Thanks Art for enunciating their strategy without spitting on yourself or telling me I was too dumb to understand it. I'm not sure I buy the "safe return > money market" part. But I also don't buy that landlording is "easy money" either.
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Thanks Art for enunciating their strategy without spitting on yourself or telling me I was too dumb to understand it. I'm not sure I buy the "safe return > money market" part. But I also don't buy that landlording is "easy money" either.
I don’t disagree that they are leaving money on the table but I think it’s just about mindset. A mindset that most bloated rich people have. It’s why fine art isn’t hung and car collections aren’t Turo’d. It’s not that it isn’t baffling but I do think it’s explainable.
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American = real estate investor
Foreign = land investor, there just happens to be a home/building on the land
I'm not going to say you're wrong, but I can't find anything, anywhere, saying that this actually happens at any scale for any length of time. Other than some websites dismissing it as some sort of urban legend... If you have some proof of this fact I'd love to see it, because I'm genuinely curious, not being dismissive.Quote:
Originally Posted by Art Shirk
I too would be interested. Especially the claim that "institutional investors" are doing this. Generally institutional investors have clients/members that they answer to, who, I would think, would *not* be so keen on all that $$ being left on the table.Quote:
Originally Posted by goldenboy
Buy and hold residential real-estate investing is really available to anyone with either the capital or the means to borrow.
But capital ain't free and the risk ain't zero. So color me in the doesn't make sense camp.
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You guys are right that I can't find any "hard evidence" either, so in the meantime, I guess I'll have to put my suspicions based on anecdotal, observational evidence in the conspiracy theory category until I can find any legit public data on it.
That said, where it DOES make some sense to leave a property vacant versus renting is if you have intentions of selling it within the next couple years due to how tenants can negatively effect selling prices if the potential buyers are wanting to live in it themselves. Tenants tend to get kinda cranky about their pad being put up for sell and often are a total PITA when it comes to showings and what not. When I've shopped for a home, I can't tell you how many times the realtors would try and set up a time with the tenants, and the places would be absolutely trashed 9 times out of 10 with weed smoke billowing out the second you open the door. They don't make it easy to photograph easy either of course.
I read somewhere that there can be an average reduction in sales prices (at least in the past) of something like a $20K+ average hit when tenants are there to muck things up. Also, when they have a lease, they're not going anywhere until the lease is up, leaving the home buyers (at least the ones who AREN'T investors) without a place until then. Thus, it actually can make some financial sense to leave a home vacant if your plan is to sell it.
Which also doesn't really make much sense, because there is all KINDS of risk associated with this sort of short-term investment.Quote:
Originally Posted by MontuckyFried
Esp for any kind of institutional investor.
Maybe they're playing 5-D chess?
That's a bit of a softer message than your last response and I appreciate that.
If you want to make it conspiracy theory, that's on you. Property ownership is on public record and is scraped by bots constantly.
There is pretty of shit that goes on behind closed doors that dumb fucks like me can't even comprehend. Residential real estate transactions ain't one of them.
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Sometimes it's not just greed. When our company owned an office building, we had to conform to zoning meaning our ground floor anchor tenant had to be classified as light industrial. The TIs for that are super specific, so you don't want to lease it to someone who might go broke. And in our case, it couldn't be a super loud business due to offices directly above and residential next door.Quote:
Originally Posted by singlesline
You just dont renew the lease with your tenants, they move out, you spend the next month cleaning, painting, reflooring, and then stage it. You lose about 1 months rent if you are lazily going about it. This really isnt rocket science and its a pretty turnkey industry devoted to slapping lipstick on a pig the month before a house goes on the market. If you just sat on the house for a few years to let it appreciate, you lost out on all the rental income (plus the ability to invest the profits), and you would still have to clean, paint, floor it so it looked new...mean while it didnt appreciate any more or less.Quote:
Originally Posted by MontuckyFried
I wonder if some of the anecdotal institutional investing is related to a forecasting of increased densification in zoning bylaws in select locations and markets. Laws are just being passed here in BC that will force munis to update zoning in key communities and locations to help address the housing shortage. No idea how able the big investors can forecast such changes, or the risks involved, but the value of those impacted parcels will certainly increase if zoning allows SFD to 3 or more story multiplex housing. And renting a place you’ll have to evict tenants within 5yrs would definitely discourage the hassles of institutional renting. Just spitballing, no idea if similar laws and zoning changes are happening elsewhere south of the border.
Some evidence of investors buying up property, at least in the Boston.
https://www.bostonglobe.com/2023/12/...g-real-estate/
Quote:
The report revealed that investors play a much bigger role in shaping the region’s housing market than previously known, although Greater Boston has not seen the same level of billion-dollar corporations snatching up cheap single-family homes as other US cities.
Investors, who often either flipped homes for much higher prices within two years or jacked up rents by as much as 70 percent, were particularly active in some lower-income areas and gentrifying neighborhoods, the report said. Parts of East Boston and Lynn, for example, saw more than 40 percent of home sales go to investors.
Can't be, numerous suburban Karens have assured me that increasing density reduces property values.Quote:
Originally Posted by BCMtnHound
3 new lane way homes within a couple of blocks in the older residential area immediately next to commercial down town area near me, it seems to go OK in an older area where the housing is all different, it doesnt seem to reduce property values but I'm not sure how it would look in an area with new residential that was all the same style & vintage
the town has zoning byaws for laneway and one of them was built by a councilor
haha. Also, where will they all park?? On the street infront of Karen's house is where... How dare they!!!!Quote:
Originally Posted by Dantheman
Ha! Well, those are the ones everyone should be respecting at the end of the conversation. ;) Wonder what the Roman’s did about the Karens.Quote:
Originally Posted by Dantheman
Smithers doesn’t hit the population thresholds of the new legs/regs though? Or have you guys finally exceeded the 5000 people within muni boundaries? I haven’t followed all the details of the changes, and some areas were targets heavier than others. Infrastructure (water, sewer, power, etc) seem to be the biggest impediments to implementation.Quote:
Originally Posted by XXX-er
5000 ish maybe but not really sure
its the " Nelson of the north" so there is a rental shortage, the laneway homes are encouraged so people have somewhere to live
Also encouraged are residential spaces over the stores downtown which give the owner a 5 yr tax break in addition to the rents
But not of them sitting empty. As your quote mentions, they are flipping them quickly (it says within 2 years, which may also imply mom&pop flippers doing the rehab + 2 year residency to save on taxes) or jacking up rents...that's not great but it isn't letting the places sit empty and untouched for years and years hoping that price appreciation makes up for it.Quote:
Originally Posted by Flounder
It also notes in the opening "particularly smaller local operators scooping up two-families and triple-deckers"...those are not institutional buyers. Those are small time landlords buying homes as rental properties...so of course they aren't letting them sit vacant.
The conspiracy theory being proposed is not that institutional buyers are just relying on RE appreciation and are too lazy to manage the properties as rentals. The conspiracy theory is that institutional buyers are buying and holding RE to artificially manipulate the RE market. At what percentage of a regions housing stock would they need to control to actually be able to accomplish this?
I don't think that's a conspiracy theory, but reality. It just depends on where the real estate market is.Quote:
Originally Posted by californiagrown
Seriously? Throw out a zip code or something. As mentioned, the transaction history is part of the public record. I how TGR is the bleeding edge, but I'd think this would get a bit more play.Quote:
Originally Posted by Hott Butt Mud
As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.
How many people enter into highly speculative, negative cash flow investments, that will not offer significant returns?
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As someone who’s analyzed thousands of real estate companies I’ve never once seen a “buy and hold” strategy. Residential property has significant operating expenses even if unoccupied, taxes, interest, repairs, utilities, mothball and restart fees. These are going to be 3-10% of the purchase price depending on circumstances and financing. This idea makes 0 business sense unless you had inside information about an area and knew it was going to appreciate significantly due to an event. Even then you’d only hold for a short time.
How many people enter into highly speculative, negative cash flow investments, that will not offer significant returns?
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Buying and holding, instead of buying and renting is like buying stock and voluntarily turning down a 5% dividend because... reasons?Quote:
Originally Posted by neufox47
And yet , individuals buying and holding is pretty much what drives the market in the top tier ski towns. For example, half of Jackson's homes are empty, are visited by owners maybe 4 weeks a year and are excluded from STR zoning. Theres no rental income coming in but these homes are some of the most expensive per square foot in the country and among the fastest to appreciate.Quote:
Originally Posted by californiagrown
Not all stocks pay dividends, btw, especially growth stocks.
Rich people not wanting the riff raff hanging out in their vacation home, playing with all their personal belongings, is a much different scenario than an investment company buying up large numbers of houses to leave completely empty.Quote:
Originally Posted by neckdeep
Those jackson homes are toys, with a secondary benefit of also being good investments. If the owners were purely focused on profit, they would be trying to STR those places at 10k/night. Institutional investors are focused on profit when they invest. Most likely those owners live and die on the tenths of percentages for the day job that made them rich.Quote:
Originally Posted by neckdeep
If you had a stock you thought would double in the next 10 years, and it also had a 5% dividend, would you voluntarily check a box to decline the dividend knowing the stockprice at the end of 10 years would double regardless? Sitting on empty housing in this rental market is the same thing as voluntarily checking that box.
If they buy a house and have so much $ that there is no need for a return on investment..Quote:
Originally Posted by californiagrown
But they're buying property that would *not* otherwise be useful to "normal" people. This scenario exists, but is kind of a red herring in the conversation.Quote:
Originally Posted by up an down
Totally. But we were discussing why/how/if institutional investment buy and hold without renting, not what the handful of uber wealthy individuals do with their personal houses.Quote:
Originally Posted by up an down
Quote:
Originally Posted by neufox47
Perhaps what we're missing in this conversation is how perhaps these investors are being quite surgical in their approach. They're not just buying up everything across the entire country willy nilly. They're going for particular homes in particular markets. With THAT approach, it is quite plausible they could have a dramatic effect on markets. Think micro-, not macro-.Quote:
Originally Posted by californiagrown
For example, my area's still pretty hot. It's a great location for a variety of reasons. Zoom in closer to my neighborhood and homes rarely come up for sell, but when they do, the 1-story homes always fetch a huge premium per/sq ft over the 2-story versions (which also sit in the market a bit longer). These 1-stories in particular are the ones I've been seeing get snatched up in the first hour on the market at WAY over asking, and then sitting empty for months on end. I pay attention because I see these homes when I walk the dog, see the activity, have gone to the open houses, and then follow up a bit online. These are nice homes that don't need any refurb whatsoever. They're absolutely move-in ready for renters, but here they sit still very much empty. Haven't seen the lights on or a single vehicle the entire time. All purchased and shuffled around by various LLCs. We're near a hospital district so it's a popular area for renters who are doctors. Since rental inventory is impossibly low here, seems to me that it wouldn't be hard for investors to buy/hold to (A) artificially drive up rents, and/or (B) artificially drive up localized RE prices. They could also easily lease them out for top dollar in about 2 seconds if they so chose to.
Before the days of AI and sophisticated algorithms, it was not realistic for investment firms to key-in so efficiently on particular small areas or neighborhoods, but now? It is 100% possible thanks to such data-driven technology, and perhaps how they're flying under the radar with what they're (possibly) doing. Across the nation? Yeah, that'd get an investigation underway (unless your name is Blackrock - corrupt sacks of crap they are), BUT a neighborhood here and there? Nobody's going to even notice except for people like me walking their dogs wondering WTF is going on with these homes?
Buying property…. to hold, not rent…. to drive up prices… on property you are renting…
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and we're back to square one.
Man, my post really got some legs.
Yeah, buy and hold, but not hold it all, and not all the time. And sell it or rent it. At scale. Some units rented, some units not. Some units sold, some units not. Sales from one REIT to another.
Driven by algorithms and smart sciency math kids backed with big $$.
“Here’s 100 million, go buy me a portfolio of x homes that maximize value. Do what you need to do.”
Not entirely. Again, thanks to such sophisticated software these days, I'm thinking an investment firm can really get dialed into smaller sub-markets. Would this strategy work on an entire city? Probably not. You'd have to have billions of expendable cash to do so. But zoom in further on the map to a micro-market and ABSOLUTELY this seems more and more plausible. Like I pointed out in my case. You find a prime neighborhood with a real need, you key in on a specific type of home at that, and wouldn't take but a few million bucks to take over the very localized market. Now take that same approach (again, figured out by AI, algorithms or [insert trendy tech buzzword here] and apply that formula to the entire country, nay, the world, and you're on to something!Quote:
Originally Posted by I Skied Bandini Mountain
Like I pointed out, there are lots of doctors here who want to live near the hospitals and looking to rent. It's the PERFECT place to pull some good ol' fashioned market manipulation!!!
I'm not saying my theory is fool-proof, but it isn't it at least plausible? I dunno. Again, it's just what I'm seeing in my own little neighborhood. All investor bought. All empty. My sample size is admittedly tiny and anecdotal, but it still strikes me as freaking weird.
No, it's not plausible.
We can hear the clicking and whirring sounds. You may wanna get the box fan checked.Quote:
Originally Posted by MontuckyFried
You seem to be one of the few here who understand this possibility. I suppose if most people aren't thinking this is possible, that would then REALLY give a hudge advantage to the companies who are instituting such algos, yeah?Quote:
Originally Posted by TAFKALVS
Such things have even invaded my world (energy) with data companies tripping all over each other to sell their products to various investors and hopeful producers. And mineral rights are WAY the hell more complicated than surface, so I don't see why institutional RE investors couldn't have some pretty sweet (expensive) tools at their disposal to exactly as you say. It's complicated, it's sophisticated, and it goes WAY over the heads of the common lay-investor.
Please elaborate.Quote:
Originally Posted by I Skied Bandini Mountain