Real Estate Crash thread

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Originally Posted by AdironRider

So we are just against property rights now?

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In US history, when certain corporations got a bit too big for their britches and start blatantly dicking over the average American consumer (yeah, yeah, nothing new), then it got addressed. Not that many didn't end up coming around full circle, but they at least TRIED to break up certain out of control monopolies.

I'm not sure we need to turn property rights on its head, BUT perhaps its time for the people and their representatives to start having some serious conversations. I'm not a big fan of the "DO SOMETHING!" approach as doing that 'something' too often ends up backfiring, but perhaps we really should take a step back and take a real honest look at all the variables and see what we can do about it. I wish there was a way to bring the power back to the consumer somehow without the usual crony corporatism (and choosing winners and losers) that too often happens when the Feds start getting involved (which is no small part of what led to the 2008 crash to begin with). Still, assholes like Blackrock need to go down.

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Originally Posted by Bunion 2020

I strongly believe in personal property freedoms. I am not so supportive of VCs and Hedge Funds manipulating the housing markets.

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Exactly. These guys are riding high while the peons fight for scraps while arguing ad nauseum over trivial political issues. These distractions are intentional.

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Originally Posted by californiagrown

I also dont see how the math favors buying houses and letting some sit empty, vs buying houses and renting them.

How much would you guestimate this strategy would need to increase housing prices to be financially better than rental income/equity building + normal appreciation?

E.g. I have a 500k home that i rent out at $2500/month = $30k/year. Add in about 5% appreciation per year and im at $55k in gross revenue in the first year. If i let my $500k home just sit and hope that the created scarcity raises the appreciation of my other $500k homes, then i would have to hope for about a 10% increase in appreciation, or about double the appreciation rate just to break even and would come with ZERO cashflow. I just dont really see that happening.

I would seem like the smart thing to do would be to buy up all the housing stock (thus creating scarcity for buyers), and renting out the housing stock to create revenue and cashflow, with the ability to sell off inventory that has appreciated when additional capital needs to be raised.

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I don't know about the math on investments, but when it comes to renting, here's an interesting piece about how thanks to software algorithms (thanks, tech bro dickheads), apartment management companies have learned that they can actually make MORE money through increasing vacancies and increasing rent prices. Something previously unthinkable in markets before:

Rent Going Up? One Company’s Algorithm Could Be Why.
https://www.propublica.org/article/y...-realpage-rent

We're doomed. :cussing:

No shit...but what exactly does that have to do with your hypothesis above?

When we fall trap to the Golden Age of Bullshit we become part of the problem.

Sent from my Turbo 850 Flatbrimed Highhorse

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Originally Posted by AdironRider

This thread is taking an odd shift.

So we are just against property rights now? You have the inherent right to let a property sit vacant if you so desire.

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No, but the tax code should make houses sitting empty when we have a housing shortage a dubious financial proposition, not something people can game for personal benefit while causing greater societal issues. Maybe once you get over a single entity owning three houses you get hammered. Multi-family owner letting units sit vacant get hit at a certain point. Etc.

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Originally Posted by Foggy_Goggles

No shit...but what exactly does that have to do with your hypothesis above?

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If algorithms have proven that vacancies can yield higher profits, then why couldn't the same logic apply to the big RE investment firms? Surely they are using some sophisticated software as well. Just ask TAFKALVS above (see post #26301).

It's good old fashioned Market Manipulation 101. And they're certainly keying in on certain market and home types too. These guys are sophisticated investors. They appear to know what they're doing. In my area, they've been focusing on single-story, smaller homes which always fetch a higher $/sq. ft. In other places, they're focusing on water-front condos. It all depends on the local market I guess.

Why would you want tenants who smoke and bring in dogs and trash your investment when it could sit empty for a few years and then get sold to a REIT at an appreciable profit for them to then rent?

When I have looked up the property tax info on the empty houses I have had in my area it has been Chinese sounding names. Seems odd not to rent them, but I'm assuming they are in China and just getting their money out, rental income probably creates issues with Chinese government. Maybe not rich enough to set up shell corps? Houses are renting for $4-5k per month, so that is a lot of income to miss out on. They seem to pay people to keep the house looking nice and turn different room lights on. NYT just had another article about how the Chinese upper middle class is trying to get money out of China even more than normal.

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Originally Posted by Foggy_Goggles

<snip> some frothy mouthed word sald hot take.

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There are certain individuals in this thread to which this apparently is the *only* reaction they are capable of.

:rolleyes2

Just so you know, Mom and Pop Landords do the exact same shit. Maybe more empathy, maybe not.

It's really easy to create an enemy and pin all kinds of problems on them, but that doesn't make it so.

Go back and wiki all the big boy words you've used and see if you understand them.

Looks I don't care for the actions of Bezos, Fink, Biden, Trump and so on but that doesn't validate going full Super Karen and vilify them with strawmen and then follow it up with some doubledown that looks like, "don't worry about the particulars, these guys are dicks!"

Sent from my Turbo 850 Flatbrimed Highhorse

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Originally Posted by Foggy_Goggles

Just so you know, Mom and Pop Landords do the exact same shit. Maybe more empathy, maybe not.

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Dude. Come on. You think mom & pop landlords have any power to manipulate the market with their 1 or 2 rental properties versus these giant investment firms? Big megacorps can afford to let properties sit empty for years on end. Not the landlord who lives in the duplex unit next to you.

You also think dirt pimps got nothing to do with pumping up markets, so there's that. :rolleyes2

FYI, at least in markets like Big Sky and Jackson, I ain't gonna name names, but the top dirt pimps are in cahoots with the big investment firms who are also entangled with the advertising arms of it all. All the moving pieces are interwoven in one giant web.

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Originally Posted by MontuckyFried

<snip> Big megacorps can afford to let properties sit empty for years on end.

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Can they? I mean... you'd think some investors would note large capital outlays with no ROI for years on end. :confused:

This hypothesis seems VERY dubious to me.

Something is kinda weird when 10% of US housing is vacant during a housing shortage.

https://www.youtube.com/watch?v=hzoN2MFkCXI

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Originally Posted by TAFKALVS

Why would you want tenants who smoke and bring in dogs and trash your investment when it could sit empty for a few years and then get sold to a REIT at an appreciable profit for them to then rent?

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Because math. See Californiagrown's post. The ROI is so much better with the rental income, even if you do have to replace the carpet or paint some walls every once in a while. Not to mention things break in an empty house, too. When that errant drywall screw that hit a pipe finally rusts through, at least the tenant will let you know about it.

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Originally Posted by mud

Institutional investors are not a major factor with availability or driving up residential pricing. It sounds good to the masses but there are a dozen more variables involved.

https://www.nar.realtor/sites/defaul...05-12-2022.pdf

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Anecdotal evidence, personal feelings, and rumors say this is wrong.

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Originally Posted by skaredshtles

Can they? I mean... you'd think some investors would note large capital outlays with no ROI for years on end. :confused:

This hypothesis seems VERY dubious to me.

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The hypothesis is true if you believe it. (reworking the Costanza principle)

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Originally Posted by MontuckyFried

I don't know about the math on investments, but when it comes to renting, here's an interesting piece about how thanks to software algorithms (thanks, tech bro dickheads), apartment management companies have learned that they can actually make MORE money through increasing vacancies and increasing rent prices. Something previously unthinkable in markets before:

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Well yeah. If i have a rental, i would rather it sit empty for a month and then sign someone to a 12month lease at $2550, than fill it immediately at $2300/month. Its pretty basic opportunity cost math. I have run that calc the 2 times i signed tenants to rent my condo (i never raised rent on either FWIW).

There is A LOT of cash sitting on the sidelines right now, and a lot of people don't want to be invested in stock market related products, and so institutionalized RE investing has exploded.

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Originally Posted by TAFKALVS

Why would you want tenants who smoke and bring in dogs and trash your investment when it could sit empty for a few years and then get sold to a REIT at an appreciable profit for them to then rent?

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Originally Posted by goldenboy

Because math. See Californiagrown's post. The ROI is so much better with the rental income, even if you do have to replace the carpet or paint some walls every once in a while. Not to mention things break in an empty house, too. When that errant drywall screw that hit a pipe finally rusts through, at least the tenant will let you know about it.

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Bingo. Assuming i bought cash, If rent is $3k/month that means im bringing in about $25k takehome per year from that rental (rental income is taxed after all). So if you let that house sit empty for 4 years, you just lost out on $100k in cash income, and the house appreciated no more than if you had renters in there the whole time smoking and trashing the place- drop $50k on a reno and it will be fully updated and new. And dont forget that even vacant houses need to pay tax and need basic upkeep.

In reality, if you do a marginally decent job of screening tenants you will drop maybe $1500/year (averaged) on basic upkeep like appliances, rugs, paint, cleanings etc.

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Originally Posted by skaredshtles

Can they? I mean... you'd think some investors would note large capital outlays with no ROI for years on end. :confused:

This hypothesis seems VERY dubious to me.

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Part of what's fucked with the world is the amount of private capital in the hands of a few. A Bezos of the world doesn't necessarily need anyone else to invest with them. The days of needing capital from from the public to finance your next project are dwindling, as are the associated public returns.

The amount of commercial RE that has happily sat empty for years tells me that similar principles can be applied to SFH.

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Originally Posted by californiagrown

Bingo. Assuming i bought cash, If rent is $3k/month that means im bringing in about $25k takehome per year from that rental (rental income is taxed after all). So if you let that house sit empty for 4 years, you just lost out on $100k in cash income, and the house appreciated no more than if you had renters in there the whole time smoking and trashing the place- drop $50k on a reno and it will be fully updated and new. And dont forget that even vacant houses need to pay tax and need basic upkeep.

In reality, if you do a marginally decent job of screening tenants you will drop maybe $1500/year (averaged) on basic upkeep like appliances, rugs, paint, cleanings etc.

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You think these people care about short-term cashflow? This is 10+ year playbook shit

If i was to use a house as collateral to secure a loan for something, would that house be worth more or less to a bank if it was occupied by a longterm lease? I.e. would the bank see it as less valuable if they couldnt foreclose and immediately sell the house off because of tenants rights?

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Originally Posted by TAFKALVS

You think these people care about short-term cashflow? This is 10+ year playbook shit

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If you could have cashflow with little/no risk, why wouldnt you? And yes, cashflow is extremely important to everyone, everywhere... whether you are getting it from investments or investors.


To again use my example above. A $500k house would get you about $3k rent per month. We established that after 4 years you would have made $100k post taxes. Meaning that after 10 years you would have made $250k profit. Who in their right mind turns down a 50% ROI on top of whatever appreciation that is to be expected.

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Originally Posted by californiagrown

If i was to use a house as collateral to secure a loan for something, would that house be worth more or less to a bank if it was occupied by a longterm lease? I.e. would the bank see it as less valuable if they couldnt foreclose and immediately sell the house off because of tenants rights?

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But paying cash on a house to then turn around and use it as collateral for a loan doesn't seem like it would pencil out without rental income

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Originally Posted by dan_pdx

But paying cash on a house to then turn around and use it as collateral for a loan doesn't seem like it would pencil out without rental income

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I was thinking maybe the institutional investors are stacking vacant houses to use as collateral because they were worth more as collateral if they were vacant and not leased? So if i bought up 100 houses for what my appraisers say was 5-10% below value, and then i wanted to use 50 of them as collateral to secure a loan to buy 50 more houses, would those 50 collateral houses be worth less to a bank as rentals or if they were vacant and ready to sell if the bank ever had to foreclose? Also, the trump trial goes to show it would be easy to inflate the value of your properties when useing them as collateral to secure inflated loans... do a 10k reno and claim it increased the value by 100k.

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Originally Posted by californiagrown

If i was to use a house as collateral to secure a loan for something, would that house be worth more or less to a bank if it was occupied by a longterm lease? I.e. would the bank see it as less valuable if they couldnt foreclose and immediately sell the house off because of tenants rights?

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Originally Posted by californiagrown

If you could have cashflow with little/no risk, why wouldnt you? And yes, cashflow is extremely important to everyone, everywhere... whether you are getting it from investments or investors.


To again use my example above. A $500k house would get you about $3k rent per month. We established that after 4 years you would have made $100k post taxes. Meaning that after 10 years you would have made $250k profit. Who in their right mind turns down a 50% ROI on top of whatever appreciation that is to be expected.

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Originally Posted by californiagrown

I was thinking maybe the institutional investors are stacking vacant houses to use as collateral because they were worth more as collateral if they were vacant and not leased? So if i bought up 100 houses for what my appraisers say was 5-10% below value, and then i wanted to use 50 of them as collateral to secure a loan to buy 50 more houses, would those 50 collateral houses be worth less to a bank as rentals or if they were vacant and ready to sell if the bank ever had to foreclose? Also, the trump trial goes to show it would be easy to inflate the value of your properties when useing them as collateral to secure inflated loans... do a 10k reno and claim it increased the value by 100k.

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Dude, you're still missing the overarching point here... The investors are operating at a scale where they don't give a shit about marginal cash flow. They care about what the house/property is worth in 10, 15, or 20 years while they do absolutely nothing, or the bare minimum, from the sidelines during the "maturing" period.

Joe Blow who invests in <10 properties is most likely renting them, but that's not who we're talking about here.

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Originally Posted by east or bust

Dude, you're still missing the overarching point here... The investors are operating at a scale where they don't give a shit about marginal cash flow. They care about what the house/property is worth in 10, 15, or 20 years while they do absolutely nothing, or the bare minimum, from the sidelines during the "maturing" period.

Joe Blow who invests in <10 properties is most likely renting them, but that's not who we're talking about here.

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I'm still really skeptical that this is going on... seems unlikely.

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Originally Posted by skaredshtles

I'm still really skeptical that this is going on... seems unlikely.

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You need to start listening to more anecdotal stories.

And before someone says the institutions are doing it to deduct rental property depreciation from taxes, you can't deduct loss of rental income, so that isn't going to pencil very well.

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Originally Posted by oldnew_guy

No, but the tax code should make houses sitting empty when we have a housing shortage a dubious financial proposition, not something people can game for personal benefit while causing greater societal issues. Maybe once you get over a single entity owning three houses you get hammered. Multi-family owner letting units sit vacant get hit at a certain point. Etc.

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Both the province of British Columbia and the city of Vancouver have a vacant home tax (2% and 3% respectively). It applies to a single property, and it doesn't even have to be vacant. It can simply be "under utilized". An example would be an empty mansion with a tenant living in a gate house.

It applies to vacant lots as well - and not just the value of the land, but to the potential value of it being developed. Since an average house with no view in Point Grey starts around 3 million, and a true mansion with a view can easily be closer to 10 mil, any vacant property could result in a six figure surtax.

So it would seem like nobody would ever do that, but the province collects over $70 million and the city collects around $100 mil annually. It would also seem like it would've put a dent in properly values, but nope. Rents did decrease, but demand still outstrips supply.

As wealth disparity reaches comic villain levels, the truly rich are using their fuck you money to say exactly that.

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Originally Posted by east or bust

Dude, you're still missing the overarching point here... The investors are operating at a scale where they don't give a shit about marginal cash flow. They care about what the house/property is worth in 10, 15, or 20 years while they do absolutely nothing, or the bare minimum, from the sidelines during the "maturing" period.

Joe Blow who invests in <10 properties is most likely renting them, but that's not who we're talking about here.

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So let me get this right... Cash flow and free liquidity doesn't matter and neither do guaranteed, no-risk returns that are as large or larger than the primary returns? Lol, wut?

At scale it makes even more sense to have rental roi as a hedge.

So, in order to make 10% annual return on a $500k house over 10years, excluding pesky things like maintenance, utilities, taxes and insurance, you'd have to sell it for $1.2million just so ya'll know the math the are arguing in favor of.

I'm not saying the insitutional investors aren't purchasing an alarming amount of SFHs and that that is concerning, I'm saying that you have basicially invented a business model out of thin air and when I ask you about how it would work, you've got nothing either in your own word and or sources.

Its a fucking problem. But understanding the problem isn't helped by just making shit up.

So, for example, is you showed he a zip code or region in metro Houston who institutional investors had have been buying up property, either MLS or not, and were witholding some from the rental inventory so they could raise the rents through scarcity, I'd be listening.

But that not what you said, you basically said something like, pay over market borrowed, leave them vacant for 10 years, they sell because it will offer a good inflation adjusted return. You know with decent credit, you can do that today! There are people in this thread that can help you with that.

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Originally Posted by ghosthop

The amount of commercial RE that has happily sat empty for years tells me that similar principles can be applied to SFH.

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YUP!!! That's precisely what's up. Ever wonder why commercial RE can sit vacant for years on end while refusing to budge on lease rates? Well there ya have it.

What the peons here don't seem to understand is that by keeping properties vacant, investment firms can (A) manipulate the market by artificial scarcity, and (B) offset capital gains by actualizing their "passive losses" upon the next transaction by way of lack of rental income over the years. With increasing rental rates (by their own hands) they can seriously maximize these offsets!

People like FG and others here are thinking like brokeys and can't even remotely begin to comprehend the squirrely games that billionaires and their legions of accountants and lawyers play. How did George Carlin put it? "It's a big club, and you ain't in it!"

Look buddy, maybe tone down the rhetoric. Perhaps part of the reason I don't understand it is because you can't explain it.

I'm not claiming to has the answers but I'm also not the smartest guy in the room, you are.

All you've done is toss out assumptions like they are fact, and opine on financial concepts and strategies that I'm not sure you understand.

To summarize

Me: how does that work?

You: fuck off dummy!



Sent from my Turbo 850 Flatbrimed Highhorse

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Originally Posted by Foggy_Goggles

Look buddy, maybe tone down the rhetoric. Perhaps part of the reason I don't understand it is because you can't explain it.

I'm not claiming to has the answers but I'm also not the smartest guy in the room, you are.

All you've done is toss out assumptions like they are fact, and opine on financial concepts and strategies that I'm not sure you understand.

To summarize

Me: how does that work?

You: fuck off dummy!

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I mean... that's how it works with MF.

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Originally Posted by Foggy_Goggles

Me: how does that work?

You: fuck off dummy!

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This is a remarkably popular debate style. It serves as further evidence that our education system has failed many of us.

Yeah, I'm not buying the institutional investors sitting on empty houses story...

I'm sure it does happen for various reasons, but it is not a large scale portion of the housing market because

A) the institutional buyer thing is generally overstated. The housing market is huge and these big players aren't actually buying that much property (especially after zillow's attempt exploded in their face). Some numbers I've seen thrown around include all business/non-individual buyers, but that's clearly not right--plenty of people buy homes through trusts/LLCs for personal use, small time landlords buy a huge share of properties, AirBNB host LLCs, larger-scale corporate landlords whose business plan is to rent or AirBNB properties, Chinese trying to stash money, etc...but the actual Blackstone-style institutional buyers are doing fairly targeted buying and are small relative to total sales.
B) When you own that many properties, the rents on them are not "marginal" cash flows. Not renting those properties out is a HUGE opportunity cost. Sure, each property may rent for $2k/mo, but when you own thousands of properties you are quickly talking about tens to hundreds of millions a year in rent payments. You don't give up that kind of money. If the homes are in hot markets, they should be easy to rent out to "prime" tenants (non-smoking families with no dogs and high credit scores)...and if they aren't in hot markets, then why would you think price appreciation will outperform other assets?

And like...here's the website for the Blackstone-spinoff buying lots of homes. I see thousands of homes for rent. Maybe they are holding back some homes based on condition/local market, but they are clearly attempting to rent the stuff they own.

When Zillow was trying to do algorithmic buying, they didn't rent the properties, but their goal was to flip in 3-6 months. Basically buy at a discount by being able to offer cash with fast close/no contingencies, make some repairs, do some staging, and then sell at a profit. On the sell side they have the opposite advantage--they can sit on the market longer and they can be far more flexible than normal sellers when it comes to closing time, contingencies, financing, etc. And presumably they could do it all internally and save on having to pay out sellers agent (and maybe buyer's agent) commissions. Of course that didn't work out for them and some of those homes sat empty longer than they intended, but they stopped buying more homes years ago at this point.

So I'm just not seeing how these buyers are impacting the markets most of us are looking at--especially since they mostly targeted generic suburban subdivisions where there where lots of comps and listings to wade through, not little mountain towns where the algorithms break down (and where a housing shortages/wealthy cash buyers make it hard for them to pick up properties at a discount).

Institutional investors are buying up tons of houses and leaving them vacant. That’s a fact, so there must be a reason.

And the reason is that they found a safe way to get a better return than a money market account without having to deal with generating an entire property management company out of thin air, fuck with maintenance, unlawful detainers, added insurance, etc. It’s all a hedge so some houses are stinkers and the winners, which are more prevalent in this market, carry the pooled investment.

I mean I get it. If I owned 300 houses, I’d do the work to get rent cash flow. If I was a Chinese conglomerate, I’d park it and call it a day without the added stress and visibility into my business.

It’s just an investment vehicle.


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Attachment 478329
A possible answer.

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Originally Posted by MontuckyFried

I don't know about the math on investments, but when it comes to renting, here's an interesting piece about how thanks to software algorithms (thanks, tech bro dickheads), apartment management companies have learned that they can actually make MORE money through increasing vacancies and increasing rent prices. Something previously unthinkable in markets before:

Rent Going Up? One Company’s Algorithm Could Be Why.
https://www.propublica.org/article/y...-realpage-rent

We're doomed. :cussing:

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This isn't at all related to the idea of keeping houses empty long-term.

This is about landlords strategically moving from 97-98% occupancy rates to 94-96% occupancy rates because waiting for the right tenant willing to pay 5-10% more rent is better than than getting 2-4% less vacant months but at a lower rent.

But 94-96% occupancy is still...mostly occupied? We're talking 1-2 weeks a year of additional vacancy per unit per year.

I don't doubt that the Blackstone-type institutions are using YieldStar or similar algorithms to maximize profit, but at most you are talking months of vacancy, not years.

Similarly, residential leases are very different from commercial...it makes perverse sense to keep commercial units vacant when their leases involve custom buildout, multi-year contracts, etc. Greedy landlords don't want a mom+pop taco shop that might fail when they could wait and pick up a Starbucks that will pay excess rent and will stay in their lease for decades.

Residential leases are comparatively easy: short term, property is presented as-is, and only the absolute worst tenants can cost you MORE than they paid in rent (since the comparison here is to owning the property for years with ZERO income on it). A profit maximizing institutional purchaser isn't going to leave that money on the table. Not to mention that vacant homes incur additional costs because you have to pay people to monitor them, maintain the yard, etc.

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Originally Posted by Art Shirk

Institutional investors are buying up tons of houses and leaving them vacant. That’s a fact, so there must be a reason.

And the reason is that they found a safe way to get a better return than a money market account without having to deal with generating an entire property management company out of thin air, fuck with maintenance, unlawful detainers, added insurance, etc. It’s all a hedge so some houses are stinkers and the winners, which are more prevalent in this market, carry the pooled investment.

I mean I get it. If I owned 300 houses, I’d do the work to get rent cash flow. If I was a Chinese conglomerate, I’d park it and call it a day without the added stress and visibility into my business.

It’s just an investment vehicle.


Sent from my iPhone using TGR Forums

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I understand what you are saying. And i would agree what you say is likely if it was a chinese conglomerate simply banking wealth someplace stable in a necessarily discrete manner.

But, for an american company doing nothing illegal i simply don't see the benefit of turning down HUGE guarantied returns from rental income that increases liquidity month after month. Turning down the opportunity for 50% greater profit month after month (with the ability to reinvest) just doesnt seem realistic for company focused on profits. The rental income, especially if reinvested, is a huge profit potential. Buying up a property management company to operate your rentals would be simple for an organization as large as blackrock. Buying houses and leaving them empty in this market would be like buying stock, and then actively turning down the dividend yield because you couldnt be bothered to collect it? I dont see the benefit of leaving the homes empty compared to renting them out for profit and cashflow?