing more money now and not spending it on upkeep yet.
  - asdefghyk 3y ago
    RE "....That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent....." What is the $$$ cost of this risk? that is the question that property owner and tenant have completely different perspectives on.
  - michaelmrose 3y ago
    Many homeowners fancy themselves a jack of all trades and do many sorts of work on their own homes often unwisely. A landlord earns enough to pay for actual tradesmen to work on their homes. Owning say 1 home and trying to save money by doing all your own work is generally ill advised. You would do better to invest the proceeds in purchasing a second rather than trying to pinch pennies. Done properly there isn't much risk that isn't trivially insurable.
    - RHSeeger 2y ago
      The risk I was talking about wasn't "I did the work myself and caused a problem", it was "oh sh_t, I need $20,000 in repairs this year".
      - michaelmrose 2y ago
        Those 20,000 should either be an unfortunate accident covered by your insurance or expected costs of doing business whereby you should either have saved for it or financed by virtue of your equity in the property.
chefandy 3y ago
> That's bullshit; being a landlord is a lot of labor. Buildings don't magically maintain themselves. It is true that there is a disconnect between the labor and the income; being a landlord in a desirable area isn't more labor than being a landlord in a less desirable area (in fact it can be less!). Nope. I co-own a late 19th century New England triple-decker: a purpose -built rental building endemic to the northeast, and easily one of the most common rental properties in the country. In my comparatively inexpensive market, it would yield about 8k month in revenue. In Boston, it would be closer to 15k. The building hardly requires more maintenance than my 2021 car. I lived in apartments where the landlord literally didn't step foot in our apartment in the 8 years I lived there except for the one time our two downstairs neighbors got bedbugs so we all got treated (and it was a 45 second walkthrough.) If you think being a landlord is "a lot of labor" for the amount of income you get out of it, you either don't realize how little most landlords put into their properties or you don't realize what "a lot of labor" means.
- asdefghyk 3y ago
  If its so profitable ( implying landlord charging high rent ) then lots people will buy own home. If its such good risk to landlord than more rental available , and rents should be coming down OR increasing less due to increasing vacancy rate.
  - chefandy 3y ago
    If it was that profitable then it would be cheaper? That doesn't even remotely make sense in the most superficial ways. I don't even understand how you'd think it does. Maybe if there were infinite housing options? But housing supply is extremely low in the US in large part because larger corporations are buying up huge swaths of housing and turning it into rental housing... Because it's really really profitable. And since supply is low and prices are high, it's not possible for most renters to buy houses. Nobody rents because it's cheaper overall, they rent because you don't need tens of thousands of dollars upfront for a down payment, plus a great credit score. That is, unless you're in Boston or the like where you must pay first months rent, last months rent, a security deposit, and a realtor fee generally equal to one months rent, meaning for that relatively reasonable $3k 2br apartment, you need $12k upfront to move in. So why don't they just buy it? Because buying a 2 or 3br market rate flat in Boston or the surrounding municipalities would cost maybe from $700k to $2m. The further surrounding areas are only slightly cheaper and by the time you hit more affordable places, your looking at a 90 to 120 minute car commute each direction. You either don't understand the math or you're not interested in understanding the math and just want to justify gouging people. Like I said, I own the exact type of building that most landlords own in the urban northeast. In fact, it was an absentee landlord rental building for decades and hasn't structurally changed since it was. I know EXACTLY how much it costs to operate this building, and how much labor it takes. That hand-wavy "but it's so expensive and takes so much work" garbage doesn't work on me. It's not labor-free and it costs money, especially if a roof needs to be repaired or the like, but that's true in all businesses and if you don't prepare for it well enough to not be a disaster when it happens, or you buy an instanely unreliable and maintenance-heavy building, that's not your customers fault. Even in our flat-roofed old timber-framed triple-decker, our very healthy and responsibly funded major repair savings and building expenses fund (roof repair, insurance, snow removal, water damage repair, etc) takes in a little over 5% of what our rental income would be in this fairly inexpensive market, and aside from the gardening and cleanup in the courtyard, we contribute nearly no labor outside of our own units. There's a culture of entitlement among landlords, at least in the US, that completely skews their understanding of what they deserve for what they put in to something. You show real plausible expenses or labor that I don't have in my 19th century timber-framed building that most other landlords have, then I'll happily change my perspective. I've asked for that every time I've had this conversation but it just doesn't materialize. You want to see what a lot of labor and expense for the amount of profit looks like? Look at the Eater article where the owner of Mei Mei in Boston details her P&L.
kerkeslager 3y ago
That's bullshit. Building maintenance per tenant is on the order of single-digit hours of work per week per tenant, and that's for landlords that bother to show up. If your argument is that they provide the services of a handyman, then they can bill hourly like a handyman--i.e. live near or below the poverty line like most handymen. To say that there's a disconnect between the labor and the income is an understatement; the labor is simply negligible in comparison to the income. The number of tenant properties one would have to manage to reach even a 40-hour workweek average is quite large, and by that point, most landlords would hire a super.

swatcoder 3y ago

Smith is speaking about the core business of owning and letting use of land (or some other finite resource) itself. The improvements that one might speculatively build on the land and then need to maintain or alter over time is actually a different, secondary business which can be seen as more labor-based, as you note.

michaelmrose 3y ago

Flipping burgers and making french fries is a lot of labor. When you aren't up to your elbows in grease you are up to your elbows in some cleaning up between rushes and the pay is low so if you want to live you better have a second gig. Your check between your 2 jobs only says 55 hours a week but in reality between community and preparing for work and lunch breaks you are out of the house at least 65 hours a week or about 3400 hours. It eats your entire life! Conversely being a landlord isn't even really a job. Once every 3 years you spend a few hours overseeing the skilled labor needed to do any repairs and updates and a few more hours interviewing 2-4 tenants and in between you mostly cash checks or fire off a few angry letters if the tenant gets behind. Spending less than 20 hours per year per unit. An average mom and pop owns 1-3 units and works less in a year what a low wage worker works in a week.

RHSeeger 3y ago
I currently own a house. I spend a fair amount of time and money on the maintenance of that house. When I rented, my landlord spent that time and money. Now, admittedly, the (normal) money came out of my rent.. but the time sure doesn't. And when the boiler went in the base of one of the place I rented, the landlord had to have it replaced. That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent. There is more risk in being a landlord than there is in owning a house, because you have to deal with all the risk of owning a house AND the risk of your tenant being a problem.
- drewcoo 3y ago
  > And when the boiler went in the base of one of the place I rented, the landlord had to have it replaced. That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent. Boilers go out. That's expected. It's predictable. The only risk involved is landlord-created risk, playing Russian roulette with the boiler, hoping it won't fail yet because that means earing more money now and not spending it on upkeep yet.
- asdefghyk 3y ago
  RE "....That type of thing, major expenses, is some of the risk that landlords take on in exchange for collecting rent....." What is the $$$ cost of this risk? that is the question that property owner and tenant have completely different perspectives on.
- michaelmrose 3y ago
  Many homeowners fancy themselves a jack of all trades and do many sorts of work on their own homes often unwisely. A landlord earns enough to pay for actual tradesmen to work on their homes. Owning say 1 home and trying to save money by doing all your own work is generally ill advised. You would do better to invest the proceeds in purchasing a second rather than trying to pinch pennies. Done properly there isn't much risk that isn't trivially insurable.
  - RHSeeger 2y ago
    The risk I was talking about wasn't "I did the work myself and caused a problem", it was "oh sh_t, I need $20,000 in repairs this year".
    - michaelmrose 2y ago
      Those 20,000 should either be an unfortunate accident covered by your insurance or expected costs of doing business whereby you should either have saved for it or financed by virtue of your equity in the property.

chefandy 3y ago

> That's bullshit; being a landlord is a lot of labor. Buildings don't magically maintain themselves. It is true that there is a disconnect between the labor and the income; being a landlord in a desirable area isn't more labor than being a landlord in a less desirable area (in fact it can be less!). Nope. I co-own a late 19th century New England triple-decker: a purpose -built rental building endemic to the northeast, and easily one of the most common rental properties in the country. In my comparatively inexpensive market, it would yield about 8k month in revenue. In Boston, it would be closer to 15k. The building hardly requires more maintenance than my 2021 car. I lived in apartments where the landlord literally didn't step foot in our apartment in the 8 years I lived there except for the one time our two downstairs neighbors got bedbugs so we all got treated (and it was a 45 second walkthrough.) If you think being a landlord is "a lot of labor" for the amount of income you get out of it, you either don't realize how little most landlords put into their properties or you don't realize what "a lot of labor" means.

asdefghyk 3y ago
If its so profitable ( implying landlord charging high rent ) then lots people will buy own home. If its such good risk to landlord than more rental available , and rents should be coming down OR increasing less due to increasing vacancy rate.
- chefandy 3y ago
  If it was that profitable then it would be cheaper? That doesn't even remotely make sense in the most superficial ways. I don't even understand how you'd think it does. Maybe if there were infinite housing options? But housing supply is extremely low in the US in large part because larger corporations are buying up huge swaths of housing and turning it into rental housing... Because it's really really profitable. And since supply is low and prices are high, it's not possible for most renters to buy houses. Nobody rents because it's cheaper overall, they rent because you don't need tens of thousands of dollars upfront for a down payment, plus a great credit score. That is, unless you're in Boston or the like where you must pay first months rent, last months rent, a security deposit, and a realtor fee generally equal to one months rent, meaning for that relatively reasonable $3k 2br apartment, you need $12k upfront to move in. So why don't they just buy it? Because buying a 2 or 3br market rate flat in Boston or the surrounding municipalities would cost maybe from $700k to $2m. The further surrounding areas are only slightly cheaper and by the time you hit more affordable places, your looking at a 90 to 120 minute car commute each direction. You either don't understand the math or you're not interested in understanding the math and just want to justify gouging people. Like I said, I own the exact type of building that most landlords own in the urban northeast. In fact, it was an absentee landlord rental building for decades and hasn't structurally changed since it was. I know EXACTLY how much it costs to operate this building, and how much labor it takes. That hand-wavy "but it's so expensive and takes so much work" garbage doesn't work on me. It's not labor-free and it costs money, especially if a roof needs to be repaired or the like, but that's true in all businesses and if you don't prepare for it well enough to not be a disaster when it happens, or you buy an instanely unreliable and maintenance-heavy building, that's not your customers fault. Even in our flat-roofed old timber-framed triple-decker, our very healthy and responsibly funded major repair savings and building expenses fund (roof repair, insurance, snow removal, water damage repair, etc) takes in a little over 5% of what our rental income would be in this fairly inexpensive market, and aside from the gardening and cleanup in the courtyard, we contribute nearly no labor outside of our own units. There's a culture of entitlement among landlords, at least in the US, that completely skews their understanding of what they deserve for what they put in to something. You show real plausible expenses or labor that I don't have in my 19th century timber-framed building that most other landlords have, then I'll happily change my perspective. I've asked for that every time I've had this conversation but it just doesn't materialize. You want to see what a lot of labor and expense for the amount of profit looks like? Look at the Eater article where the owner of Mei Mei in Boston details her P&L.

kerkeslager 3y ago

That's bullshit. Building maintenance per tenant is on the order of single-digit hours of work per week per tenant, and that's for landlords that bother to show up. If your argument is that they provide the services of a handyman, then they can bill hourly like a handyman--i.e. live near or below the poverty line like most handymen. To say that there's a disconnect between the labor and the income is an understatement; the labor is simply negligible in comparison to the income. The number of tenant properties one would have to manage to reach even a 40-hour workweek average is quite large, and by that point, most landlords would hire a super.