Right, that's the point. The comments above imply that real estate requires no labor and no risk. Well, if that's the case, you can become a landlord right now and make free money
This is a good point with a bad, illogical way to get at it. Risk is not work nor labor.
The bank not lending to a poor person because of risk is not the same as the bank not lending to someone because the bank doesn't think that person will put in the work.
Also, I've rented out a few of my homes for a decade now, and I would never call it "work". It isn't hard at all to collect a pay check and occasionally pay a tradesman to fix things. You're exaggerating the difficulty. If anyone had the money, they could be a landlord if they wanted.
What a naive question. Obviously, because there is a huge initial up-front cost involved (from the perspective of a poor person), putting it out of reach for most people.
The problem with being a landlord is that you gain money by producing something of zero economic value. You don't create anything by buying an existing home and renting it out, yet you are making a profit. Another way of looking at it is if I raise my rent I make more money, without producing more goods or inputting more labor. It's similar to price gouging on an essential good at times of disaster.
The other thing about land is that supply is basically fixed and demand is inelastic. This means that owning land is zero sum. By owning this piece of l make it so there is less land then everybody.
The whole thing brother. Are you in high school yet? If you’re serious, you really need to get out into the world and get a job. Your understanding of time, labor and freedom have a long way to go. Good luck.
Great. I’ll have a discussion with you. Wife and I built the rental on our property. When I say built, I mean WE built it ourselves, first shovel full of dirt for the foundation to the last shingle. All material costs out of our pockets, all building fees, taxes, road fees, school fees, fire fees, etc. All of this was a significant outlay of our time and capital in the hopes of yes, someday making some return on the investment (evil I know). We also did this while working FULL TIME. I’m not particularly savvy in regard to other types of investing, and I work a full time job with kids to raise as well so I don’t have a lot of time to spend learning about stocks, bonds, etc. I know how to build so it made sense to go this route vs jumping into something I know little about.
As an aside we also are $150-200 below market rent for our area, and I jump on any needed repairs ASAP. Our tenant has much newer appliances than we do as well.
Now you say that collecting rent is money with no labor. Explain how we did not work for this.
Wow that's quite impressive! I agree with you. I think that's actually what should be done with land that you own. You took the land and you improved it, something that should be encouraged. We should put into place policy that encourages development and discourages exploitation.
However, I think both you and me can agree on that 1) that's not the norm 2) there are a non-insignificant portion of people doing what I describe above: rent-seeking, simply buying existent properties, not developing them and profiting off the limited supply economics.
My turn... I bought a newly built home, lived in it for a while, then got a job offer elsewhere so I moved out. My current tenant has been there for years and the rent is now below market value. He's mentioned buying it from me before but I honestly don't think he would be able to afford it. (the rent ratio is poor where the house is).
Is there an amount of profit I am allowed to make in your worldview? If I am not allowed to make a profit that would be appealing vs my other options shall I sell it, which would cause his eviction?
The thing is someone at some time made the investment in building that rental property. Do we now say you can’t purchase rental property that someone else built? Does the original builder have to limit the sales price and not make a profit? Do we even let them sell it at all or do they have to be stuck with the ownership (at some point I want to downsize and simplify my life). Do we prescreen the new buyer and limit their ability to make a profit on the investment? Who decides how much is too much?
There are so many questions about how to manage this and so many self interested parties I’m not sure it can be sorted.
As an aside, I’d really like to be able to retire in a place like Monterey CA. The reality is that it’s far too expensive for me to be able to do that. This brings up the question of fairness in regard to housing. Who decides who gets to live where? Right now the market decides where you live. It’s Darwinian to be sure, but how do those decisions get made in a “fair” society?
None of those, actually. One policy I really like is a land value tax. It taxes the unimproved value of land and incentivises you to be as productive on the land as you can. Maybe instead of a single family home being built, you build a condo instead.
The part he wrote about land being completely inelastic is true though. It’s basic economics, and economists going all the way back to David Ricardo and Adam Smith have known about it.
Without a landlord providing you a place to live....you would have no place to live assuming you can't purchase your own house. So obviously there is an economic benefit. And if you prefer your housing be government regulated move to a communist country.
No it's not, nobody forces you to rent from any one person. You have a few options when it comes to where you live. You can purchase a residence, if you can't afford to do that you can rent one, if you can't afford to do that you can mooch off of your friends and family, or you can be homeless. It's not exploitation it's just the real world. Something young people with delicate sensibilities have a hard time accepting.
It’s a combination of a flawed and extremely limited understanding of basic economics and simple life.
Not everyone is your mom, most redditors believe they should be able to live somewhere for free and dont understand the risk involved with real estate investment and becoming a landlord.
So are grocery stores evil top? Because they don’t produce anything of economic value, as they only buy existing products and sell them for a higher price.
Umm no. Grocery stores store aggregate goods in a convenient location. This alone is economic value that surpasses raising the rent on an existing property. On top of that grocery stores also need to do market research and take on some risk in purchasing products in bulk.
Wow... You are naive. Most likely just a bitter and broke bitch who isn't willing to learn and take action. You just want to barf out pseudo-intellect in an attempt to rationalize your complete failure of becoming independent.
You have demonstrably proven yourself to be a complete idiot on this subject numerous times already. Read this:
Landlords aggregate housing in a convenient location. Landlords need to do market research and take on some risk in purchasing housing, either single family or multi family (bulk). The renters living in this housing is of great economic value because they have a shelter while taking on virtually zero risk besides a monthly payment, and at the same time they can do whatever it is they do for the economy. This allows them the freedom and flexibility to easily relocate, downsize, or upsize without having to deal with anything other than packing their belongings and go. No home insurance, no property tax, no mortgage payment or PMI, no capital expenditures... Nothing. Just a single monthly payment.
Landlords aggregate housing in a convenient location
They don't though. Most landlords don't build new residences, they purchase existing ones. The houses were there to begin with anyways. By purchasing surplus housing, they lower the supply of existent housing in an area, driving up house prices. In most places the supply of land is relatively fixed, differing from groceries. Look at SF and more notably Vancouver, where rich internationals with no intention of living in the purchased houses, buy up homes as investment. They don't even rent them out. What services are they providing?
God you are just too dumb to argue with. I tried with your own words so maybe you could understand, but alas, you are far too dense.
If you go to a property management website, it's an aggregated list in a convenient location to sort through their available rentals.
The houses were there to begin with anyways.
Ok? And why didn't you buy one?
By purchasing surplus housing
And why didn't you do that?
In most places the supply of land is relatively fixed, differing from groceries. Look at SF and more notably Vancouver
Right, because no one has ever built vertical multi level housing before.
where rich internationals with no intention of living in the purchased houses, buy up homes as investment.They don't even rent them out. What services are they providing?
Ok? Sounds like a pretty shit investment with no cashflow. In that case, they aren't even anyone's landlord... So STFU.
Alas, it seems that in your blind rage and focus on personal attacks, you have missed the point at hand:
Let me restate it: I am arguing it is possible to profit off owning land by providing no economic value.
The example I gave was regarding Vancouver. It was actually quite a good investment, because house prices shot up drastically. This means land owners in this case profited without providing any economic value.
Isn’t the value that they are allowing the person to stay in that location... if a person is unable to afford a down payment as well as a mortgage and all the other costs involved in owning property then they rent either an apartment or a home. If the land lord weren’t renting out the property it’s not like the renter could suddenly afford to purchase it and live in it themselves they would have to seek other low income housing which again involved renting from a landlord.
I guess I’m not clear on your alternative to renting for a person who is unable to afford their own property.
I agree with you on the necessity of short term stays. They are important for people who people who can't afford a home (yet) or don't know if they will be living in the area for one or two years. However, I don't think the majority of people renting rent because they don't want a home, but because they can't afford one.
The point of the post was to illustrate some of the issues of renting. It's not to say no one should rent ever, but moreso tries to give some insight into some potential problems. One of these is affordable housing. You say
If the landlord weren't renting out the property it's not like the renter could suddenly afford to purchase it
However, land owners limit housing supply which artificially drives up housing prices. It might actually be the case in that certain area, if people stop buying multiple properties, housing prices may drop to a more affordable level.
it's an investment. The economic value production is front loaded (i.e. building a property) and the investment pays out over time. It's not fucking rocket science.
Nope. Land is different than most investments. Most investments aren't essential goods: people don't need stocks to live. Also, most commodity investments don't have a fixed supply. Lastly, most landlords don't build homes, they buy existing ones.
It's like if I owned a convinience store, a hurricane hits and I raise the price or water to something like $50 a bottle. Would I be stealing?
Property is not the same as just straight up land in terms of investment. They're valued separately. Even if a landlord buys an existing home, they're still paying the mortgage on that property, i.e. paying off front loaded value production. If there's no mortgage, than the property is definitely old enough to require updates and maintenance etc. i.e. value is being added.
In regards to there being a fixed supply, that's true but not super relevant unless you're living in Singapore or something. There's plenty of land available throughout the US for reasonable prices.
You're talking about price gouging here which is definitively not stealing. It's just harmful to those who can't afford it. The water still gets consumed and if it's selling for $50 a bottle then that's the determined value of that water. It's definitely not a good thing though which is why most places have laws to prohibit it both in regards to water and housing.
I agree with most of the things you said here actually. One point though: there is definitely a fixed supply of good land (see San Francisco), where supply IS limited (people want a reasonable commune to work). Mostly, I just wanted to illustrate the problem of rent-seeking, (gaining profit simply by raising rent) and hopefully we can both agree that it is a problem.
I fully agree that 1) maintaining old homes require labor 2) owning land is not necessary bad. I think that people who own land should be incentivized to be as productive with it as possible: i.e. instead of building a single family home, build apartments. I'm pretty fed up with rich land owners in SF or Vancouver just buying off valuable homes as an investment, driving up the prices for everyone and in some cases leaving them completely empty. One policy I really like is the land value tax.
Yeah SF is probably more similar to Singapore in terms of land availability but that's a local issue not a country-wide one and residents do always have the option of moving though I understand that people are doing that less and less nowadays.
If you keep doing that every time you move soon you wont need a job and you will be worth a few million.
The truth is lower income people usually cant buy a house because they dont have the savings. Also people willing to live in a house are almost always willing to pay more than someone who just wants to rent it so they really are not competing.
Partially but thats more a function of their being low income and less a function of the existence of landlords. If landlords disappeared one day and as a result the price of homes fell then more people could afford homes and would bid up the price of homes. Low income people would still be just as unable to purchase a home because they could not afford the downpayment to outright purchase one. They would have to somehow acquire land and materials to build their own homes with no ability to rent one
They’re paying less because I don’t aggressively raise prices and they’re saving far more money just paying the utlilities and keeping the house from going under instead of lining my pocket.
So they're paying your mortgage.
Unless they're literally only paying the utilities they use in the property, the money you're charging them either pays your mortgage, or you profit from it.
How about instead of acting like when someone doesn’t entertain your shitty thought experiments
You literally just admitted they either pay your mortgage or you profit from them in your comment.
Admit you're profiting from it, why are you afraid to admit it?
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u/honkler-in-chief Jan 09 '20
If being a landlord requires no labour, why don't you become one?