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Americans still think they can make money flipping houses

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Re: Americans still think they can make money flipping houses

#61

Post by epistasis »

nemo44x wrote: post #55
mrjin wrote: post #48

Earlier quoted context omitted.

There was one obvious reason: too much money was printed, for decades. Virtually unlimited supply of cheap money not only push up asset prices but also make it super easy to blindly take loans to invest in assets and make tones of money. Once you tasted the easy money, you want more and earn from hard working would look super stupid. Properties are the most accessible way of getting involved, so people flock in. It's…

Falling interest rates for 40 years wasn’t the problem. If anything there has been less demand for money which is why rates fall. Things are far less capital intensive than they used to be in many cases. Falling interest rates have been great for people as more people own homes than at any other point in history. But printing trillions more last year was a flaw. At least got physical proof that MMT doesn’t work.

MMT is the idea that inflation is the result of government spending, rather than "bankruptcy" or people being unwilling to buy US government bonds. And in particular that limited productive capacity will cause inflation. So if anything the past years show that MMT was exactly right all along.

Re: Americans still think they can make money flipping houses

#62

Post by hiptobecubic »

smt88 wrote: post #47
endisneigh wrote: post #30

Earlier quoted context omitted.

What area are you referring to where housing was understood to be a depreciating asset? Though that’s true in the literal sense, there are only a handful of instances in American history where they was empirically the case. Not to mention you don’t specify a locale which is the most important thing in real estate, heck, these days perhaps a neighborhood.

In much of the North and Rust Belt of the US, houses declined in real dollars between the heydey of the mid-20th century and now. Detroit is a good example.

Ok but didn't Detroit like... collapse? Not every city is an economic monoculture of an industry that was offshored.

Re: Americans still think they can make money flipping houses

#63

Post by m0llusk »

BrianOnHN wrote: post #52
nwatson wrote: post #39

Earlier quoted context omitted.

And a big swath of the US population were barred from participating in those programs and so didn't get the benefit of relative inflation.

What programs?

Federal Housing Administration backed loans and the mortgage interest tax deduction worked together to give a big boost to a very specific demographic slice of the population.

Re: Americans still think they can make money flipping houses

#64

Post by SamuelAdams »

bluGill wrote: post #5

You can make money flipping houses. However it becomes a job and you need to treat it like one. You have to invest in the right house, a house that only needs paint and it will sell for a thousand profit vs a house that needs to have the main beams replaced to get $50000 profit. The above numbers are real required profit because of the risk you are taking, and also the time that you own the house paying intrest waiti…

What’s interesting is that this article seems to insinuate flippers as holding onto houses for 5 years. Then they go on to say the maintenance and mortgage payments eat into the profits.

Well yes, of course that is an issue. But most flippers I’ve seen in my neighborhood only own the property for a max of 3 months. They make cosmetic changes and maybe some core changes (new roof, hvac), then turn around and sell it in less than a week.

Most flippers are not holding onto property for 5 years. That’s just regular people living in houses.

Re: Americans still think they can make money flipping houses

#65

Post by hiptobecubic »

bluGill wrote: post #5

You can make money flipping houses. However it becomes a job and you need to treat it like one. You have to invest in the right house, a house that only needs paint and it will sell for a thousand profit vs a house that needs to have the main beams replaced to get $50000 profit. The above numbers are real required profit because of the risk you are taking, and also the time that you own the house paying intrest waiti…

This kind of extremely risky approach to earning money, where one mistake ruins you, is colloquially referred to as "gambling."

Re: Americans still think they can make money flipping houses

#66

Post by CogitoCogito »

chrisseaton wrote: post #60
blululu wrote: post #57

Earlier quoted context omitted.

Pretty much every capital asset depreciates. Even with basic maintenance everything wears out over time. Only legal entities are immune from the ravages of time.

> Even with basic maintenance everything wears out over time. There's basic ongoing maintenance yeah, but I don't think that counts as deprecation in any sensible way does it? If you keep your oil paintings in a mouldy cupboard they'll rot, but we don't say art is a deprecating asset because of this. You just make sure they don't rot and clean them every now and again. Houses can stand for hundreds and hundreds of ye…

> As they get older they get more valuable because people like older buildings for aesthetic reasons.

Is this really true in general? I mean sure I can find examples of it being true, but it's kind of assumed that many of the old houses in my parent's neighborhood of San Diego are teardowns whenever a buyer comes interested.

Re: Americans still think they can make money flipping houses

#67

Post by m0llusk »

chrisseaton wrote: post #42
m0llusk wrote: post #18

It is an amazing contrast with the situation when I was younger. House prices were bounded by wages and were understood to be depreciating assets. That is, without constant investment they lost their value and became unusable and difficult to trade. Even in the best of times it takes time, preparation, and fees to sell real estate. Landlording was a rich person's game because of the risk involved and if you really wa…

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot then yeah maybe in ten years it will have lost value because it will need a lot of work, but other than that I think it's never been the case they're depreciating in any meaningful sense.

Take just the roof alone. On a typical house roof replacement is at least a few thousand dollars and for a nice house in an urban area it will cost at least ten thousand and maybe much more. Even with good materials and installation roofs stay in good condition for around 30 years and become completely degraded in around 50. Some napkin math for a common and kind scenario is another $10k roof every 30 years which is $333/year or $27/month just to keep basic structure integrity.

Now add on to that interior details, floor coverings, appliances, and such many of which are lucky to last 10 years and the numbers start to add up.

Re: Americans still think they can make money flipping houses

#68

Post by pibechorro »

m0llusk wrote: post #63
BrianOnHN wrote: post #52

Earlier quoted context omitted.

What programs?

Federal Housing Administration backed loans and the mortgage interest tax deduction worked together to give a big boost to a very specific demographic slice of the population.

This is why we aught to never have subcidies or bailouts.

Re: Americans still think they can make money flipping houses

#69

Post by zacherates »

lotsofpulp wrote: post #33
alphabettsy wrote: post #27

Earlier quoted context omitted.

It’s subsidized regardless. There are countless tax incentives for homeowners.

I was referring to taxpayers subsidizing the actual loan itself, not the act of owning a home. What are the tax incentives (in the US)? On a federal level, all I can think of is mortgage interest tax deduction, but that was greatly neutered in 2017 TCJA, and less than 10% of Americans can benefit from it. And that is a tax incentive to borrow money to buy a home, not a tax incentive for home owners. Only other one is…

The biggest tax benefit of living in an owner occupied home is that nobody pays income tax on the rent you would pay if you were living in a house someone else owned.

... but most places don't have the stones to tax imputed rent [1]: Belgium, Iceland, Luxembourg, the Netherlands, Slovenia, Spain and Switzerland being exceptions.

[1] https://en.m.wikipedia.org/wiki/Imputed_rent

Re: Americans still think they can make money flipping houses

#70

Post by yvan-eht-nioj »

nemo44x wrote: post #55
mrjin wrote: post #48

Earlier quoted context omitted.

There was one obvious reason: too much money was printed, for decades. Virtually unlimited supply of cheap money not only push up asset prices but also make it super easy to blindly take loans to invest in assets and make tones of money. Once you tasted the easy money, you want more and earn from hard working would look super stupid. Properties are the most accessible way of getting involved, so people flock in. It's…

Falling interest rates for 40 years wasn’t the problem. If anything there has been less demand for money which is why rates fall. Things are far less capital intensive than they used to be in many cases. Falling interest rates have been great for people as more people own homes than at any other point in history. But printing trillions more last year was a flaw. At least got physical proof that MMT doesn’t work.

"...more people own homes than at any other point in history..."

I'm not sure about elsewhere, but rates of home ownership in Australia have declined since the 1980's [1], neatly coinciding with a decline of interest rates [2] and a rise in house prices as a proportion of income [3].

[1]https://www.aph.gov.au/About_Parliament/Parliamentary_Depart... [2]https://www.rba.gov.au/statistics/historical-data.html [3]https://www.aph.gov.au/about_parliament/parliamentary_depart...

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