3 ms·
The risk inherent in the ownership of land is having too much of your wealth concentrated in it, and having used leverage to purchase the land. Both are true fo
by fooker 4mo ago
The risk inherent in the ownership of land is having too much of your wealth concentrated in it, and having used leverage to purchase the land. Both are true for a large fraction of landlords in the world.
A real estate bubble bursting or anything that makes your area unappealing to live in would suddenly be really problematic and in the case of leverage get you negative equity.
- estearum 4mo agoJust because you can lose money does not mean you are "taking on risk" in the way a bank or insurer does. If they didn't "take on that risk," the land is still right there being land. That is not true for banks or insurers, where if no one was willing to hold that risk then the inverse product wouldn't exist.
- fooker 4mo agoBanks hold money for you, the cash would still be under your mattress if the bank did not hold it. I'm sure you have a philosophical point here, but this is exactly how the modern economy prices risk. Your understanding of the semantics of risk is not being questioned here.
- estearum 4mo agoUhhh... banks do not "hold money for you." You think banks pay you interest to have the privilege to... hold your money? No. They pool deposits and they lend it out, taking on the risk of doing so with the guarantee they will make their depositors whole. This is called "taking on risk," and they are paid for this service (among the other instrumental services they provide in order to make this happen). Without banks providing this set of services, these deployable pools of capital would not exist. This is absolutely not the same as the price risk that any asset holder has, and it is not what landowners are paid for. It's not a philosophical point. It is literally a question of who is getting paid what, and why?