Wall Street Investors Enter Single Family Rentals
arpitrage.substack.com
arpitrage.substack.com
Their having lower insurance costs totally makes sense. If you go to an insurance company and tell them you have 1500 properties in 12 states (hopefully none of which are Florida!) they're going to give you a nice discount.
But that just isn't possible with property taxes. If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval". Or flat laughed-at. The only way they could have lower taxes is by owning lower-valued properties - either because they bought cheap, or aren't maintaining them and they decline in value (which is the slow way to getting poor returns as a landlord).
I think there's just too much money being spent. One day in a few years the investors will find a new "sure-fire" strategy involving some other asset and the country will get a glut of properties up for sale. At first they'll be listed at market rates, and then much lower as they panic to sell at any price. Leading to housing crash 2.0
1. Why would the assessor give bulk discounts in the first place? It's not like they can take their business (houses?) elsewhere if the assessor refuses. Many jurisdiction have transaction/transfer taxes, which mean even if they want to dump their holdings, the county would come out on top.
2. Is the assessor even allowed to give bulk discounts? Even if they could, given the political climate against big corporations, granting such discounts seems like political suicide. You're just asking to get challenged in the next election.
I think what they mean is the overall hit from property taxes is marginal at their scale because of the better margins they get on other inputs like insurance.
That said, Zillow tried this strategy a couple years ago and it ended horribly for them.
I don't think yet another fund will be able to get an edge that local landlords and real estate companies have.
> Professionalizing management, better bargaining over expenses, some degree of appeals over property tax, and better access to capital markets therefore enable institutional investors to improve their cost structure
where 'some degree of appeals over property tax' is linked here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4269561
I am not a subscriber so can't read the details, and nothing about appeals is mentioned in the abstract.
This doesn't matter all that much because houses that people bought and are living in are inert, off the market. They might as well not exist (and people who own them).
What matters is how many houses investors are buying right now and it's significant part of all purchases.
I’m sure this will be fine.
Thank gods my parents were wise enough to buy land and homestead the frontiers when it was still possible for the working class to do so.
Buy land if you can, people. Not houses, land. You can always build a house. You can’t build land.
At least in many parts of the USA it’s still possible for many to buy land in lower demand rural areas if you are very careful with your living expenses. It might not be in the ideal place, but owning land makes it the best place. My preference is for land with few zoning restrictions and a low tax burden, since it might sit unused for a while.
I was able to build a (tiny) house on my parents property using scraps I got from doing free demolition work when I was 16-18. I have parlayed that one advantage of never having to pay rent into a relatively prosperous life despite only modest successes. Not having a huge monthly bill pays compounding dividends over a lifetime if you invest that money into things you own instead of borrow.
Unless the investor is willing to pay significantly more than a local family, this could deprive your heirs of money that they otherwise would have received.
Especially in a world of decreasing social trust, people are less likely to do something for the benefit of their neighbors or community and more likely to make purely selfish choices for themselves and their family.
"Who's outbidding you by tens of thousands of dollars for that home of your dreams? A hedge fund"
https://www.nbcnews.com/business/real-estate/who-s-outbiddin...
Research about declining social trust:
https://www.pewresearch.org/politics/2019/07/22/the-state-of...
https://www.pewresearch.org/short-reads/2019/07/22/key-findi...
It is an investment and the actions to protect such an investment is detrimental to using the house as a home. Corporations get representation in government these days so nothing changes to benefit the would-be family home buyer.
https://www.nbcnews.com/business/real-estate/who-s-outbiddin...
"Who's outbidding you by tens of thousands of dollars for that home of your dreams? A hedge fund"
I am assuming "outbidding you by tens of thousands of dollars" means they are paying higher prices right?
10k+ extra is a nontrivial amount of money for most Americans. That's enough to help offset taxes or pay the real estate agent fees.
And barring a catastrophic event like the housing crisis, housing prices never really go __that__ down.
It's like broader inflation. If prices increase by 2% and wages by 1%, after 10 years that's a much broader gulf that is far, far harder to recover from.
Give it 20 years and we’ll be where Canada, Australia, and the UK are where a house is 10x or more the median yearly salary.
I’ve come to terms with the fact that I’ll never own a house because of the greed of exisiting homeowners and the cowardice of politicians. It is what it is, and it’s entirely out of my control.
When my wife and I decided to upgrade to a house, we kept our townhouse to use as a rental property. Shortly afterwards, the city council (Seattle) and state government started passing new laws that made things less and less friendly to landlords. You couldn't use certain kinds of data to select tenants, you had to take the first qualified applicant, evictions become much harder to do, etc. At the same time (2020, a time of social unrest), the same politicians pushed for less policing, so the townhouse's neighborhood started to go downhill due to increased crime and homelessness. We acted fast and sold off that rental property, somewhat bitter that a passive income stream had dried up.
If someone had come along on a high horse and lectured at us to take another financial hit for the good of local families because doing an Absolute Good is good for our afterlives, I would have laughed in their face. As it turns out we ended up selling it to a married couple, but if a hedge fund had offered even $1K more I would have taken it.
I suppose this is an example of decreasing social trust, but I'm not rich enough to be able to leave money like that on the table.
Institutions tend to not be dumb money as much as retail. But institutions can uniquely be dumb at scale. Every few years someone thinks they solved the housing market with algorithms, and tends to be profitable to do business with them.
If you’re in a Democrat state use the word “transplant”. Otherwise use the word “immigrant”.
Then if you’re in a Democrat state put out a sign saying “All are welcome” and stick a COEXIST sticker on your car.
Republican state? Jesus sign outside about him loving everyone.
Now that is True Good. Or as they say “unalloyed good”.
This idea falls apart very quickly after the first few sentences of followup.
But hey, money is more important than anything and nothing should constrain the markets, eh?
Politicians don’t care, people with houses don’t care, the rich don’t care.
We’ve made a future in which there’s no social contract, where young people have nothing and no home and no prospect of ever owning a home.
By this measure, capitalism has failed entirely to serve the people.
There will be consequences.
What regulation is being captured?
I've noticed this on HN. Anytime thr market produces a negative result for society, rather than acknowledge it, it gets blamed on some imaginary regulatory capture. Like there there is an ability to accept that markets produce negative results for society - it's always blamed on some external force.
Like, what are the odds some local 'boomer NIMBYs' or whoever the scapegoat is succeed about everywhere.
That's not mutually exclusive with regulatory capture. The problem of excessively large motor vehicles in the US is contributed to by both deliberate quirks of the tax system and a zero sum bidding war to be the biggest on the road, for example.
If these people were smart, they'd realize that rising house values don't help them, because 1) they can't make money on a house they're still living in, they have to sell it first, and then where are they going to move to? and 2) rising house values means rising tax assessments which means their mortgage bill will increase to pay the higher property taxes.
The underlying problem is that city councils ban the construction of most new homes. This has led to a supply shortage. The wealthier among us are thus forced to bid up the price of cheaper, older homes. Landlords can charge more for existing properties too. We need to change the laws so that we build lots more homes.
I do. agree strongly with your point about the loss of a social contract. If you’re interested in helping fix this problem, join the YIMBY movement.
It wouldn't even be a bad thing if rent was low. But it can't be, as that would probably imply a lower cost of ownership.
If you are selling your home and the highest offer is a Wall Street firm, turn it down and go with a lower bid.
If you’re selling your home and it’s been listed for almost a year and the only offer is from a Wall Street firm, turn it down and wait.
Who is with me?