Should Homeowner Groups Stop Investors From Buying Houses to Rent?

[alarmguy]

I'm guessing you haven't tried to buy a home recently...

It's easy to say there is not an issue if you are selling a car or selling a home, but try being on the buying end. You can sell your home to the highest bidder, no issues with that, but then you'll end up overpaying for whatever you try to buy next. I'm seeing small POS houses that need tons of work sell for $50,000 over asking price, because companies will come in and out-bid everyone else.

With salaries not increasing with inflation it's just unsustainable. I work at a University and they are having trouble hiring entry level positions, because nobody can afford to live here, even renting. Entry level people are being priced out of the area, which again is unsustainable. I'm nervous for my state, we have a large percentage of the state workforce retiring soon, entire state departments that will have nobody running them, and we can't hire replacements. Not everyone can/should make $150k a year.

I have family in CT and Long Island (my old home)
It is sustainable because it is happening. I get tired of people complaining that homes are not affordable. If they weren't affordable no one could buy them! Same goes for cars, boats and planes.

Home prices will ALWAYS be sustainable, prices are what the public can afford. Its worked for over 200 years in the USA among the highest standard of living in the world but that isnt good enough for some people for some reason.
The University you speak of isnt paying enough if people cant afford to live there.

... and BTW, a mortgage company will not let you overpay for a home that you can not afford. They can only make loans based on your income and limited by that income. If a mortgage company lends you money, you can afford it but many young people have been spoiled by free spending ways and dont have the maturity to stop spending on unnecessary items.

This is a good subject by the way, but look at it simply, if homes were unaffordable, no one would live in them. Rising interest rates will put a squeeze on rising prices and rightfully so, the young people in this country have had record low interest rates never seen in this country.
Once we get them back to 7 or 8% or even 10% home prices will settle down. Then they will complain about interest rates. Lots of complaining about their choices in life!

 

[Trashman]

Our country has never provided absolute freedom or even close
Corporations and Foreign influences have historically been under the governments thumb for good reason, literally every other country imposes severe limits on vast foreign ownership and corporate monopolies except of coarse us.


When you have something worse than the US government buying up all property there is a problem ,
And imagine if you would if instead of a foreign company it were the us government buying homes, to the guy on the street the affect is no different but imagine the difference in response?

What’s worse is the type of cascading failure that will occur when a large percentage of the population stops paying rent and mortgage because the market price has grown out of proportion to wages.

We are only about 1 month away from that happening , if literally anything happens during this recovery and jobs are affected

Well said. I am a die-hard patriot who loves my country, but the truth is the truth.

 

[Trashman]

I have family in CT and Long Island (my old home)
It is sustainable because it is happening. I get tired of people complaining that homes are not affordable. If they weren't affordable no one could buy them! Same goes for cars, boats and planes.

Home prices will ALWAYS be sustainable, prices are what the public can afford. Its worked for over 200 years in the USA among the highest standard of living in the world but that isnt good enough for some people for some reason.
The University you speak of isnt paying enough if people cant afford to live there.

... and BTW, a mortgage company will not let you overpay for a home that you can not afford. They can only make loans based on your income and limited by that income. If a mortgage company lends you money, you can afford it but many young people have been spoiled by free spending ways and dont have the maturity to stop spending on unnecessary items.

Normal people can't buy them, but corporations and folks paying cash for an investment don't have to worry about qualifying for a mortgage like we do. So yes, it is sustainable as long as you are rich, you are 100% correct.

 

[Pew]

I think its affordable to whomever can pay it. It wouldnt be $6000 if no one could pay it. Based on this statement the rent is only $2000 a month.

I never said that it was affordable. Just that if they can't even afford 6k to rent, how are they even going to be able to buy?

True, I suppose it does depend on the zip code since $2K/month in 2018 would have gotten you a nice 1,700sqft 3bd/2 bath/2 car garage in a nice neighborhood 40 miles away from downtown Chicago while $2K in Gold Coast, Chicago gets you a 2bd apartment.

I don't have a problem with folks renting out their homes that they grew out of like @Trashman stated but I do have a problem with corporations buying them for profit (and I usually side with corporate "freedom.")

 

[Wolf359]

I agree with you in that aspect, although obviously not in the bigger picture. If a guy owns one house as a rental, say his starter house, then he upgraded and now has a nicer house, and rents out his starter house, no problem. There is always a need for a rental, young folks just getting started, folks moving to a new place etc. So yes, rentals are necessary. But folks who go out and buy multiple houses just to profit off of normal folks end up driving up the price of homes. Whether you agree or disagree, it's true. Of course greedy folks with multiple rentals who sit up on their high horse disagree with me, that is not a surprise at all.

What's the difference between greedy and an investment? Who are normal folk? Are those the same people who also trash a place and not pay rent?

 

[jeepman3071]

Once we get them back to 7 or 8% or even 10% home prices will settle down. Then they will complain about interest rates. Lots of complaining about their choices in life!

But with higher interest rates won't people just qualify for a smaller mortgage, essentially making it equal out? Corporations buying properties with cash will have an even easier time buying.

 

[alarmguy]

Normal people can't buy them, but corporations and folks paying cash for an investment don't have to worry about qualifying for a mortgage like we do. So yes, it is sustainable as long as you are rich, you are 100% correct.

This is incorrect. You are saying corporations are paying cash as an investment. Well what are they investing in a home for if they cant sell it?
That means they would be losing their entire investment if unable to sell it.

 

[jeepman3071]

This is incorrect. You are saying corporations are paying cash as an investment. Well what are they investing in a home for if they cant sell it?
That means they would be losing their entire investment if unable to sell it.

Not to sell, but as rental properties.

 

[UG_Passat]

Go to your city/town's council and have the local government make ordinances to make short term rentals (like Air BnB's) illegal.

Some cities in SoCal has such ordinances.

 

[alarmguy]

But with higher interest rates won't people just qualify for a smaller mortgage, essentially making it equal out? Corporations buying properties with cash will have an even easier time buying.

Exactly my points in all my posts.
Home prices are what the public can afford, plain and simple. I mean one just has to look at the facts.
*LOL* Repeat = The facts are Home Prices are What the Public can Afford.
Either the bank gets the money in interest or the homeowner gets the money in sale price. Either way one of those two get the money AND they will only get as much money as the public can afford to pay. Banks can only lend up to a certain percentage of their income so they cant over pay for a home.

Super high interest rates = Low home prices
Super low interest rates = high home prices
World wide covid health event = low home inventory until people start moving and supply chain catches up.

The only ones complaining are the ones that cant afford a home and social and news media makes it sound like a problem. Its not a problem, never was and never will be.
Gosh, I remember back in 1988 buying our first home~! 10% interest rates, no homes on the market, real estate agent saying how bad she feels for young people as homes so expensive and interest rates so high. Looking back now, isnt that laughable?
But today... with news media on everyones phone, and social media on everyones phone, all of a sudden its a problem!

 

[Wolf359]

Go to your city/town's council and have the local government make ordinances to make short term rentals (like Air BnB's) illegal.

Some cities in SoCal has such ordinances.

Well the corporations are just buying them as rental properties which are typically for 1 year so bans on short term rentals won't stop corporations from buying rental properties.

I know many small landlords. About the biggest they can go is about 25 units or so. I think once you get beyond that, you need full time management. They can be more efficient than larger landlords. I guess it's just pretty visible if a large corporation buys up 200 units, but if 50 small investors buy 50-100 units, it's way more spread out and less noticeable.

 

[UG_Passat]

Well the corporations are just buying them as rental properties which are typically for 1 year so bans on short term rentals won't stop corporations from buying rental properties.

I know many small landlords. About the biggest they can go is about 25 units or so. I think once you get beyond that, you need full time management. They can be more efficient than larger landlords. I guess it's just pretty visible if a large corporation buys up 200 units, but if 50 small investors buy 50-100 units, it's way more spread out and less noticeable.

The real concern is the Chinese corporations whose mission is to buy property in the US.

 

[Wolf359]

The real concern is the Chinese corporations whose mission is to buy property in the US.

It's a free country, investors from overseas are welcome to buy whatever they want. Remember they can also get burned, the Japanese bought up a lot of investment property a while ago and got burned bad when the market collapsed.

 

[BMWTurboDzl]

They are building like crazy, but who is buying these new homes? The very folks creating the problem... If they were banned, that would get rid of the root of the problem. No big corporations, no foreign owners of any kind, no LLC's. But that would require a lot of these greedy landlords to stop getting rich off of the backs of hardworking, normal folks, and heaven forbid we have that.

What is being built? Luxury or near luxury homes/condos/townhomes or starter homes?

 

[BMWTurboDzl]

The real concern is the Chinese corporations whose mission is to buy property in the US.

Why? They're not going to steal the house. Someone was made better off when USD returned to the US.

 

[MrGraybeard]

What's the difference between greedy and an investment? Who are normal folk? Are those the same people who also trash a place and not pay rent?

In Milwaukee, almost 15% of rental housing is owned by out-of-state landlords. Most popular buys are inner-city properties that can be bought up cheaply. https://www.jsonline.com/in-depth/n...orporate-landlords-raking-profits/6989234002/
From the story: "Highgrove Holdings Management Inc. boasts on its web page that its Milwaukee properties 'provide tremendous cash flow of 12%-18% returns annually.'"
"The southern California company, which has about 130 homes in its rapidly growing Milwaukee portfolio, added that 'each property generates a gross annualized return rate of just over 20% and in some cases have exceeded 30%.'"
My BiL's house near the city limits (and the former mayor's home) was the last owner-occupied home on his block.

 

[Jack Watts]

The idea that "there isn't a problem, it's just kids these days" really flies in the face of reality. My wife and I certainly would no have been able to buy a house today 7 years after getting out of college (student loans to pay off, not family money to help out, early career wages...).

The scale is tilted pretty badly in favor of those who have baked in advantages. I know, because I'm one of those people. We bought a house for 160K in Seattle that quickly doubled, leveraged that into another property that is now worth 4 times we paid for it, and used that leverage to buy other properties that are in positive cash flow and have increased significantly. We used some of that money to invest in RELP's...

There are two ways to look at it: 1) it's been a great opportunity for me, so why restrict others from it? 2) real estate ownership is getting concentrated in fewer and fewer hands, so it's creating huge barriers to entry. Personally, I think the latter sentiment is closer to the truth.

To the original question, I think doing this at the HOA level doesn't really do much except lower the value of places in that particular HOA. As such, I'm not sure it's a great idea. Additionally, I think we need to make a distinction between an individual renting his place out, and real estate investors. If someone buys a house, lives in it and get a job somewhere else, that seems like a different thing than buying a place strictly as an investment.

To be honest, I think a lot of this could be corrected by the tax code. Right now, there are a lot of favorable advantages in the US for real estate investors. One quick way to level the playing field a bit would be to do what they do in some other countries, and this is to put a higher tax on places that are not owner-occupied, and to tax them if they're vacant. Additionally, a tax on foreign investment seems like something that really needs to be done if we actually care about housing affordability. This is a pretty good article on foreign investment: https://knowledge.wharton.upenn.edu/article/foreign-purchases-u-s-homes-impact-prices-supply/

In short, I've certainly profited from the rules, and I'll play by the rules in front of me--but I think we need to look a bit more critically at them. My $.02

 

[Jack Watts]

Why? They're not going to steal the house. Someone was made better off when USD returned to the US.

not a hypothetical--a real world example: My neighbor sold his house for 720K. A Chinese national bought it, cash, to get his money out of China. It sat vacant for about 7 years, then sold about roughly twice that amount. It was sold to a Chinese investor...

Who was actually was made better off here? Well, I guess I was, since my property values continue to shoot up. They were since they were able to hide some money from the Chinese govt (which is getting harder and harder to accomplish these days).

Who loses in this scenario? Anyone trying to buy a house in Seattle--or, the surrounding areas that feel the upward price pressure, since people can't afford it here.

Other countries have taken steps to limit foreign investment, and it seems like a reasonable thing to me.

 

[thastinger]

Most renters don't GAF about the property, yard or general upkeep of the place and most landlords only fix problems when the city writes them a citation for it.

I've got an absentee landlord property behind my house right now, he lives in FL and doesn't fix/paint/repair ANYTHING unless the city gets on him about it. He has 2 dead trees on the property that are beginning to drop deadfall onto my outbuilding...does he GAF, nope.

 

[jeepman3071]

not a hypothetical--a real world example: My neighbor sold his house for 720K. A Chinese national bought it, cash, to get his money out of China. It sat vacant for about 7 years, then sold about roughly twice that amount. It was sold to a Chinese investor...

Who was actually was made better off here? Well, I guess I was, since my property values continue to shoot up. They were since they were able to hide some money from the Chinese govt (which is getting harder and harder to accomplish these days).

Who loses in this scenario? Anyone trying to buy a house in Seattle--or, the surrounding areas that feel the upward price pressure, since people can't afford it here.

Other countries have taken steps to limit foreign investment, and it seems like a reasonable thing to me.

Chinese nationals are also currently one of the top buyers of US farm land.