Gyroscopic Investing

tomfoolery wrote: ↑Sun Jun 06, 2021 2:08 am 5 years ago I would have said of course it should be legal for someone to be a landlord of a single family home. Now, I question that.

There’s a shortage of single family homes, which is pretty evident.

Institutional buyers have been scooping them up to rent our for the last decade.

Air BNB has scooped up some inventory to turn into unlicensed hotels.

The fewer homeowners in houses, the less skin people have in the game for their communities. All else equal a city with 100% resident-owned houses will be taken better care of then one with 100% landlords renting single family houses out to vacationers for a few nights or to long term tenants who can’t afford a house.

People don’t rent because they want to rent, they rent because they can’t afford to buy. And the “landlords” of single family housing are hoovering up all inventory, becoming an oligopoly that is raising prices, pushing more people on the margin away from ever being able to afford a house, and making them lifelong renters. Which increases profits for the landlords even more.

The more money the “landlords” throw into single family housing, the more profits they make because the more they can raise rents because the less opportunity for competition exists.

So they go into a historically low cost of living area in 2010 to 2019, like Vegas or Phoenix, buy every low end property possible to rent out, wait for price appreciation, either because some local residents who were renting have finally saved up enough to buy even at the higher rates the landlords are asking if they were to sell. And then the landlords do a 2:1, where they can flip the house for double, and use the money to buy two new houses in whatever low cost of living area still exists like Omaha or Indianapolis. Now they can buy up double rhe number of houses they did initially, taking inventory away from potential resident homebuyers.

And in 5 to 10 years they’ll have doubled the price of those houses simply by sucking up all inventory In those markets, they’ll sell, and buy 2:1 in a new cost of living city like rural Kansas or something. Now they own 4x as many houses as when they started in Vegas and Phoenix.

And while they wait 5 to 10 years for the prices to double, they are collecting rents that cashflow positively.

Meanwhile they pay zero income tax on this venture because when they sell the houses at 2x profits there’s no tax if they 1031 exchange into more houses in a cheaper city. And if they want money to pay themselves or buy more houses, they can cash out re-fi which is a tax free way to get money.

Seems like our system is designed to make the rich richer and the poor poorer and destroy anyone’s incentive to maintain a clean, friendly, or safe community, since when you own nothing, you don’t care about what happens in the community. Which is why poor poverty areas of town look like crap with litter and broken glass and loud music, and the rich part of town is clean, quiet and safe. The rich people have skin in the game. The poor people might as well throw trash on the sidewalk, they don’t own any of it anyway.

dockinGA wrote: ↑Sun Jun 06, 2021 5:39 am

tomfoolery wrote: ↑Sun Jun 06, 2021 2:08 am 5 years ago I would have said of course it should be legal for someone to be a landlord of a single family home. Now, I question that.

There’s a shortage of single family homes, which is pretty evident.

Institutional buyers have been scooping them up to rent our for the last decade.

Air BNB has scooped up some inventory to turn into unlicensed hotels.

The fewer homeowners in houses, the less skin people have in the game for their communities. All else equal a city with 100% resident-owned houses will be taken better care of then one with 100% landlords renting single family houses out to vacationers for a few nights or to long term tenants who can’t afford a house.

People don’t rent because they want to rent, they rent because they can’t afford to buy. And the “landlords” of single family housing are hoovering up all inventory, becoming an oligopoly that is raising prices, pushing more people on the margin away from ever being able to afford a house, and making them lifelong renters. Which increases profits for the landlords even more.

The more money the “landlords” throw into single family housing, the more profits they make because the more they can raise rents because the less opportunity for competition exists.

So they go into a historically low cost of living area in 2010 to 2019, like Vegas or Phoenix, buy every low end property possible to rent out, wait for price appreciation, either because some local residents who were renting have finally saved up enough to buy even at the higher rates the landlords are asking if they were to sell. And then the landlords do a 2:1, where they can flip the house for double, and use the money to buy two new houses in whatever low cost of living area still exists like Omaha or Indianapolis. Now they can buy up double rhe number of houses they did initially, taking inventory away from potential resident homebuyers.

And in 5 to 10 years they’ll have doubled the price of those houses simply by sucking up all inventory In those markets, they’ll sell, and buy 2:1 in a new cost of living city like rural Kansas or something. Now they own 4x as many houses as when they started in Vegas and Phoenix.

And while they wait 5 to 10 years for the prices to double, they are collecting rents that cashflow positively.

Meanwhile they pay zero income tax on this venture because when they sell the houses at 2x profits there’s no tax if they 1031 exchange into more houses in a cheaper city. And if they want money to pay themselves or buy more houses, they can cash out re-fi which is a tax free way to get money.

Seems like our system is designed to make the rich richer and the poor poorer and destroy anyone’s incentive to maintain a clean, friendly, or safe community, since when you own nothing, you don’t care about what happens in the community. Which is why poor poverty areas of town look like crap with litter and broken glass and loud music, and the rich part of town is clean, quiet and safe. The rich people have skin in the game. The poor people might as well throw trash on the sidewalk, they don’t own any of it anyway.

The highlighted statement is just plain wrong. There are plenty of people who just want to rent. Homeownership isn't always what it's made out to be. Anyone who isn't sure that they will be staying in their current home for many years and is not in a financial position to make extra principal payments is most likely better off renting.

I Shrugged wrote: ↑Sun Jun 06, 2021 5:30 pm Tom I think you are too focused on financial optimization of your life.

pp4me wrote: ↑Sun Jun 06, 2021 6:20 pm

I Shrugged wrote: ↑Sun Jun 06, 2021 5:30 pm Tom I think you are too focused on financial optimization of your life.

How can anyone possibly tell what Tomfoolery is focused on?