[euroclydon]

"It’s like a doubling up. The homeowner goes to buy the next home, move up or move down. And because mortgages are so cheap, it’s a really good time to keep the first one as a rental unit. And so each year I go to buy a next one and I keep my first one. And so that’s one big phenomenon. And all of a sudden I’m a real estate investor. And at the same time, institutional money’s been cheap. There’s a lot of news about the big private equity funds buying up homes, but it’s actually the individuals who are driving most of it. So in the last decade we’ve taken 8 million homes out of the resale cycle and moved them into the investment rental part of the pool. And that’s, you know, 9% of all the single family homes."

This tells me that home seekers should be making offers to landlords rather than wasting their time making cold offers for people's primary residence. I bet a lot of those small time landlords are nervous about cash flow, and you could find one that's ready to get out.

[StevePerkins]

> "There’s a lot of news about the big private equity funds buying up homes, but it’s actually the individuals who are driving most of it."

I realize there are a lot of "house flipper" shows on reality TV, but I don't buy this. I'm not receiving 20-30 phone calls and texts per week from "individuals" wanting to buy my house. I'm getting those calls from sophisticated commercial operations, who mask their phone numbers to include the same area code and first three digits as my own, etc.

Individuals aren't putting up "We buy houses! Guaranteed offer!" billboards every few hundred feet in my city.

I don't think that banks will even give individuals an endless series of mortgages. You can't declare rental income as "income" to qualify for mortgage loans.

[mcv]

I think there needs to be a strong fiscal disincentive against owning houses for investment. Houses need to be lived in, preferably by the owner. I'm all for a punitive tax on empty houses or houses with ridiculously high rent.

[tut-urut-utut]

One step forward would be to just disallow any tax deductions for renting. Next step, increase taxes on rented or empty housing.

In a few years, the market would settle with much more affordable prices for buying. But we still would have a problem that building new houses would stop to a halt due to low ROI, and renting market would heat again. For that, I'm not sure how to solve this.

[pmorici]

Wether a house is rented or owned by the person occupying it doesn’t effect the basic supply/ demand dynamics of the market. Punitive taxes on landlords isn’t going to cause housing prices to come down because the cause of high prices is a housing shortage. There is no indication supply is being artificially depressed by people letting houses sit unoccupied.

[BizarroLand]

There are more than 40,000 vacant homes in San Francisco, report says:

https://www.sfgate.com/bayarea/article/how-many-vacant-homes...

Took me less than a minute to search this.

[pandaman]

The report [1] the article is referencing is talking about housing units so it's not just homes but apartments (and possibly rooms that can be rented as a unit?). Furthermore, the very same report gives the distribution of the vacant units, of which only 21000 could be possibly considered "hoarded" (this is assuming nobody does repairs and renovations, all rentals go up for rent as soon as the previous tenants move out, there is no corporate housing, no housing is involved in legal proceedings and the buyers move to the new house on the closing day), which makes 5% of total housing in SF. Does not look like a huge hoarding problem to me.

[1] https://sfgov.legistar.com/View.ashx?M=F&ID=10441217&amp...

[shiftpgdn]

They already have this in Texas (homestead exemption) and Texas is one of the hottest markets for single family rentals. They are building entire suburbs that are rental homes only. Millennials as a group don’t want to live in apartments anymore because of the effects of Covid 19 causing people to be locked into their homes.

[StevePerkins]

Same thing in Georgia (punitive taxes on any residential property beyond your primary home), and Atlanta is still one of the hottest housing markets in the nation.

Just pass those costs on to your tenants.

[escapedmoose]

I don't think homestead exemption is big enough to realistically expect a broad shift in behavior.

[maxerickson]

Build lots of housing so that the market isn't demand driven.

[readthenotes1]

Have you seen the price of timber lately?

(I know a family that opened a concrete plant in 2016. They are now multimillionaires whereas before they were scrambling to keep afloat)

[hedora]

The important thing to remember about current timber prices is that our punitive lumber tariffs are the only thing protecting us from the red threat from the North.

Canadians sure are a crafty lot.

[closeparen]

Being able to rent a place to live is good, actually.

[escapedmoose]

But not nearly as good as being able to buy it (assuming the single-family, multi-year home that the author is describing). Communities need both options, but the current climate leans far too heavily toward renting in situations when buying would be better for everyone.

[Daishiman]

It's the opposite; mortgages are extremely cheap versus rent.

[escapedmoose]

You must be referring to monthly payments, which are one of the smaller hurdles in the path to homeownership.

[hansvm]

The usual argument I see for renting being good is that up-front barriers make home buying hard for a lot of people and that transaction costs make it impractical for short tenures. If those were independently solved somehow would renting still have notable advantages?

[closeparen]

* Other investments may outperform home equity, even taking into account imputed rent, especially if homes are sustainably affordable (read: have no return).

* Other investments may be less correlated with your earning potential.

* Risk of being underwater.

* Risk of an expensive, unexpected maintenance or repair item.

* Chores you are no longer paying for, you have to do yourself.

[duped]

Being unable to own a place to live is bad

[bognition]

> “You can't declare rental income as "income" to qualify for mortgage loans.”

You absolutely can, it is income after all.

All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio.

[ryanianian]

> All the banks care about is if the cost of the new mortgage is going to exceed your debt to income ratio.

Not exactly. The underwriting process is very different for full-time residences versus investment/rental properties. Rates are usually higher, debt/income ratio must be lower, and appraisals and cashflow analyses include rental market considerations.

Given this it's entirely reasonable to assume the rift between mortgage products for investment vs residence to widen. If congresspeople want to do something about perceived imbalance between residence and income real-estate, they could change federal subsidies or underwriting requirements for income properties making mortgages for income properties much more expensive and/or harder to get.

(Just realized a peer comment said something similar.)

[Kon-Peki]

That's not what the article is saying. You buy a house as your full-time residence, live in it for a few years, and then buy another as your full-time residence. The previous one is rented out. As long as you wait a few years, the bank holding the loan on the previous house doesn't care. That original, owner-occupied rate is locked in for the life of the loan.

[frankbreetz]

This is definitely wrong in my city. Everytime something reasonable comes up for sales it sells in a couple hours and is back on the market in couple months with some cheap renovations for a ridiculous amount.

They buyer/seller is almost always listed as an individual and not a corporation.

[mooreds]

> You can't declare rental income as "income" to qualify for mortgage loans.

Depends. If you have a signed lease, some lenders will take some portion of that into account when considering lending you money.

[curiousllama]

No, but they consider a mortgage on a rental property with a signed lease separately from a mortgage on a primary/secondary residence.

They’ll def give an endless series of mortgages to an otherwise wealthy person who keeps paying them back by renting out the homes.

[dmitrygr]

> You can't declare rental income as "income" to qualify for mortgage loans.

You absolutely can. I did that. Bank was happy to consider money i make from renting out one of my houses as income when qualifying me for a mortgage for another.

[ryathal]

You can absolutely use rental income as income, the main thing is you generally need 1-2 years of experience running rentals. You can even use theoretical income from renting out a new purchase in some cases.

[jrs235]

>You can't declare rental income as "income" to qualify for mortgage loans.

You can, but [typically] not until you have a solid history (a few years) of that rental income and it will be lender dependent. You also can't typically use future/potential income from a property to qualify for a mortgage for THAT property but you could for a business loan. That business loan will have a much higher interest rate and likely require you to put up other collateral or personal guarantee.

[OJFord]

Wow, where's that?

[StevePerkins]

Atlanta. The Southeast is booming, and Atlanta in particular is turning into a tech hub. There may be less pressure in areas that are seeing net migration outflows, but I don't think the U.S. has enough housing to cover our population increases anywhere.

[powvans]

Can confirm. I live in Atlanta and am about to write letters like the one from the article to the owners of a couple dozen properties in my neighborhood that I’ve identified as suitable for my family. Just as discussed, I’m not planning to sell my current home.

PSA: For anyone thinking of moving to Atlanta, don’t. It’s horrible here, go anywhere else. Save yourself from doom! /s

[ianai]

Most or all of these type of landlords that I’ve spoken to strongly disliked to actively hated being a landlord. It’s very counter the “get wealthy slowly” narrative of being a landlord. Of course the financial aspects are true though they don’t mention them. This is in a location where good renters are a dime a dozen and building new units is pretty much impossible.

[nerdponx]

Being a halfway decent landlord is a miserable pain in the ass unless you live or work very close to your rental property. And even then, it's pretty easy to see several months income go up in smoke with even a modest renovation or repair.

The income is nice, but it's anything but "passive" unless your rents are so high that you can afford to pay a management company, and/or you are comfortable being a slumlord.

[ianai]

Yes and I’ve heard mostly complaints about management companies. All the classic principal/agent problems with the costs of bringing more people into the situation.

Edit-added “more people”

[a2tech]

Well yes, they all complain about being a landlord. However as you say, they never discuss the money side of things--just the hassle. Most landlords in a very bad year will break even, but in an average year will be in the positive. And of course you shouldn't even be looking at rental income in the short term--you should be looking at it as an asset that someone else pays for entirely and maybe slops a little extra cash to you in the short term and THEN when you're older and they've paid for your asset as a revenue generator. I've been looking at buying a rental even though the prices are insane right now simply as a source of reoccurring revenue when my wife and I are older and the loan has been paid off.

[sjamaan]

I've done the same (bought a house, kept the old one for rental) and used an agency as a middle man. They take care of collecting rent, and the day to day business if, say, a plumber needs to be called (I just have to sign off on it). This at a 6% fee of the monthly rent is quite worth it to avoid any hassle. The rent income also fully covers the mortgage of the new house so basically my living costs are for free.

[willcipriano]

I think the trick to "we buy homes" or whatever is they buy way under market. My neighbor sold for something like 150k, they fixed the place up and resold it for a little over 500k. Landlords aren't going to go that low.

[bluGill]

I'm guessing they put in 100k or more go remodel. 290k wouldn't surprise me. They are still making a lot money, but they are also taking that risk. There is far more of it going on than should be, but people who need to move in a hurry might like it. The better such companies that have existed for years without the advertising have good working relationships with contractors and thus get both a better deal and faster service than you could: the contractors know who brings in busines. They also know which contractors are actually good as opposed to scams.

But the business doesn't support nearly the advertising that you see in normal markets. Call A qualified realtor with a dump house and they will call these people if your house is a hard sell. (If you know the fair value of your house you can avoid realtor fees selling direct )

[willcipriano]

I'm sure they put a lot of money in, these are old houses. I think they target less sophisticated sellers who don't have capital. She could've gotten a lot better deal if she put 20k - 30k in herself and fixed the major issues but she wasn't in a place to do that. A landlord with a few properties has more options and won't sell as low.

[bsenftner]

Although the books are old and the author discredited, the "Rich Dad Poor Dad" real estate investment series still have a large number of people trying to follow the author's advice. They and similar "pop culture investors" are the prime landlords in over their heads that would be likely to sell. But be able to negotiate potential nonsense, as they are over their heads and tend not to be rational about their investment.

[IAmGraydon]

What is described here (buying a chain of properties year to year) is unlikely for most people. You can’t use rental income when calculating your debt to income ratio. Unless you have a massive income or an equally massive pile of cash, you are going to quickly run out of lenders willing to lend to you in your entirely over-levered position. Also, you have to stay in a home for a certain number of years for it to be considered a “primary residence” and therefor able to be mortgaged with a low down payment. Otherwise in each transaction you’ll have to come up with 25-30% down.

[endisneigh]

Most of this is false:

1. With a lease and/or two years of prior landlord experience you can use rental income both for existing and projected for new property.

2. For multi unit, if you’re owner occupied you qualify for FHA and therefore can put down as little as 3%

3. You only have to stay in your home for 6 months for refinance and 1 year for initial purchase. The guidelines are loose, and can relocate earlier depending.

That being said, it doesn’t really make sense since most properties in high cost of living areas don’t cash flow well to begin with.

[adwi]

Having purchased a multifamily recently I can confirm all of these are true.

I bought during the plummeting urban Covid rents. When looking for my mortgage a few banks told me their underwriters were temporarily directed to ignore all building income toward qualification.

I worked with a good mortgage broker and he had the option of 20+ banks that were happy to write a conventional loan using a ratio of the building’s income counting toward my qualification. I believe it was 80%.

Re: cash flow, I live in half the building, at current rents the two tenants pay 84% of the mortgage tax and insurance. The tax write offs more than make up for the rest.

[ttt333]

> "You can’t use rental income when calculating your debt to income ratio."

Do you have a source for this claim? Based on personal friends who work in the lending / single family rental home space, I don't think that's correct. [0] [1]

[0]: https://www.valuepenguin.com/mortgages/claiming-rental-incom...

[1]: https://selling-guide.fanniemae.com/Selling-Guide/Originatio...

[StevePerkins]

If that's actually the case, and many of those mortgages are adjustable-rate, then we've learned nothing and another 2007 may be inevitable.

Fortunately, I still believe that the overwhelming majority of new rental units are being scooped up and placed on market by commercial entities, not individuals. You may have many individuals putting their second house up for rent, but I'm skeptical that banks are giving individuals a half-dozen loans in series. With the housing shortage as bad as it is (we're just not building enough to offset our population growth), I suspect that commercial entities would swoop in and buy up most second houses that individuals couldn't maintain anymore.

[adwi]

It is the case, and generally people that are savvy enough to purchase these are savvy enough to lock in a 3% rate when offered.

[prepend]

> This tells me that home seekers should be making offers to landlords rather than wasting their time making cold offers for people's primary residence.

I don’t think so as landlords are locked into a 3% fixed mortgage and have a profitable income stream.

Unless there’s some life event that requires them to sell, landlords are less likely to sell than regular homeowners.

[xwdv]

This will only guarantee you will buy the shittiest houses with poor cashflow or other issues, as those are the only ones landlords will sell off.