- two properties (neither owned outright)
- tesla
I'm saying this as someone who is about to be 5x leveraged on a 2 fam property in NYC. What kind of leverage does this guy have 10x? 12x? More?
In NYC, CONED is not shutting off gas for non payment due to covid: https://www.coned.com/en/about-us/media-center/news/coronavi...
If the gas was off prior to covid, I guess you could find yourself in a catch-22, where you'd need to bring the account current before they turned it on, but then they aren't shutting it off at this point. It's unclear if he fought the fine with the city.
If this gets to court, I'm pretty sure he would have a cut and dry case that he as the landlord did not breach habitability (the gas worked) and that it was tenant misconduct (failure to pay the bill) that caused the gas to be shut off (https://www.nysenate.gov/legislation/laws/RPP/235-B) Now, I have no clue what kind of ruling the judge would make, but yeah.
Additionally, the covid laws that are protecting from eviction are also enabling mortgage forbearance: https://www.dfs.ny.gov/consumers/coronavirus/mortgage
I haven't had to go through that process, so I'm not sure how many people are denied, but the wording on this page makes it seem like you have a few options (including complaining to the state -- like his tenant did for the gas bill) before you are out of luck.
I feel for this guy, and as someone who intends to rent to a tenant in NYC this is scary, but I feel like my guy got way over leveraged, and because of it, this bad actor has hung him out to dry. There are a few pieces of this story that feel like they are left out to garner sympathy, which may or may not be warranted.
- why is he not getting or eligible for mortgage forbearance?
- why is he so over leveraged?
- why didn't he negotiate with his tenant about the relocation fee? (get the tenant to sign a paper, give the 10k (or less) as a rent credit on back-owed rent, get them out.)
------ Hilariously, I had a similar situation happen to me as a roommate -- One of the roommates I lived with stopped paying rent, wanted to AirBnB their room, and sleep on the couch, while using the AirBnB money to pay rent. They were few months behind on their portion of the rent, we worked with the landord, and the landlord agreed to credit back rent to get them out. Covid makes this more complex, but those with mortgages should be getting some protection based on the way the law is written. If he's not able to I think thats the real story and much more interesting.
It's only helpful if they are helping increase the quantity of housing or somehow providing some other kind of service.
Simply using rent to pay the mortgage is really not something that we as a people benefit from. It would be better for everyone if that immigrant in Queens invested their savings into something else that would provide value.
People getting a mortgage and renting out the mortgage adds systemic risk without increasing supply, it doesn't provide any service that isn't provided otherwise.
And you're certainly misusing the term "systemic risk" here - a small-time landlord borrowing money to buy a rental does not in any sense contribute to any kind of systemic risk. They are taking on personal risk in the hope of generating a return on their investment.
Besides, the main cost in building in NYC is land prices - in the long term the builder isn't worse off by decreased land prices, and neither are renters, while people who want to buy a house are much ahead.
You could make the same point for just about everything. Starting a restaurant doesn't help anyone because you're just buying food ingredients, labor and real estate and turning that input into food and anyone can do that so you're not increasing the supply of food. Investing money in the stock market certainly doesn't help anyone since you're just buying existing securities that were already issued. The economy as a whole is full of things that aren't that important independently that you could make a convoluted argument against, even those things often add up to a functioning economy with a robust system for price discovery.
In the aggregate, there are more renters that want to buy but can't than people that want to rent but have to buy instead. No problem is being solved, and risk is added.
This is all gibberish - economically, if a marginal landlord buying a property then renting out contributes to the increase in real estate price due to creating additional demand then they equally contribute to the decrease in rent by creating additional supply.
First, you're assuming that they own the place outright. That wasn't the case for the immigrant in the top level comment.
Second, you're making the bizarre implicit assumption that the market for buying housing and renting it are fully independent, which couldn't be further from the truth. Increasing real estate prices contributes to an increase in demand for rent, as less people can afford to buy housing and must rent, until there are no more would-be homeowners that can't afford a house and must rent.
Those units are getting sold, one way or another. They're either getting sold to a landlord or a homeowner, so until there aren't enough units for rent for people that don't want to buy, and we are very far from that, it being sold a landlord means one less homeowner.
By the way, this is a huge issue in New York City - landlords that have a mortgage, like the one the OP had mentioned, can't afford to lower rents because that would break their mortgage agreements and force them to renegotiate it which they can't afford, so they would rather keep vacancies than rent at lower market rates.
Otherwise, if someone adds actual housing supply then it can be worth increased systemic risk. If they aren't, there is no upside to the downside.
1. This isn't an example of systemic risk - I suggest you look up the phrase since you keep mentioning this.
2. Lowering rent has nothing to do with mortgage agreements - I have no idea what you'd think one has anything to do with the other. And no this isn't a huge issue in NYC. Sure, you're going to have a hard time refinancing an investment property that's not yielding much in rent, but you're going to have an even harder time if it's vacant. Rent is a price - most landlords are going to try to charge what they can given the market - this generally has nothing to do with how the property is financed.
3. If the markets for rentals and buying are related, that still doesn't change the fact that buying a place to rent out is demand-neutral in aggregate. Sure, there's one less housing unit to buy, but it also takes a renter out of the market. So if the markets are intertwined, then reduced rental demand -> reduced rent -> reduced housing price. The only thing that reduces demand for housing is moving out of the city.
1. Investors of this kind (those who buy relatively modest housing units to rent out) are far more sensitive about prices (because the price has to be justified by what they can charge in rent) than buyers who plan to live, who do not have a clear anchor. Therefore, they contribute to price stability - they will tend to buy in bad markets and sell in hot markets.
2. Transaction costs are extremely high in real estate and for most people that are able to choose between buying and renting, by far the most important factor isn't affordability but how long they plan to live in a give place. Actual home buyers tend to choose buying over renting precisely when prices are high and when they do so, they tend to buy larger and more expensive units than they would otherwise rent because they take into account future needs. This leads to increased demand as you turn marginal renters into homeowners.
3. People that are able to choose between renting and buying are typically well-off and making things slightly more affordable to entice them to buy isn't a social good.
4. People that are unable to afford buying units and are forced to rent are the poorer ones in comparison. These people benefit the most from a housing unit being turned into a rental because unlike the previous class, they do not have the flexibility to choose between renting and buying.