this post was submitted on 19 Mar 2024
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Financing isn't a cost of ownership.
And higher rents result in higher real estate prices. With lower rents housing prices would fall to their intrinsic fair value.
Also a lot of people invest in real estate without external financing (unless it's way too cheap & an opportunity - a few years back b2b loans were at 1% vs 4+% now). Investment companies on the other hand ofc optimise cost of financing with target yields and leverage.
I don't understand. They do that now, at a much larger scale, I work for them :D. And with low rents everyone would benefit more on average.
For all but the ultra wealthy, it absolutely is. Which is my point.
Im decently wealthy, but clearly still working class. As is pretty much everyone else I know around me. Plenty of them have 1 to a few rental properties. I know one guy who just basically covers his costs with rent, and uses them as investments. But all the others use it as a stream of income. So the claim that only the ultra wealthy profit from it makes no sense, and if you think the people you work for are the only ones in the market, then your perspective is terribly inadequate.
My in laws are also sitting on a property that they could rent out for income, and while they are well off, they are not ultra wealthy either.
I didn't say that. Most of the middle class wealth arose from real estate, however Im saying that the "ultra rich" benefit a lot more from real estate than people you describe. But building several housing complex for 10s of millions each absolutely nets you more that a studio apparent in some basement.
Also, what Im saying overall here, regular people would get more real estate in it were not so profitable. Government housing projects that lower market rents are then terrible for ... 'decently wealthy', so none of that?
Also, its not that the usual case is that a landlords would be less 'wealthy' than the tenants they have. So however you look at it, it's a market where your goal is to up the rent as much as possible ("it wasn't me, it's the market, tho my costs didn't even change, lul") over people less fortunate than you that usually don't have another choice.
And no, I don't understand how financial expenses would be cost of ownership. Sure, you can't do it or it doesn't make sense not to take a loan, but that's financial stuff, not ownership stuff, the same way as you job isn't the cost of ownership for a house. It might be in your case, ofc, but there are steps in between.
Sure seemed like you did when you responded to my claim that they would be the only one profiting from it, by saying that is happening now.
Maybe, but the issue is that if you couldn't use your financing in your calculation on how much rent to charge, only those who can outright buy properties (i.e. the ultrawealthy) would be the ones who could profit from it.
But if you have to finance to own, then it is part of the cost. I don't possibly see how you can argue again this. One could easily decouple the maintenance and taxes from it in the same exact way and say you have to work for the money to pay these things, so it doesn't count.
I don't think we are following each others thoughts very well here.
You (eventually) cannot have property without maintaining it and paying taxes on it. You can have property without financial leverage or even without buying it.
Im not saying that loan interests and even loan nominal repayments, maintenance, taxes, etc dont get forwarded to tenants, Im saying that only happens because landlords just can do that because are usually in a privileged position to tenants.
I didn't understand your claim why only rich would profit from real estate if real estate would be cheaper (bcs of lower rents/yields). In that case everyone could buy or rent.
And I dont understand how profiting only from the less fortunate wouldn't only lead to more inequality and more extreme conditions on the same market there already are huge issues atm (can't buy a house without a 30y loan, wtf?).