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Real estate is special because of multiple federal government and state government policies limiting (subsidizing) borrowers’ risk, allowing borrowers to lever

Real estate is special because of multiple federal government and state government policies limiting (subsidizing) borrowers’ risk, allowing borrowers to lever without commensurate increases in risk. The federal government taxpayers (especially future ones) provide enormous subsidies in the way of 30 year fixed rate loans with no prepayment penalty, and no risk of having the loan be called. Many state governments make home mortgages non recourse as well. And then there’s the federal 1031 tax exchange benefit. And there are county/state limits on property tax increases, like California’s famous prop 13.

SirMaster 2y ago
When I learned how a lot of the government policies worked it just kinda blew my mind. Yes you are effectively 4x leveraging your investment with a way lower risk than doing something like that in the stock market. You are certainly leveraging other people's money in a way. Plus the tax deductions on asset depreciation are wild. Maybe it won't last forever, but I'll pursue it while it works.
__turbobrew__ 2y ago
Yea I think that is the crux of it. You are using social programs designed to keep a roof over people’s head for financial gain.
- lotsofpulp 2y ago
  If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. The fact that the social program involves extending lines of credit means that the design was not to keep a roof over people’s head, but rather enrich existing asset owners and indebt future ones to get them chained to the treadmill. Similar to cutting funding for higher education and replacing it with student loans.
  - __turbobrew__ 2y ago
    Maybe I am wrong about the purpose of subsidized loans for housing but the result is the same — public costs, private profits. Will gen Z see they are at the bottom of a pyramid that ceases to exist with their generation?
  - TeMPOraL 2y ago
    > If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. Except it wouldn't happen, because it would get killed by even louder whining about giving free money to the lazy do-littles. Every social program has to have a layer of appeasing the people who only feel they're part of a society when it benefits them.

SirMaster 2y ago

When I learned how a lot of the government policies worked it just kinda blew my mind. Yes you are effectively 4x leveraging your investment with a way lower risk than doing something like that in the stock market. You are certainly leveraging other people's money in a way. Plus the tax deductions on asset depreciation are wild. Maybe it won't last forever, but I'll pursue it while it works.

__turbobrew__ 2y ago

Yea I think that is the crux of it. You are using social programs designed to keep a roof over people’s head for financial gain.

lotsofpulp 2y ago
If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. The fact that the social program involves extending lines of credit means that the design was not to keep a roof over people’s head, but rather enrich existing asset owners and indebt future ones to get them chained to the treadmill. Similar to cutting funding for higher education and replacing it with student loans.
- __turbobrew__ 2y ago
  Maybe I am wrong about the purpose of subsidized loans for housing but the result is the same — public costs, private profits. Will gen Z see they are at the bottom of a pyramid that ceases to exist with their generation?
- TeMPOraL 2y ago
  > If the social program was designed to keep a roof over people’s head, then it would simply give people cash, or a roof. Except it wouldn't happen, because it would get killed by even louder whining about giving free money to the lazy do-littles. Every social program has to have a layer of appeasing the people who only feel they're part of a society when it benefits them.