A Picture is Worth 1,000 Words

mikewof

mikewof
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Words to think about.


I have a feeling that in 2023 there is going to be a sell-off of many of these properties, tenants in place, and in many cases the tenants will be able to use their 3 5% down FHA loans to buy the homes they are already in.

Corporations tend to lose interest in depreciating investments.
 

badlatitude

Super Anarchist
31,180
5,969
I have a feeling that in 2023 there is going to be a sell-off of many of these properties, tenants in place, and in many cases the tenants will be able to use their 3 5% down FHA loans to buy the homes they are already in.

Corporations tend to lose interest in depreciating investments.
One can always hope.
 

MR.CLEAN

Moderator
46,682
4,716
Not here
One can always hope.
private equity + manageco model does not have the same asset valuation criteria as what most see as a 'corporate model'. Their use (some would say abuse) of the provisions of the tax code and other federal law places significant value on things that make little sense to regular business people. A pubco can't afford to carry all sorts of things on its balance sheet, while PEGs have no such constraints, for instance. Similarly, their entity structures may get significant benefits from buying big portfolios of homes solely for the tax features and liabilities the portfolio company owns, rather than anything particular about the homes themselves. Finally, there are a raft of state and local subsidies and tax benefits that may accrue to institutional home buyers/landlords who purchase in the right spot.
 
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Steam Flyer

Sophisticated Yet Humble
45,305
10,140
Eastern NC
I have a feeling that in 2023 there is going to be a sell-off of many of these properties, tenants in place, and in many cases the tenants will be able to use their 3 5% down FHA loans to buy the homes they are already in.

Corporations tend to lose interest in depreciating investments.
One can always hope.

Corporations are not always rational. Then there's the tax angle, which make a profitable investment for a corporation out of a property that an individual could not afford to subsidize... and this is going to take cash away from small towns. Hello, defund the police?!?

The good news is that if corporations are buying up homes to rent them out, that is going to stabilize falling home prices. Unfortunately it can also fuel an unrealistic boom.
 

badlatitude

Super Anarchist
31,180
5,969
Corporations are not always rational. Then there's the tax angle, which make a profitable investment for a corporation out of a property that an individual could not afford to subsidize... and this is going to take cash away from small towns. Hello, defund the police?!?

The good news is that if corporations are buying up homes to rent them out, that is going to stabilize falling home prices. Unfortunately it can also fuel an unrealistic boom.
That would all be well and good if corporations behaved like responsible citizens, but they don't. They buy these houses, throw a coat of paint on them, and evict the current renter so they can raise rents. Naturally raising rent comes back to the corporate owner with increased value which locks out the average buyer. That simply means that this has become a huge windfall for corporate owners, and has created a market where the corporations actively outbid people who want in to housing ownership. Tenants don't have a prayer in this environment. It has to be curbed.
 

SloopJonB

Super Anarchist
70,000
13,207
Great Wet North
She married this and had his kid and you sound surprised.

1664385804430.png
 

mikewof

mikewof
45,868
1,246
Corporations are not always rational. Then there's the tax angle, which make a profitable investment for a corporation out of a property that an individual could not afford to subsidize... and this is going to take cash away from small towns. Hello, defund the police?!?

The good news is that if corporations are buying up homes to rent them out, that is going to stabilize falling home prices. Unfortunately it can also fuel an unrealistic boom.

They were definitely unrational when they ran lemming-like into a lot of overpriced markets. And you are undoubtedly right, at least a portion of them will hold onto those properties as the values fall.

But the rental markets seem to be opening up in at least the two cities that I rent, L.A. and Denver. If they can't command those high rentals with two and three year shopworn places, I think that a good number of them will cut their losses and sell. Private property owners who live in a place can afford to be far less rational than a corporation with impatient shareholders.

The old saw is that fear beats greed.
 

mikewof

mikewof
45,868
1,246
That would all be well and good if corporations behaved like responsible citizens, but they don't. They buy these houses, throw a coat of paint on them, and evict the current renter so they can raise rents. Naturally raising rent comes back to the corporate owner with increased value which locks out the average buyer. That simply means that this has become a huge windfall for corporate owners, and has created a market where the corporations actively outbid people who want in to housing ownership. Tenants don't have a prayer in this environment. It has to be curbed.

I agree. That horse is already out of the barn though. The emerging question in 2023 will be how long they are willing to hold onto depreciating assets in a weak market.

Even what I have seen over the last few months has been night and day for rentals. It is the normal ebb and flow of the market that people like me who rent old family property at below market rate can absorb with a lot less pain than a multimillion dollar corporation.

But i guess we'll see what happens. I am bullish for future small property owners.
 

badlatitude

Super Anarchist
31,180
5,969
I agree. That horse is already out of the barn though. The emerging question in 2023 will be how long they are willing to hold onto depreciating assets in a weak market.

Even what I have seen over the last few months has been night and day for rentals. It is the normal ebb and flow of the market that people like me who rent old family property at below market rate can absorb with a lot less pain than a multimillion dollar corporation.

But i guess we'll see what happens. I am bullish for future small property owners.
I truly hope you're right.
 

Steam Flyer

Sophisticated Yet Humble
45,305
10,140
Eastern NC
I agree. That horse is already out of the barn though. The emerging question in 2023 will be how long they are willing to hold onto depreciating assets in a weak market.

Even what I have seen over the last few months has been night and day for rentals. It is the normal ebb and flow of the market that people like me who rent old family property at below market rate can absorb with a lot less pain than a multimillion dollar corporation.

But i guess we'll see what happens. I am bullish for future small property owners.

Y'know, this could be a good thing overall. Maybe the big corporations looking to use some of their built-up capital in capturing the housing market will buy near the peak, ride the wave down, and then decide it was a bad idea and start selling off their properties cheap to young families.
 




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