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Comment by skybrian | Hacker News Reader

For the purpose of understanding how housing markets work, I don’t think homes that the owners use part of the year and aren’t offered for rent should count. It doesn’t seem like there’s any mystery about that? They own it for their own use. Some places have very seasonal demand.

But the article also talks about some cities where there is housing for rent, but not at prices where anyone will rent it. That’s curious. It would be interesting to find out more about what’s going on there.

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One big source of apartments being too expensive to rent is investment companies swooping in to buy apartment buildings, hoping the _building itself_ will appreciate in value, so that they can then sell it later at a profit. In this model, it's actually against the owner's interest to rent apartments because renters inevitably cause damage that needs fixing, which cuts into the owner's bottom line and makes the building less resellable. So, the solution is to charge exorbitant, insane above market rents; a small number of fools with more money than sense will rent at that price, and that will help cover loan interest costs, etc. in the meantime. With enough starting capital, renting to a few tenants at very high prices is a much better investment than renting to many tenants at market rates. You just hope that the building appreciates by a large margin in the next X years while your few, wealthy tenants pay your interest, and then you can sell the whole building to the next investor.

Now, is this ethical? Abso-fucking-lutely not. Not only is it basically a bigger fool scam, it takes an extremely valuable and important commodity (housing) out of the market for no reason other than financial gain. I'm of the opinion that apartment buildings should be required to maintain 80% occupancy or risk having their apartments go rent controlled; if you aren't willing to rent at market rates in order to provide the service you claim to provide, you're taking housing away from people who need it, and you should be punished for it. Sure, you can argue that real estate is an investment and therefore these ghouls have the right to do this, but IMO becoming a landlord should come with the social responsibility to _increase_ housing supply and availability, not decrease it. If you're not willing to play by those rules you shouldn't be allowed to participate in the market.

No major real estate investor has a thesis of pure speculation. That would be insane and banks would never underwrite it. (If anything, buying for speculation is almost entirely the business of individual households who get huge subsidies to do so.)

> No major real estate investor has a thesis of pure speculation

2007 called, they would like to sell you an amazing condo development in Naples, FL.

I’m not an expert in real estate but this doesn’t make a lot of sense to me. Sometimes tenants might do so much damage that it would be better to not have rented the unit at all, but this hardly seems likely for most tenants?

Also, it seems like an apartment building that’s mostly rented out would sell for more than one that’s mostly vacant and losing money? Assuming it’s not a teardown.

It seems like it’s similar to any other business. A profitable business would go for more than an unprofitable one.

I can see it as a reason to be picky about tenants, though.

Not when the primary asset of the business appreciates on its own. The fact that the building itself is an investment that can appreciate in value irrespective of its usage means that the incentives are misaligned.

I'm still wondering how the incentives work. It seems like more money (from renting) is better than less money.

> The fact that the building itself is an investment that can appreciate in value irrespective of its usage means that the incentives are misaligned.

You do not seem to understand how commercial property is valued at all.

Your rant is some /r/LateStageCapitalism nonsense.

No. This is not how any of this works and you’re wildly speculating.

A multifamily property is worth some multiple of its Net Operating Income. Almost all Multifamily properties are acquired with debt. No lender will grant a loan for a property that has a high asking price, high rents and high vacancy.

Source: I have owned many multifamily properties.

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