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Landlords facing stiff competition from WallStreet


By Mark D   Follow   Thu, 15 Nov 2012, 10:32am PST   2,248 views   19 comments
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Get out before it is too late.

http://www.bloomberg.com/news/2012-11-14/blackstone-sees-two-year-window-to-buy-houses-mortgages.html

"Investors buying foreclosed U.S. homes might have less than two years to accumulate properties as competition and rising prices shrink the pool of cheap assets, according to Blackstone Group LP (BX), the largest buyer.

Blackstone, the world’s largest private-equity firm, has spent about $1.5 billion on 10,000 foreclosed properties in the U.S. this year, making it the biggest buyer of single-family homes in the country, Gray said. Blackstone has been buying $100 million of houses a week, Stephen Schwarzman, chairman of the New York-based firm, said during an Oct. 18 earnings call.

Thomas Barrack’s Colony Capital LLC, a private-equity firm, has bought about 5,500 homes since April, spending more than $500 million, and expects to reach $1.5 billion invested by the end of next year. Closely held Waypoint Homes has said it has bought about 2,500 homes and expects to have 10,000 homes by the end of next year.

Blackstone, Colony and other investors buying homes in bulk to rent have said they could create real estate investment trusts out of the properties to take public, paying dividends from the rental income on the homes, similar to the wave of apartment REITs such as Equity Residential (EQR) that went public in the early 1990s."

Comments 1-19 of 19     Last »

Bellingham Bill   Thu, 15 Nov 2012, 10:36am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 1

just shoot me!

bmwman91   Thu, 15 Nov 2012, 10:40am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 2

Fuuuuuuuuuuuuckkkkkk.

Everyone keeps snarkily saying that, "this won't end well for them." I think that "them" actually means all of us average people. The government is bought and paid for by the entities that will soon be our housing overlords. If you thought that HOAs were Satan's spawn, just wait for this shit to get into high gear.

EastCoastBubbleBoy   Thu, 15 Nov 2012, 10:53am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

Sounds to me as if this is a classic case of heads I win, tails you loose.

Bellingham Bill   Thu, 15 Nov 2012, 11:49am PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 4

robertoaribas says

What do you gentleman have against capitalism?

That's just it, ya know.

Buying up existing wealth is not capitalism, it's a form of rentierism.

"Ground rents are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Ground rents are, therefore, perhaps a species of revenue which can best bear to have a peculiar tax imposed upon them." -- Adam Smith, father of Capitalism

Capitalism isn't just acquiring money, by that definition bank robbers are capitalists.

The wikipedia definition of capitalism is a good starting point here:

Capitalism is an economic system that is based on private ownership of the means of production and the creation of goods or services for profit.

I will admit that the construction of MFH can arguably be a form of capitalism. But the problem with all real estate income is that the bulk of its flows is not coming from the creation of goods or services, but the mere ownership of them.

Here we have the pathological -- end state rent-seeking really -- case of the already massively rich actively enslaving families by buying up existing houses -- the foundational element of the American Dream -- and then renting them out.

There is no new wealth creation going on here. Pure rent capture, and the bullshit of what our housing sector has devolved into is a MAJOR reason why things are so fucked now, why the 5% have all the money and the 95% are broke.

Before discovering Georgism I had no firm philosophical foundation to understand what was so wrong about our land economics, and natural resource economics for that matter.

Now I do.

Bellingham Bill   Thu, 15 Nov 2012, 11:57am PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 5

bmwman91 says

Everyone keeps snarkily saying that, "this won't end well for them."

could go one of two ways. We get a return of the 1930s as we adopt austerity, higher taxes, whatever.

or we continue to abuse monetary policy to fluff up velocity with printing and whatever it takes to keep existing asset values from crashing and consumers consuming.

90% chance of the latter vs the former, unfortunately.

Bellingham Bill   Thu, 15 Nov 2012, 12:04pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 6

robertoaribas says

it is always funny when someone with that limited a grasp of economic theory tries to act like they know what they are talking about!

dude I've spent more than a decade studying this so kindly fuck you.

http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html

HOW you make your money money is the question here, not the ownership structure.

Corporations CREATING new goods and services are capitalist in nature, even if they make insanely high profits.

Microsoft and Apple are good examples of these kinds of entities.

Weyerhaeuser, Standard Oil, and other resource companies are profiting from selling our own damn natural wealth back to us. This is a corrupted form of capitalism and what I'm on about.

robertoaribas says

Somebody better tell avis cars they are going to hell too, since they don't produce any goods or services, just make a rent off of them, after they "buy the wealth of cars..."

cars are manufactured wealth and mobile. Supply is no problem, we're up to our eyes in supply. Housing is the exact opposite of all that -- land cannot be manufactured and everyone would like more land to live on than they have tenancy of now.

If landlords profited 100% from the value of the housing good proper (ie the fixed improvement), you would not be hearing a fucking peep from me.

but that is not how housing works. Houses are valuable because they provide living within a community, they capture the site value -- ground rent -- of the community.

The site value of a home is dependent on everything OUTSIDE the lot lines, so landlords are reaping what they did not sow.

Now, arguably, the act of construction of MFH is a valuable economy endeavor and I don't want to get into that here since it's not really germaine to the current topic of billionaires buying up SFHs to rent out.

bmwman91   Thu, 15 Nov 2012, 12:06pm PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 7

Roberto, I think that Bill's post was more of a rant against financial mega-entities acquiring giant swaths of housing and renting them out. There is a very real danger of those same entities lobbying for the repeal of all renter protection laws and them subsequently becoming slumlords that actively destroy the American standard of living. I don't see landlording as anti-capitalistic. It's all a game, and if you play it well you make-out well. It becomes an issue when a player is able to re-write the game's rules and decimate all other participants for their own gain.

Bellingham Bill   Thu, 15 Nov 2012, 12:13pm PST   Share   Quote   Permalink   Like (3)   Dislike     Comment 8

It's all the same thing whether it's done in ones or twos by tens of thousands of people or in the thousands by one or two parasitical entities.

The end result is tens of thousands of people -- the renters -- being financially enslaved by the rent-seekers.

The core problem here, as Churchill pointed out, is that land is the mother of all monopolies.

Each house enjoys a relative location monopoly. It is the only living place that can exist at that place in the community.

Car rental places are nothing like this. Cars are fungible, their supply is mobile, and the barrier of entry for competitors is minimal.

Iwog here will be the first to cackle about how he assembled a set of properties on one street, literally establishing a rental monopoly right out of the fucking boardgame.

All I can say is that I hope this bullshit will be educational and wake the american people up the economic cancer they've allowed to grow for the past 100-odd years.

Bellingham Bill   Thu, 15 Nov 2012, 12:22pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 9

my economics actually defend capitalism, while yours are just self-serving justifications for appropriating wealth.

legalized robbery really

The only reformer abroad in the world in my time who interested me in the least was Henry George, because his project did not contemplate prescription, but, on the contrary, would reduce it to almost zero. He was the only one of the lot who believed in freedom, or (as far as I could see) had any approximation to an intelligent idea of what freedom is, and of the economic prerequisites to attaining it....One is immensely tickled to see how things are coming out nowadays with reference to his doctrine, for George was in fact the best friend the capitalist ever had. He built up the most complete and most impregnable defense of the rights of capital that was ever constructed, and if the capitalists of his day had had sense enough to dig in behind it, their successors would not now be squirming under the merciless exactions which collectivism is laying on them, and which George would have no scruples whatever about describing as sheer highwaymanry.

--Albert J. Nock "Thoughts on Utopia"

http://geolib.com/essays/sullivan.dan/royallib.html

I do not propose you should not landlord, I only propose you reap what you sow.

bmwman91   Thu, 15 Nov 2012, 12:36pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 10

robertoaribas says

Renter protection laws are actually very against tenants long term

Yeah, I was talking more about code enforcement, maintenance obligations, eviction requirements and landlord-entry restrictions. Rent control is a different beast entirely, and I would agree that it generally has more unintended detriments than intended benefits. If it was actually supposed to help folks on fixed incomes, it would be written very differently.

And Berkeley...oh lord. The place is no less nutty now. It's a veritable bastion of blind progressivism and all the ironies (some hilarious, some just plain sad) that come with that. Oh well, I can always count on good beer, pizza and live music at Jupiter when I am up there occasionally. I especially enjoyed the UCB Republicans Club's Racial Bake Sale. My GOD, the outcome and characters that showed up could not have been more predictable!

matthew79   Thu, 15 Nov 2012, 8:29pm PST   Share   Quote   Permalink   Like   Dislike     Comment 11

Bellingham Bill says

kindly fuck you

Patrick should make this a bumper sticker too.

bg   Thu, 15 Nov 2012, 9:39pm PST   Share   Quote   Permalink   Like   Dislike     Comment 12

Bellingham Bill says

Corporations CREATING new goods and services are capitalist in nature, even if they make insanely high profits.

Bellingham Bill says

Weyerhaeuser, Standard Oil, and other resource companies are profiting from selling our own damn natural wealth back to us. This is a corrupted form of capitalism and what I'm on about.

I worry that corporations that are built on selling things to us that we don't need while destroying the natural resources on this planet are as problematic as the resource vendors.

I wonder how history will judge us 200, 300, 500 year from now.

errc   Thu, 15 Nov 2012, 10:01pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 13

Imagine the quality of the housing stock after a decade of this corp ownership hocking them as rentals. Coupled with the quality of the building materials and the "craftmanship"/labor used this past decade

I imagine it will be similar to buying a 3 yo Hyundai from Enterprise after they've run it thru the rental wringers

Bellingham Bill   Thu, 15 Nov 2012, 11:43pm PST   Share   Quote   Permalink   Like   Dislike     Comment 14

SFace says

it is not happening here in your lifetime.

"Second is Prop 13’s failure to distinguish between residential and commercial properties. At the moment all property values (and hence tax bills) are reassessed only when ownership is transferred. Many favour a “split roll”: annual reassessment of commercial property value, which in a rising market would mean higher revenues."

http://www.economist.com/news/united-states/21566672-passage-tax-measure-and-political-realignment-have-left-californias

Getting there. I consider this is a lifetime battle, and not one I expect to see over, no.

The forces of predatory wealth do in fact hold all the high cards here, and have immense economic leverage to fuck people over to protect their rent taps.

But if I can swing 2 people over to the Georgist side, my work is done, LOL

upisdown   Fri, 16 Nov 2012, 12:03am PST   Share   Quote   Permalink   Like   Dislike     Comment 15

Bellingham Bill says

If landlords profited 100% from the value of the housing good proper (ie the fixed improvement), you would not be hearing a fucking peep from me.
but that is not how housing works. Houses are valuable because they provide living within a community, they capture the site value -- ground rent -- of the community.
The site value of a home is dependent on everything OUTSIDE the lot lines, so landlords are reaping what they did not sow

Large entities can afford to actually improve the structure and usually do because of spreading the costs out per unit, but lose in the property management cost. That versus an ownwer with limited resources to fix and/or repair a property. Plus, there are more man-hours in the upgrades too, and that money is usually paid and spent locally.

The renter does pay a higher rate by renting as opposed to actually owning the property for the use of those community resources, and when they no longer need to pay for those needed community resources, they can move to a lower cost area.

KILLERJANE   Fri, 16 Nov 2012, 1:49am PST   Share   Quote   Permalink   Like   Dislike     Comment 16

The three little pigs and the big bad wolf. Only one of three got to keep their house.

epitaph   Fri, 16 Nov 2012, 3:40am PST   Share   Quote   Permalink   Like   Dislike     Comment 17

Did Churchill write that before property taxes were invented? I'm guessing he did.

Bellingham Bill   Fri, 16 Nov 2012, 4:08am PST   Share   Quote   Permalink   Like   Dislike     Comment 18

Churchill back in his progressive days in the Liberal Dem party was talking about land value taxes, not the "property tax" as is understood today.

http://en.wikipedia.org/wiki/Land_value_tax

for the record, I HATE "property taxes" where we tax the improvements, especially new improvements. TOTALLY bass-akwards, taxing people who literally improve their properties.

I'd also exempt actual producer-owned productive property -- factories, warehouses, etc -- from the LVT, too. There's still plenty of tax base to go after, especially if we were to levy a progressive luxury tax on very high-value residential real estate. The first two miles from the coast in California is worth billions & billions -- at $2M/acre 500 miles of it values out at a cool trillion.

Bellingham Bill   Fri, 16 Nov 2012, 4:21am PST   Share   Quote   Permalink   Like   Dislike     Comment 19

Oh man, I didn't know Stephen Moore was a crypto-Georgist:

"One of the greatest economists and social philosophers of the past two centuries was Henry George. The world would be a vastly better place if those in Congress and the media called a "time out" from the verbal grenade lobbing against the tax bill and became familiar with George's writings. Here is one of my favorite passages from George, dating back to 1879:

Taxes operate upon energy, and industry, and skill, and thrift, like a fine upon those qualities. If I have worked harder and built myself a good house while you have been contented to live in a hovel, the tax gatherer now comes annually to make me pay a penalty for my energy and industry, by taxing me more than you. If I have saved while you wasted, I am mulct, while you are exempt. If a man builds a ship we make him pay for his temerity, as though he has done injury to the state; if a railroad be opened, down comes the tax collector upon it, as though it were a public nuisance; if a factory be erected we levy upon it an annual sum which would go far toward making a handsome profit. We say we want capital, but if anyone accumulates it, we charge him for it as though we were giving him a privilege. We punish with a tax the man who covers barren fields with ripening grain, we fine him who builds machinery, and him who drains a swamp.

"I think you will agree that such wisdom, though over 100 years old, strikes at the heart of what is wrong with the debate in Congress of recent weeks."

http://www.cato.org/publications/commentary/how-fight-greedenvy-lobby

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