Real Estate Crash thread

[MontuckyFried]

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

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.

[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?

[406]

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.

[skaredshtles]

<snip> some frothy mouthed word sald hot take.

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

[Foggy_Goggles]

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

[MontuckyFried]

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

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.

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.

[skaredshtles]

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

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

This hypothesis seems VERY dubious to me.

[neckdeep]

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

[byates1]

[goldenboy]

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?

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.

[I Skied Bandini Mountain]

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

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

[I Skied Bandini Mountain]

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

This hypothesis seems VERY dubious to me.

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

[californiagrown]

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:

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.

[californiagrown]

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?

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.

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.

[ghosthop]

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

This hypothesis seems VERY dubious to me.

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.

[TAFKALVS]

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.

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

[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?

[californiagrown]

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

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.

[dan_pdx]

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?

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

[californiagrown]

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

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.

[east or bust]

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?

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.

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.

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.

[skaredshtles]

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.

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

[I Skied Bandini Mountain]

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

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.

[Ted Striker]

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.

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.

[californiagrown]

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.

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.