No Stupid Questions

I have a very specific viewpoint on this issue, as I live in a vacation destination. Various investors are buying up every property that comes up for sale in my community (large corporations, small companies, wealthy individuals looking for vacation homes, etc.)

Every single property that gets bought, gets renovated or otherwise improved to the point that there's no chance in hell anyone living and working in the community full-time can afford to buy, unless they bought their first property before 2016. Since then, home ownership among my colleagues has become a pipe dream (and without giving away too many personal details, let me just say my colleagues and I are well-educated professionals making way above the median income for jobs in the area).

As I type this out, I'm listening to a million-dollar house being built in the lot behind me (which will almost certainly sit vacant >80% of the time), a shit rental being turned over next door (which charges $3k/mo for a 3/1.5), and two short-term vacation rentals partying across the street (which usually charge at least $300-$400/night).

Regardless of who it is, investors buying up housing is a huge problem for people that are trying to own their own home, especially first-time buyers.

It matters because blaming foreign investors is a diversion used to avoid bringing forth actual solutions.

This is pretty basic math. Just think about Monopoly (yes, the board game).

Housing is a finite resource. You can buy it or you can rent it. When you buy, you build equity. When you rent, it's pure expenditure.

So what happens when nobody can buy? They are forced to rent. Demand for rentals rises, which allows landlords to raise their rents.

So how does someone with very deep pockets turn this to their advantage?

First, starting one metropolitan area at a time, you buy up everything you can. If you coordinate with other investors, all the better. The goal is to strangle supply for buyers and prevent anyone who can't pay cash upfront from making a purchase. When people are unable to buy, they are forced to rent. So for buyers supply is down and costs are WAY up, and being locked out of buying means demand is up for rentals.

Now, renters also aren't building equity; when means it is perpetually more difficult for them to buy in the future as long as they kept away from that equity-building opportunity.

So as an "investor" you can now have a lot of different levers for manipulating both the supply and demand sides of the housing market. For example... what happens if you have more rental property than people willing to pay your asking price? Won't you be forced to lower your prices? First of all, that rarely happens - because as an investor, you target places that already have reliable, consistent demand (e.g. big cities and metropolitan areas). If you have to occasionally let a property go unoccupied for a few months, it's still no biggie... you keep those prices high and do not, under any circumstances, devalue the market (for your own sake as well as your investment cronies). Now, if there were competition, prices might be driven down... so how do you avoid competition? You collude. But that's illegal... so to avoid accusations of collusion and price fixing, you farm out your rates to a third party service that all your cronies also use: RealPage. It's not collusion or price fixing if you use a middleman. So now you are making bank on rental rates that will see a full return on your (higher than the properties value) investment in 15 years or less.

This has been going on for well over a decade, and these "investors" are now printing money on some of their earliest purchases, with no intention of EVER putting anything back on the market.

TL;DR; Buy all the supply, force plebes to rent, control the prices, profit. Just like Monopoly.

Home rental and ownership are not substitutable to each other nor does renting lower the demand for ownership. The amount of tax exemptions of buying a home, esp as first buyer, are decent over rental. Find out what a buyer's vs seller's market is. Look at what the avg. capital gains are for homeownership vs home rental (which are basically none). You still pay property tax on rentals such as apartments. Buying real estate is an investment, meaning you expect and should make returns on it (even if its just from selling the home years from initial purchase). A lot of this can change by state but generally, and overwhelmingly so its rings true across the US.

Look, I'll be straight up, you seem like you are coming from a place of someone who has never closed on property - which is 100% okay. but you are wrong, as what you said was not an opinion but just factually wrong.

From what I've seen this has been turned upside down by... well essentially automation, just not the kind everyone is afraid of.

Between better techniques and tools, a lot of construction is significantly faster than it used to be, to the point that a job that's smaller has enough... I guess "opportunity" cost that it can be significantly less profitable.

Let's say I'm a plumber. In the 80s, I would use copper pipe and have to solder all the connections - even a small job would take a long time - on the order of days. If I do a small house it takes way less time than a big house.

But now instead I would put in long lines of PEX with crimp on connectors. It's like 4x as fast so it should be 4x cheaper right? Except now I have to drive to 4 different jobs to work all day, set up and tear down 4 times, deal with 4 different customers and invoices, etc. OR I can do 1 big house and make essentially the same money since I cut out all the extra work.

Add to that that most people are going to use more expensive finishes on larger houses that I basically just take a percentage of, and they might request something specialty and working on small affordable houses seems like a terrible business plan.

It’s pretty simple: The cost to make the structure of a house is pretty much the same for luxury or basic models: Framing, electrical, foundation, etc.

But if you throw in some cheap granite countertops, a fancy tub, and up-market flooring suddenly it’s a luxury house and you can charge twice as much, despite it not costing nearly twice as much to build.

Same thing goes for cars: A luxury car just has different fabric and some badges, but they charge way more than a comparable econobox because it’s “luxury.”

You sound like me! Your situation and everything is similar. I also refuse to follow the herd when it comes to 30 year loans. No way, no how am I being enslaved by debt for that long.