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B-Nasty posted:I guess I just don't see this as that scary. He/They are just using a computer to help find properties faster that match what most (smart) RE investors already do: if you can buy a place where it rents with positive cash-flow from day one, that's a good investment. It seems like something that, assuming supply isn't limited by restrictive zoning laws, will balance out as rents drop as the supply increases. Scale is the entire point of this and scale is how companies like that are going to affect, in the future if not now already, the home-buying experience of everyone in this thread. Enough hedge fund and venture money is sitting around without a clear opportunity in bonds, stocks or commodities that they thought: "hey, let's just buy up all the single-family housing that we can and make money that way." And they're doing it, and it's never been done at this scale before, and they're aggressively scaling up in a nonlinear fashion. "It's not like people are homeless" is a remarkable view, but I'll let it sit there since this isn't a political thread. I do find your faith in supply-and-demand lowering rents (and therefore this business model) quite amazing given what informal cartels can do in limited markets. And housing isn't exactly a luxury people can just avoid buying. pmchem fucked around with this message at 02:53 on Jun 26, 2019 |
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Jun 26, 2019 02:50
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Something like this is already happening in Austin. There are a few local companies that snap up unrenovated homes at 50% over their 2010 value rather than the 100%+ increase even mildly updated homes go for. They do quick flipper renovations and sell them for what private sellers are asking. The consequence here is that there are far fewer unmolested homes available, and they get listed at higher prices knowing these flipper companies will snap them up.
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Jun 26, 2019 02:53
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More people renting because buying a house is much more difficult due to investors buying up single family homes. Very cool.
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Jun 26, 2019 02:54
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B-Nasty posted:I guess I just don't see this as that scary. He/They are just using a computer to help find properties faster that match what most (smart) RE investors already do: if you can buy a place where it rents with positive cash-flow from day one, that's a good investment. It seems like something that, assuming supply isn't limited by restrictive zoning laws, will balance out as rents drop as the supply increases. headline: mid-00s regdate still really mad that george w bush failed at social security privatization
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Jun 26, 2019 02:55
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editing in quote since this thread moved fast:Jealous Cow posted:Something like this is already happening in Austin. There are a few local companies that snap up unrenovated homes at 50% over their 2010 value rather than the 100%+ increase even mildly updated homes go for. They do quick flipper renovations and sell them for what private sellers are asking. I view flipping as entirely different and less scary to the individual home-buying process (and hence this thread) than the multi-decade corporate ownership and rental of millions / tens of millions of single-family homes. Flipping has always existed in some form.
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Jun 26, 2019 02:55
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That guy is engaging in a form of arbitrage, in which he identifies mispriced houses on the basis of prevailing rents in the area and some calculation of renovation costs (the need for renovations is what is causing those houses to be mispriced in the first place). That relates to his advantage over other corporate competitors who can afford to make sight-unseen cash offers within 12 hours of listing. When his competition catches up, he'll wind up bidding on the same units his competitors are bidding, and the sellers will raise prices to meet that demand, carving into his margins. But it speaks to a more general problem of the cash investor's advantage over the family that needs a mortgage in order to buy. Sellers near-universally prefer a no-financing-contingency cash offer, which means buyers needing mortgages must pay extra in order to make their offer attractive. That's the source of the issue for ordinary people who can't cough up two or three hundred thousand dollars in cash to buy a house appropriate for a family income of 60k. Without regulating that advantage in some way, we are shifting the country's middle class from owners to renters, and that has follow-on affects: the corporations reap the benefit of rising housing values instead of that middle class, the middle class loses the security of ownership and as renters are likely to be more mobile, less tied to a specific community, less involved with that community, etc., which in turn affects community governance. The silver lining is that big money investors have little tolerance for failure. When the economy slides, middle class homeowners will likely stay in houses that are now worth less than when they bought them, as long as they can keep up with the mortgage payments; investors, on the other hand, will insist on dumping them so they can move what remains of their capital to better investment opportunities. This isn't necessarily a good thing, though: huge homeowning corporations dumping their underperforming assets onto the market could closely resemble the mortgage crisis of 2007-11 in which a flood of foreclosed units on the market depressed values so badly that it had an accellerating effect, putting more and more individual owners underwater and unable to sell when they needed to due to job losses preventing them from keeping up with payments. So I there's a systemic risk to allowing corporate speculators to accumulate significant fractions of the domestic housing stock, in addition to and beyond the basic issue of corporations using their buying power to steal the wealth generation of home ownership away from the middle class. Concentrating ownership could create "too big to fail" institutions that have to be bailed out to avoid the disastrous effects on the housing markets if they are allowed to collapse and dump all their assets at once. That's my half-assed seat of the pants take, anyway. Leperflesh fucked around with this message at 02:59 on Jun 26, 2019 |
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Jun 26, 2019 02:56
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I generally agree with your take, including the 'too big to fail' point, but note that his arbitrage is very different from something like a currency arbitrage because he has a competitive advantage against a middle-class home buyer, even if they had the same information: his renovation/repair costs are way lower due to scale (as mentioned in the article). Therefore he can always make a better offer.
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Jun 26, 2019 03:03
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It's like, wow, imagine if some home construction company had near infinite capital and they just decided to only build rental single family homes. And imagine this happened 50 years ago and everyone living in post-Eisenhower-highway suburbs was renting instead of owning. Just try to imagine that reality and break your brain. Now imagine competing against that company when bidding on a home you're trying to buy.
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Jun 26, 2019 03:06
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I just want a house that's not next to a bridge in a swamp behind the dump.
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Jun 26, 2019 03:08
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Mr. Powers posted:I just want a house that's not next to a bridge in a swamp behind the dump. I live in San Jose and that's basically my thinking. Definitely leaving the bay area to buy. I was looking at houses in Westminster (Denver) this weekend and none were over 400k. And the people in Denver are like "houses are unaffordably expensive!"
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Jun 26, 2019 03:59
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Regions are funny. I was in Texas for work last week and the property taxes were described as really high in the area I was in at $2,000/yr. Here in NH, you'll pay $2,000 tax annually on a <$100,000 house on a postage stamp lot, if you can find such a thing.
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Jun 26, 2019 04:54
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pmchem posted:I generally agree with your take, including the 'too big to fail' point, but note that his arbitrage is very different from something like a currency arbitrage because he has a competitive advantage against a middle-class home buyer, even if they had the same information: his renovation/repair costs are way lower due to scale (as mentioned in the article). Therefore he can always make a better offer. Don't worry, I'm taking up the fight for the little guy by never pulling permits!
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Jun 26, 2019 04:57
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That doesn’t sound right, Mr. Powers. Last I checked taxes in, say, Houston, Austin, or San Antonio were in the range of 2.5-3% of market price (not even assessed value). I don’t live there, though. Ok, maybe not that high, but easily over 2%. WithoutTheFezOn fucked around with this message at 05:03 on Jun 26, 2019 |
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Jun 26, 2019 05:00
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I’m in the San Antonio area and property taxes run 2.1 to 2.7 % of the market value of the house depending on exactly where you are. My house is valued at about 370K and taxes are just under 8,000 for the year. I’m in a lower tax area. If I lived in San Antonio proper they’d be about 9500 or so. This is before any exemptions but let’s not go there to keep things simple. Parts of Houston or other areas with MUD taxes can be over 3%.
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Jun 26, 2019 05:08
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Maybe I misheard what they said, which makes the rest of the conversation that happened after really strange. It was the Dallas area. E: I don't know what happened in that conversation. Looks like TX property tax is split the same way NH is with municipal and school. Maybe they were talking municipal only, but that would make no sense for talking total tax. Maybe the municipal rate was really high for TX? carticket fucked around with this message at 05:16 on Jun 26, 2019 |
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Jun 26, 2019 05:12
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San Antonio as well, taxes will be about $5k before any additional factors and being outside city limits It was probably $2k for schools, with a proposal to raise taxes by a few points to build a new football stadium.
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Jun 26, 2019 05:22
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redreader posted:I live in San Jose and that's basically my thinking. Definitely leaving the bay area to buy. I was looking at houses in Westminster (Denver) this weekend and none were over 400k. And the people in Denver are like "houses are unaffordably expensive!" Do it. I too am in the bay and we're moving away in two weeks. It's crazy getting a house half the price for double the size.
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Jun 26, 2019 06:31
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pmchem posted:I generally agree with your take, including the 'too big to fail' point, but note that his arbitrage is very different from something like a currency arbitrage because he has a competitive advantage against a middle-class home buyer, even if they had the same information: his renovation/repair costs are way lower due to scale (as mentioned in the article). Therefore he can always make a better offer. Yeah his arbitrage is exploiting the mispricing of those houses by other corporate cash buyers. He's locating mispricing on that basis using his (much vaunted by the article) extra specially good machine learning algorithms that help identify properties that are overly discounted due to condition issues. That's not a big moat, and my expectation is that companies take notice of what he's doing and how, develop their own algorithms, achieve sizes that also allows them to get similarly cheaper prices on renovations, and gradually reduce his technology moat. At that point, multiple corporations compete when bidding on those "mispriced" homes, prompting sellers to raise prices for those cash bidders. As those prices get raised, the arbitrage opportunity is reduced. This assumes that a free market is retained, that is, article dude doesn't grow so fast and so effectively that he becomes a defacto monopoly in the markets he plays in. That may not be a safe assumption. And of course this is all aside from the way that all cash bidders, including especially those with access to cheaper remodeling costs, have an unfair advantage over the buyer who must include a financing contingency in their offer.
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Jun 26, 2019 06:57
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pmchem posted:Scale is the entire point of this and scale is how companies like that are going to affect, in the future if not now already, the home-buying experience of everyone in this thread. Enough hedge fund and venture money is sitting around without a clear opportunity in bonds, stocks or commodities that they thought: "hey, let's just buy up all the single-family housing that we can and make money that way." And they're doing it, and it's never been done at this scale before, and they're aggressively scaling up in a nonlinear fashion. "It's not like people are homeless" is a remarkable view, but I'll let it sit there since this isn't a political thread. It's just a non-issue. Even the article itself states it: "Institutional investors own only about 2% of America’s 15 million single-family rental homes." Computers run amok or the evil, hedge fund investor isn't who you have to worry about; you're more likely to be outbid by a local, wanna be RE mogul who attended a seminar. If houses can be purchased as rentals such that they cash flow, people are going to do that. The only real way that changes is if house prices go up and/or rents go down until it balances. Involving the government in the housing market typically leads to disastrous, unintended consequences.
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Jun 26, 2019 12:31
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How problematic is buying a FSBO?
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Jun 26, 2019 14:11
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B-Nasty posted:It's just a non-issue. Even the article itself states it: "Institutional investors own only about 2% of America’s 15 million single-family rental homes." You miss the point of my posts and ignore other parts of the article. I repeatedly discussed the future problems this business model presents, on a multi-decade time horizon. I was not discussing current day issues. As the article states in no less than 3 spots, the CEO of that company wants "to get to 1 million homes in the next 15 years or so." That's just one company, and that's less than 20 years. Imagine several companies doing this, and what things look like in 50+ years. Very quickly, you have corporations possibly owning more than half of all single family homes in the USA, and serving as our new corporate landlords. Home buyers will be bidding against them. B-Nasty posted:Involving the government in the housing market typically leads to disastrous, unintended consequences. Well, that's certainly a galaxy-brain level opinion to hold in the wake of the consequences of lax oversight and regulation that led to the financial crisis, Wall Street mortgage-backed-security related bailouts, and Great Recession.
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Jun 26, 2019 14:46
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Mr. Powers posted:How problematic is buying a FSBO? Depends on the owners expectations versus reality. If they understand how it all works and are willing to play ball correctly (basically, they have a real estate attorney) it should be fine. It should be apparent very quickly if they are morons.
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Jun 26, 2019 15:16
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H110Hawk posted:Depends on the owners expectations versus reality. If they understand how it all works and are willing to play ball correctly (basically, they have a real estate attorney) it should be fine. They are running an open house and understand commission reality and are offering 2% towards buyer commission. Unfortunately, based on photos and property description, it's probably overpriced by 7-10% or so, in my view.
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Jun 26, 2019 16:03
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Mr. Powers posted:They are running an open house and understand commission reality and are offering 2% towards buyer commission. Unfortunately, based on photos and property description, it's probably overpriced by 7-10% or so, in my view. Generally when I've seen FSBO homes it's because they owe so much on the house they can't sell it while paying the normal 6% commission plus fees without putting cash into the deal. Them listing at an unrealistic price is no surprise.
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Jun 26, 2019 16:19
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Mr. Powers posted:How problematic is buying a FSBO?
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Jun 26, 2019 16:31
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A guy I know sold his house as FSBO but it was during an insane time a few years ago, when any desirable house got like eight offers within a day of listing.
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Jun 26, 2019 17:06
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gvibes posted:It's not, other than that I don't think I've ever seen a FSBO house listed at a reasonable price. This lines up with the pricing on it.
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Jun 26, 2019 17:15
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Put it this way: there are brokers whose entire career is based on calling up FSBOs and offering to list their house, because most of those people find out pretty quickly they're in wayyyyy over their head.
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Jun 26, 2019 17:21
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pmchem posted:I generally agree with your take, including the 'too big to fail' point, but note that his arbitrage is very different from something like a currency arbitrage because he has a competitive advantage against a middle-class home buyer, even if they had the same information: his renovation/repair costs are way lower due to scale (as mentioned in the article). Therefore he can always make a better offer. They can't outbid owner occupants, because they need to make a certain amount of money for the purchase to be profitable. Many sellers would take a higher offer with contingencies over a lower cash offer. And many sellers will hold out for a better offer after getting an offer the first day, waiting for an open house This companies cost of renovations may be better than the norm for the industry, but it doesnt mean they have the lowest cost. DIY flippers can afford to pay more to the seller and still make more money than businesses like this because of sweat equity, lower financing costs(mortgage rates are lower than what returns the company is paying investors), or cash to buy distressed homes, and the capital gains exclusion.
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Jun 26, 2019 17:44
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redreader posted:I live in San Jose and that's basically my thinking. Definitely leaving the bay area to buy. I was looking at houses in Westminster (Denver) this weekend and none were over 400k. And the people in Denver are like "houses are unaffordably expensive!" Westminster isn’t Denver
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Jun 26, 2019 17:54
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Hauki posted:Westminster isnt Denver Looks close enough to me 
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Jun 26, 2019 17:58
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lampey posted:They can't outbid owner occupants, because they need to make a certain amount of money for the purchase to be profitable. Many sellers would take a higher offer with contingencies over a lower cash offer. And many sellers will hold out for a better offer after getting an offer the first day, waiting for an open house This is what i was trying to type up. An owner-occupier will also overpay for some trendy fixture and be stuck with it forever, while renters will only overpay for that trendy feature as long as it is popular and then it will just be dated.
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Jun 26, 2019 21:00
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Those $400k places near Denver all need a lot of work and also consider you might be taking a very large pay cut.  If you are not, then....congrats!
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Jun 26, 2019 21:20
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Man I'd kill for 400k in Portland - count your lucky stars Denver.
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Jun 26, 2019 22:16
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I just listed my townhouse for $385k in Portland, please buy it I'll give you a free gun
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Jun 26, 2019 22:18
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GoGoGadgetChris posted:I just listed my townhouse for $385k in Portland, please buy it There's a joke in here somewhere about your stolen guns...
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Jun 26, 2019 22:35
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GoGoGadgetChris posted:My CPA just told me she "has no idea" if the sale of my townhouse is going to trigger a $30,000 capital gains tax bill or not And depending on how much information she had before your call your response was somewhere in between "I'll be finding another CPA" and "you have until COB tomorrow to give me this information", right? I'm assuming she was already provided with the relevant documentation.
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Jun 26, 2019 23:33
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GoGoGadgetChris posted:I just listed my townhouse for $385k in Portland, please buy it I swear to god if you claim it's Portland and it's in loving Bethany I'm going to take you up on your offer for the gun.
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Jun 26, 2019 23:49
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Kirios posted:I swear to god if you claim it's Portland and it's in loving Bethany I'm going to take you up on your offer for the gun.  Unincorporated Washington County, but it's a Portland address!!!!!!And for the offer; my door is always open
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Jun 26, 2019 23:56
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pmchem posted:Home buyers will be bidding against them. So what? His company, or computer program or whatever, will only bid up to the point that it cash-flows from day one. This isn't some speculator sitting on properties for decades hoping for appreciation to kick in; he finds what amounts to under-priced properties and/or undesirable ones (without renovations), fixes them, and rents them. I'm not sure why you think it's a human right to be able to purchase a property that would not only cost less (PITI) than it would rent for, but would also be easy to keep rented out. You also completely forget about the other side of the transaction, who benefit from someone actually buying their house, especially with a fast close for cash.
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Jun 27, 2019 01:01
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