American landlords derive more profit from renters in low-income neighborhoods • Hacker News Board

Re: American landlords derive more profit from renters in low-income neighborhoods

#111

Post by cmauniada » Sat, Mar 23, 2019, 6:06 PM UTC

zaroth wrote: post #82

It’s a well known fact that as property value rises the yield on rental income decreases. A $180k townhouse can rent for $1600/mo but a $1.8m McMansion isn’t going to rent for $16,000/mo. The economics of this has to do with marginal utility mainly and nothing to do with exploitation . There’s also the calculation of fixed rental costs which derive a larger portion of the monthly payment the lower the payment gets. I…

This is a really good point, as someone who has seen first hand exactly how fast cheaper houses rent out vs more expensive ones, this point is very succinct.

Re: American landlords derive more profit from renters in low-income neighborhoods

#112

Post by JamesBarney » Sat, Mar 23, 2019, 6:06 PM UTC

zaroth wrote: post #82

It’s a well known fact that as property value rises the yield on rental income decreases. A $180k townhouse can rent for $1600/mo but a $1.8m McMansion isn’t going to rent for $16,000/mo. The economics of this has to do with marginal utility mainly and nothing to do with exploitation . There’s also the calculation of fixed rental costs which derive a larger portion of the monthly payment the lower the payment gets. I…

I think a lot of this is also landlords make up a smaller percentage of the market as you go up in price and when you get to a 1.8 million dollar home the rent will never justify costs to a landlord. Two facts cause this.

The first is it's always a better deal to live in a property than rent it out.(100% occupancy, no expenses to find tenants, no evictions, etc). Plus there are non-financial reasons people prefer to own. This means all things being equal owner occupiers almost always outbid landlords.

The second is high income individuals are more likely to be able to buy a home than low income individuals.

Basically what happens is in high income neighborhoods, owner occupiers(or developers) bid up the properties until it doesn't make financial sense for landlords to own them anymore. The returns just don't justify it, but the house might still be worth it for owner occupier because they get a better return and want to own a house or lock in neighborhood.

Re: American landlords derive more profit from renters in low-income neighborhoods

#113

Post by tfehring » Sat, Mar 23, 2019, 6:09 PM UTC

mhuffman wrote: post #85

zaroth wrote: post #82

It’s a well known fact that as property value rises the yield on rental income decreases. A $180k townhouse can rent for $1600/mo but a $1.8m McMansion isn’t going to rent for $16,000/mo. The economics of this has to do with marginal utility mainly and nothing to do with exploitation . There’s also the calculation of fixed rental costs which derive a larger portion of the monthly payment the lower the payment gets. I…

This exactly! Also upkeep. Replacing a cheap shingle roof vs a metal or Spanish tile roof are night and day in costs. Plumbing is cheaper in a cheap small house with simple layout vs. Sprawling multi-level house. Size of grounds (and expected level care) to maintain are different. It goes on and on, but the gist is that the total net on a cheap house (ie. houses in cheap areas) is going to be more for the same level…

Taking GP’s example of a $180k townhouse vs. a $1.8M McMansion, will these costs really be significantly more than an order of magnitude more expensive for the latter, and therefore significantly higher as a percentage of property value? My intuition is that the opposite would be true, i.e., that the difference would typically be less than a factor of 10.

Re: American landlords derive more profit from renters in low-income neighborhoods

#114

Post by googley » Sat, Mar 23, 2019, 6:17 PM UTC

Lndlrd wrote: post #31

Ctrl+F "exploit", appears 24 times in this 13-paragraph article. > "Defining exploitation as being overcharged relative to the market value of a property" The ratio they've based their narrative on is called GRM (gross rent multiplier): https://en.m.wikipedia.org/wiki/Gross_Rent_Multiplier GRM is one of many factors when analyzing investment options. Other important factors include appreciation and expenses (maintena…

I’m about to start investing. May I please pick your brain a little bit?

Re: American landlords derive more profit from renters in low-income neighborhoods

#115

Post by DangitBobby » Sat, Mar 23, 2019, 6:24 PM UTC

joelhaus wrote: post #92

mjevans wrote: post #81

Skimming the article, an obvious solution seems to be overlooked. Someone is probably a lot less likely to trash/destroy something they own / are in the process of owning. Imagine if there was far less rental and much more liquid stock of housing units in markets? What if everyone who was renting now could actually "buy" livable housing at that same level of rent; rather than lining the pockets of others?

True, but beware the unintended consequences of 2007.

2007 doesn't have to happen again. It's possible to both make houses affordable for people with lower income and not give irresponsible amounts of debt to people who cannot afford it. It just requires smaller, more affordable houses to be built. I don't know why, exactly, but as a general trend the sizes of houses have just been going [up, up, up](https://www.google.com/url?q=https://www.census.gov/const/C2...) (PDF)! Consider that the [mean, median] square footages of new houses built in the US had gone from [1660, 1525] in 1973 to [2392, 2169] by 2010. Maybe the reason people can't afford to buy houses is that no one wants to build affordable houses.

Re: American landlords derive more profit from renters in low-income neighborhoods

#116

Post by angel_j » Sat, Mar 23, 2019, 6:26 PM UTC

In California, you must have a special license to do almost any business, but be a landlord. You need a license to do people nail's (nail technician). And in some cases, there a special taxes applied to that industry (like legal cannabis).

Landlording needs this (not nail techs). Keep up your certification, provide quality living conditions, and pay extra tax to offset the housing problem.

Furthermore, we should have non-profit, non-governmental institutions running low-income housing, not slum lords.

Re: American landlords derive more profit from renters in low-income neighborhoods

#117

Post by AlexTWithBeard » Sat, Mar 23, 2019, 6:31 PM UTC

scarface74 wrote: post #79

pytester wrote: post #57

Earlier quoted context omitted.

>The point is that, according to that narrative, you could be "less evil" than the other landlords. You can afford to "protect your investment" less So, don't kick out people who don't pay their rent immediately? Sounds like a recipe for achieving all of the "acclaim" for being a slumlord with none of the actual profit...

You can’t kick people out immediately if they don’t pay their rent. It’s been awhile so I’ve forgotten all of the terms. In my relatively landlord friendly state, it is a long process. 1. You have to give them a written notice and they have 7 days to pay rent. 2. Then you have to go and file an eviction notice with the court and wait up to another week for them to send a notice to the tenant. 3. Then you have to wait…

Exact rules depend on the state.

In NY a typical eviction process takes about half a year.

Re: American landlords derive more profit from renters in low-income neighborhoods

#118

Post by AlexTWithBeard » Sat, Mar 23, 2019, 6:37 PM UTC

I wonder if it's about low-income or there are other factors like neighborhood crime rate, education level or the amount of garbage on the streets.

I understand all these correlate with income level, but it would be extremely interesting to see statistics controlled by income.

Re: American landlords derive more profit from renters in low-income neighborhoods

#119

Post by hejdnrndk » Sat, Mar 23, 2019, 6:47 PM UTC

krapp wrote: post #109

hejdnrndk wrote: post #105

Earlier quoted context omitted.

I wrote that comment using a new account to avoid being outed at work. To be very clear: your accusation is false, there was never any special parentheses, and I invite an admin to confirm that if they can.

>To be very clear: your accusation is false, there was never any special parentheses, and I invite an admin to confirm that if they can. There were, I saw them, other people saw them, they were copied into eli_gottlieb's comment. His comment is flagged now, but it's still visible to some users. Whether an admin can or does confirm it is irrelevant. You made a green account, and you screwed up with some 4chan nonsense…

I guess a troll is going to troll, but the idea that some coded message was in my comment is just insane.

I unequivocally deny any use of “triple parens”. Full stop.

Re: American landlords derive more profit from renters in low-income neighborhoods

#120

Post by Retric » Sat, Mar 23, 2019, 6:48 PM UTC

JamesBarney wrote: post #112

zaroth wrote: post #82

It’s a well known fact that as property value rises the yield on rental income decreases. A $180k townhouse can rent for $1600/mo but a $1.8m McMansion isn’t going to rent for $16,000/mo. The economics of this has to do with marginal utility mainly and nothing to do with exploitation . There’s also the calculation of fixed rental costs which derive a larger portion of the monthly payment the lower the payment gets. I…

I think a lot of this is also landlords make up a smaller percentage of the market as you go up in price and when you get to a 1.8 million dollar home the rent will never justify costs to a landlord. Two facts cause this. The first is it's always a better deal to live in a property than rent it out.(100% occupancy, no expenses to find tenants, no evictions, etc). Plus there are non-financial reasons people prefer to…

Buying and selling a home has huge transaction fees which destroy this argument. Worse, economy of scale still applies with apartment complexes paying less for the same services than condo owners.