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Housing is at the root of many of the rich world’s problems (2020)

economist.com

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Re: Housing is at the root of many of the rich world’s problems (2020)

#331

Post by dclusin »

lotsofpulp wrote: post #221
dclusin wrote: post #193

Earlier quoted context omitted.

My personal belief is that the housing supply scarcity is having the opposite effect and is actually holding property values down. Let’s say there’s two 1 acre lots that have a market value of $1m each. A developer can buy them and turn them into 8 condos and sell them each $600k yielding $4.8m. Is it possible the developer would pay more than $1m apiece for these properties? Obviously, these numbers are made up some…

At the property values referenced in above post, the opposition to apartment buildings is not exactly about properties’ sale prices. Presumably, the residents are happy where they live, so their priority is not in maximizing the sale price, but keeping the riff raff out that cannot afford $1M+ homes, and hence have to live in apartments. The concern about decrease in home prices is just cover from accusations of disc…

Yeah that’s a good point. That the value argument is actually just a veiled way of saying people and buildings that don’t look like the way we want them to look.

Re: Housing is at the root of many of the rich world’s problems (2020)

#333

Post by tomrod »

idkyall wrote: post #122

Housing in the US has gotten to where it is due to horrible laws effectively allowing total tax avoidance for landlords. Take some investment property. You buy it at some basis price, let's say 500k. You rent it out for 15k a year. Each year you can offset your rental income against deprecation of the property and property taxes - meaning, you pay no income tax on your rental income. ~30 years later, you've deprecate…

I really don't understand what you're describing. Can you recommend a place where I could learn more about "deprecation of the property and property taxes"?

Re: Housing is at the root of many of the rich world’s problems (2020)

#334

Post by effingwewt »

idkyall wrote: post #122

Housing in the US has gotten to where it is due to horrible laws effectively allowing total tax avoidance for landlords. Take some investment property. You buy it at some basis price, let's say 500k. You rent it out for 15k a year. Each year you can offset your rental income against deprecation of the property and property taxes - meaning, you pay no income tax on your rental income. ~30 years later, you've deprecate…

And it gets better!

They now have the added buffer of rental/leasing agencies! Many of these are fly-by-night and skirt or outright ignore inconvenient laws like renter's rights.

Repairs? Cost sink, just don't renew complaintant's lease. Bonus you get to raise the rent again!

Want to get in touch with the owner? Most times you'll have to look up tax records and hope it's actually in the owner's name.

Makes rental properties probably 90/10 profit/cost.

I know people on both sides of the equation and it's more than a little insane the entitlement some landlords feel.

Re: Housing is at the root of many of the rich world’s problems (2020)

#335

Post by denimnerd42 »

jason0597 wrote: post #298

When AMD or NVIDIA sell GPUs to scalpers, and those scalpers resell the GPUs and keep the profit, there's outrage about it. Nobody ever says to "build more GPUs" to fix the problem. When houses and new developments get snatched up by investors and landlords as buy-to-lets (or even by Blackrock and pension funds), there is little outrage and calls for restricting who can buy them. The same argument is rehashed over an…

huh.. everyone knows scalpers business model will die when they can build more GPUs

Re: Housing is at the root of many of the rich world’s problems (2020)

#336

Post by TrackerFF »

idkyall wrote: post #122

Housing in the US has gotten to where it is due to horrible laws effectively allowing total tax avoidance for landlords. Take some investment property. You buy it at some basis price, let's say 500k. You rent it out for 15k a year. Each year you can offset your rental income against deprecation of the property and property taxes - meaning, you pay no income tax on your rental income. ~30 years later, you've deprecate…

When purchasing real-estate in a hot area, the real money comes from increasing prices. Some cities have had something like 10% - 15% annual growth, for 10 years straight.

Banks are also much more forgiving when it comes to down-payment, when they know it's going to be a rental, and you already have other rentals as collateral.

In essence, purchasing a rental unit with only 1%-5% down payment up-front, is kind of like purchasing stocks with 20x - 100x leverage. As long as you meet your mortgage payments, get steady rent, and don't get any crazy expenses - you're sitting on a goldmine.

Some of the guys I went to school with did just that. Bought a rental unit, while working. All their salary went toward down-payment of the next unit, and the banks were very forgiving when it came to new loans. After 10 years they had a nice portfolio of rentals, which they then sold to typical real-estate investment funds.

Re: Housing is at the root of many of the rich world’s problems (2020)

#337

Post by Jiro »

dionidium wrote: post #328
Jiro wrote: post #323

Earlier quoted context omitted.

https://en.wikipedia.org/wiki/The_Market_for_Lemons There's a legitimate reason why a car immediately loses its value. People are more likely to sell cars that have something wrong with them. The market price for a car that you just drove off the lot is not the market price for an average car of that age, it's the market price for the subset of cars of that age that people want to sell. Because a car in that subset i…

That sounds reasonable to me, but it didn't stop the cost of used cars from skyrocketing during the pandemic, due to the supply-chain-induced shortage of new cars. When the car market started looking a lot more like the housing market, so did its prices.

In that situation, the value of all cars went up, both new and used. The value of a used car was still much less than the value of a new car, you just didn't notice this because new cars didn't have their prices raised to correspond to the increased value.

Re: Housing is at the root of many of the rich world’s problems (2020)

#338

Post by huevosabio »

dbjacobs wrote: post #301
huevosabio wrote: post #281

Earlier quoted context omitted.

You fix it by deprecating only the improved value. The land beneath a building does not deprecate, whereas the value of the building should. Since for most properties the majority of the value is in the land itself, your basis to deprecate would be much lower, and more realistic.

This is already the case. You can only depreciate the building value not the land portion. So single family homes have much lower depreciation since most of the value is typically in the land vs an apartment which is the opposite.

In paper, but we constantly underestimate the value of land.

Re: Housing is at the root of many of the rich world’s problems (2020)

#339

Post by throwaway908724 »

rhacker wrote: post #279
throwaway908724 wrote: post #214

Earlier quoted context omitted.

Wow, I wish. I'm speaking as someone who put all his retirement savings into index funds year after year, but then married someone whose job is related to real estate. Real estate feels more concrete and understandable to her than finance, so that's where our money goes now. It's not easy free money, and I don't know why you would think that any high-profile, low-barrier-to-entry investment would be easy free money.…

It sounds like you're landlords, but you didn't explicitly state it. But isn't your tenant basically paying off each property, over the next 30 years. So right now your debt load may be high, but you're not experiencing that. You're just paying off the loans from rental income and handling the overage (prop tax and fixes) with the dev job. So in 30 years the two of you will have like 40M dollars paid over the backs o…

Yes, we're landlords. We own two small properties that were originally built as residences but now have commercial tenants because the zoning permits it and therefore the tax valuations assume we'll use it that way.

> Everyone wants to do what you are doing.

As with any other asset that makes money, there are reasons why property prices are what they are, and if it's a magic ticket to free wealth, you have to ask yourself why professionals with deep pockets aren't grabbing every property and driving prices up even further. In the case of properties that are within the reach of upper-middle-class earners, professionals are not willing to pay the prices that overexcited individual amateurs are.

> isn't your tenant basically paying off each property

...and it's special logic like this that convinces people that there's free wealth to be had. But there's no magic. There is a price. There is income. There are costs. There are assets that depreciate. The land is an asset that appreciates. That all adds up to a return on the investment. Professionals calculate the return and compare that to other things they could do with their money.

Amateurs (like us) just buy and hope and feel good because we're doing something that feels like rich person stuff. We're doing fine with our properties, but we'd be doing fine putting our money into index funds, too. In case it's not clear, I don't think our properties will turn out to be great investments for us unless the speculative aspect pays off big. But my wife actually enjoys the work of finding tenants, handling building maintenance, designing and overseeing improvements, etc., so we implicitly price her time at zero.

Let me repeat that to let it sink it: I think we'd be just as well off putting our money in the stock market. The main reason we've put a significant amount of our money in real estate because my wife enjoys it and doesn't mind putting a lot of personal work into our properties for free.

Re: Housing is at the root of many of the rich world’s problems (2020)

#340

Post by malfist »

namelessoracle wrote: post #216
namdnay wrote: post #173

Earlier quoted context omitted.

> If people had to pay inheritance tax on their family home, how many could not afford such a tax bill and would have to get rid of their family home to please the tax man. so if they can't afford to pay tax on the windfall, they'd have to sell the house and buy a smaller one. is that the end of the world? > Regarding the cost basis rest that is so people can upgrade their house without having to pay a tax bill what…

So a family on hard times should be forced to leave their grandmothers home when she dies and hope they can find a new one? Gentrification can easily push a property in the place they've lived their whole lives out of their price range. And the family home might not have been super well kept up so the "windfall" isn't as big as the property values in the area may reflect. This happens now with gentrification in big c…

Yes, won't somebody think of that poor family on hard times inheriting an estate worth more than 12 million. How could we ask them to pay taxes?
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