[robertlagrant]

The problem with this simplification is that it ignores risk. Being an employee means you get paid, and can change job it the business fails. Bring an owner/investor means you might lose all your money if the business fails. That is massive risk, and entirely ignored by the above characterisation.

[pierat]

Oh please. And you're up-playing risk.

Let's talk local.

We have lots of cheap shit 3 story stick built apartments. ( https://www.bloomberg.com/news/features/2019-02-13/why-ameri... ) The ones opened are charging half of Boston for rents. And I'm not even in a megacity or state capitol.

The same apartments are getting 10 year tax abatements, because they are "good for business" aka trickle-down.

During the pandemic, pandemic "loans" were given to hundreds of businesses in the local area. And those loans were turned into grants (not have to pay back).

And landlords are usually smaller, but again, they're another reason why housing is stupid priced: it's common to see a rental of a home priced at mortgage+30% . The landlord gets their principal covered, keeps the property, and raises costs for everyone.

None of these apply to me or my family, sans the whole big $1200 relief check. I have no tax abatements, and pay taxes in full every paycheck and when I buy stuff. And local governments usually allow whatever by companies unless there's a big fuss. And, those corporate promises about hiring people or bringing in business? Yeah, not actually enforced.

And I didn't even discuss "too big to fail", fed govt propping up industries, and the like.

[AnthonyMouse]

> The same apartments are getting 10 year tax abatements, because they are "good for business" aka trickle-down.

This promotes new construction. Not as well as zoning reform, but it does. Which lowers the rent (or at least makes it go up less fast).

> And landlords are usually smaller, but again, they're another reason why housing is stupid priced: it's common to see a rental of a home priced at mortgage+30% .

Well of course they are. The landlord is taking on the maintenance of the property, insurance, the risk of a housing crash (look at housing prices FFS), the risk of a vacancy or destructive or non-paying tenant, legal expenses associated with operating a business etc. And on top of that, they have to pay the mortgage.

They do turn a profit, because of course they do, why else would they do it? And with that they slowly buy the property from the bank, at which point the interest on the value of the property goes to the landlord instead of the bank, the same as it would if they sold the property and invested the money in something else.

The problem with landlords is not that they turn a profit -- they always will or they'd sell the property instead.

It's that they lobby for zoning restrictions that limit the housing supply to increase rents. But homeowners do the same thing, to the detriment of both renters and prospective homeowners.

[herczegzsolt]

Mortgage is not a cost accounting wise. Interest is a cost, but capital repayment is already "profit" which the landlord will keep at the end of the loan.

Let's say rent is mortgage + 30%. If we assume all the risks and costs (maintenance, insurance, etc) are eating up all of that 30%, they still make a whopping 200%+ profit in the long run.

In a fair business relation with 20-30% profit, the landlord would actually loose cash each month until the mortgage is over, with the expectation to realize profit when the property is sold. This rarely happens.

[AnthonyMouse]

> Mortgage is not a cost accounting wise. Interest is a cost, but capital repayment is already "profit" which the landlord will keep at the end of the loan.

Only a small sliver of the first mortgage payment is principal. Most of it is interest and the escrow for the property tax and insurance. By the last mortgage payment most of the interest has been replaced with principal, because by then the landlord is the one who owns the property instead of the bank, so now they get what used to be the interest. The property tax and insurance payments never go away, they just stop going through the bank.

The question you have to ask if you think they're overcharging is, why don't more people do it? If it got higher returns than other investments, why wouldn't people sell their stocks and buy real estate? The answer is that they do, until it doesn't anymore. And then it doesn't anymore, because the price of real estate goes up until investing in real estate no longer has above-market risk-adjusted returns.

We have pretty good numbers on this: Here's a common real estate ETF, it's basically "be a landlord, but as a stock", 10-year average return 5.49%:

https://investor.vanguard.com/investment-products/etfs/profi...

S&P 500 ETF, 10-year average return 11.86%:

https://investor.vanguard.com/investment-products/etfs/profi...

If the landlords are making so much money, how come they're not making so much money?