[indemnity]

I don’t understand when people believe this - as an owner of an investment property in Auckland, NZ, I almost never can just pass on increases to my tenants, unless I want long stretches of no tenants, even with the shortage as it stands.

The market dictates what I can charge.

And if I have good tenants I’d rather keep them than immediately try to recover costs.

[saltcured]

You might buffer changes in costs and provide some stability to the tenants just as they can provide some to you by extending a lease rather than vacating. But, you do need to adjust and pass on the costs, or fail as an investor. In a significant way, the service in a healthy landlord-tenant transaction is for the landlord to accept the liquidity hit and risk of property ownership and redistribute it along with other costs in the form of rent.

Where people may get confused is in ignoring the land appreciation assumptions built into a speculative investment. They don't always recognize that a capital-rich investor might be perfectly happy to buy a property and sit on it for decades without thinking of it as a revenue source. They can only imagine a more leveraged landlord where the property is purchased with a minimal down payment, the rents have to cover all mortgage, tax, and other operating bills, and the landlord may only have a limited amount of emergency capital.

[pc86]

The second point here is the most important. I know a handful of real estate investors and one that is far away the most successful. He buys everything in cash. He has a contracting team on payroll that fixes whatever needs fixing so he's not immediately outlaying any additional funds to fix up a property, other than the opportunity cost of having those employees busy. He hasn't mortgaged a property in probably half a decade or more.

If he thinks a property will appreciate and make money, he will absolutely buy it and let it just sit on his books for a decade while the RE value increases and he waits for an opportune time to develop or rehab it.