I think you also have to take in to account the higher risk of renting to lower income individuals.
They are more likely not to pay. They are probably also more likely to trash the place.
American landlords derive more profit from renters in low-income neighborhoods
11–20 of 173 posts
Re: American landlords derive more profit from renters in low-income neighborhoods
#12Can confirm, I work for a company that helps landlords finance the purchase and repair of rental properties.
In certain very LCOL urban areas around NYC and Philadelphia, we have individuals with tens of millions of dollars of property spread out among ~$150k buildings.
They inspect their portfolio with armed bodyguards, and they very often own other businesses in the same neighborhoods that throw off money in small but regular amounts: laundromats, bars, clubs.
An an interesting aside, these individuals are almost all involved with close-knit religious groups to which they contribute great deals of capital.
Re: American landlords derive more profit from renters in low-income neighborhoods
#13Well, yes, that's the way the efficient frontier in the risk-yield curve works.
Efficiency in markets usually at least implies closely following the truth, as I understand it. Is the risk higher at the low end of the market?
In a huge way. People don’t pay, people trash the place, people leave and break contract to be never heard of again etc.
On higher risk of any of those is negligible.
Re: American landlords derive more profit from renters in low-income neighborhoods
#14I think you also have to take in to account the higher risk of renting to lower income individuals. They are more likely not to pay. They are probably also more likely to trash the place.
I think you don’t understand “take more profit.” That means they have considered those costs and still they “take more profit” even considering those costs. That’s what profit means.
Re: American landlords derive more profit from renters in low-income neighborhoods
#15Paying one fourth of apartment cost in rent yearly makes no sense. There should be something more in play here the analysis is not going deep enough or simply incorrect
It seems they literally define "exploitation rate" as rent over purchase price. Then later they add in some estimate of costs of repairs. But it would be much more interesting to actually see the books. I'd bet a lot of money that the tenants in expensive neighbourhoods are much more likely to pay on time, every month, and to leave when the contract is up. And in addition, the labor in dealing with each tenant is pai…
Yes, some people do think payday loan sharks are greedy.
Re: American landlords derive more profit from renters in low-income neighborhoods
#16Interesting article but the Marxist tangent the author went on was unusual.
One wonders how much of this correlation is affected by more people renting properties in low income neighbourhoods combined with the fact that its more economical for landlords to rent low-mid value properties.
Re: American landlords derive more profit from renters in low-income neighborhoods
#17A guy I used to work with once told me that instead of buying a $100k rental house, you should buy three $30k rental houses. We're in a LCOL area, and him and his wife easily made over $200k in salary alone, so why he spent his free time managing all those rental houses is beyond me. He had over 20, and managed them all himself.
20 rentals at $1000/mo is $240k/year. Granted, that's definitely not all profit, but it's a lot of cash flow.
Re: American landlords derive more profit from renters in low-income neighborhoods
#18I think you also have to take in to account the higher risk of renting to lower income individuals. They are more likely not to pay. They are probably also more likely to trash the place.
I think you don’t understand “take more profit.” That means they have considered those costs and still they “take more profit” even considering those costs. That’s what profit means.
I read this article with an eye to that as well, but it does not appear such damage was taken into account.
When Wilmers and Desmond control for regular expenses in the form of mortgage payments, property taxes, property insurance, utilities, and property management fees
A new roof, flooding from a busted pipe can be considerable expense even including insurance help. Factor in chemical residue from cooking meth, destroyed fixtures like porcelain toilets and sinks, it can be very expensive to rent to unconscientious people (nothing to do with income!).
Re: American landlords derive more profit from renters in low-income neighborhoods
#19I think you also have to take in to account the higher risk of renting to lower income individuals. They are more likely not to pay. They are probably also more likely to trash the place.
I think you don’t understand “take more profit.” That means they have considered those costs and still they “take more profit” even considering those costs. That’s what profit means.
Actually... According to the research source landlords do charge more due to increased risk: "Because landlords operating in poor communities face more risks, they hedge their position by raising rents on all tenants."
Re: American landlords derive more profit from renters in low-income neighborhoods
#20I think you also have to take in to account the higher risk of renting to lower income individuals. They are more likely not to pay. They are probably also more likely to trash the place.
I think you don’t understand “take more profit.” That means they have considered those costs and still they “take more profit” even considering those costs. That’s what profit means.
I think the poster is referring to the PITA factor. The article's author chose to come at this from the "exploiting the poor" angle. There's a case to be made there, and there's also a case to be made for how people are less willing to take on in these kinds of investments. That will no doubt effect the profit margin that those who are willing are able to take.