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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (243009)	4/5/2010 3:06:11 PM
From: GraceZ	Respond to of 306849

Some REITs are managed with income as a primary objective and some are managed with cap gains as a primary objective, just as stock mutual funds are. i am talking about the entire country, right now, today. in many, many parts of the country, you can rent for a fraction of the cost of ownership. there is no magical law that says renters always get a bad deal. My primary point in the beginning was that owning has tax incentives beyond that of the mortgage interest deduction, not that all renters get a bad deal- they just don't get the same deal tax wise. The profits enjoyed by landowners may or may not be sufficient to compensate for their considerable risk but those profits are not non-existent. IOWs landlords are not wholesale pulling profits from some other enterprise to support their land-lording habit, they are getting rents in excess of their expenses on a macro level. If this were not true the supply of rental units would shrink until it was profitable. Just as I can't extrapolate my experience to the entire universe of rental property you can't extrapolate the recent experience of investment property owners to the class as a whole. My point was that if it were not profitable to own investment property, on average, people would stop providing rental property until it was profitable. To think that all or even most investment property, recently acquired, is operated at a loss isn't accurate. Ask John Vosilla about the properties he has acquired in the last five years. He will tell you that they have excellent cap rates. To think these opportunities only exist in "arm pits" is also false. Of course, the term arm pit is such a subjective term, one could apply it to almost anything to make a point. As for my area (MidAtlantic) right NOW, I can't rent a better place than the one I own with the returns I could get from the money I have invested in my house because investment returns in financial assets of similar risk are so low, historically low and the taxes I would pay on that income would be taxed at the highest marginal rate, reducing the after tax income. If I didn't own my house outright and had to borrow to buy it at the current price, my answer might be different. This is most certainly not true in some urban and suburban areas of CA, NY, the North East and hasn't been the case for a long time. This is why I repeatedly recommend people rent rather than own in those areas where renting is so much lower than owning. OTOH commercial property in my area can be rented below the cost to buy and that is the reason I've never bought commercial property for my biz and have always rented.