The idea is to arbitrage other people’s misery. With the ranks of the rental class expected to swell, investors can buy houses at clearance sale prices, pour some money into repairs and then take advantage of the difference between their low cost of capital and the rent they receive. Often, they bank cash from day one.

20 comments on “The idea is to arbitrage other people’s misery. With the ranks of the rental class expected to swell, investors can buy houses at clearance sale prices, pour some money into repairs and then take advantage of the difference between their low cost of capital and the rent they receive. Often, they bank cash from day one.
  1. another says:

    Repairs?

  2. Robert Mockan says:

    The first housing bubble was aggravated by flipping. Prices kept going up because lie loans were easy to get, and loans were easy to get because houses kept appreciating as they were bought and sold at higher prices.

    So now we have rental unit flipping?

    The only way to stop this nonsense is to mandate that once a house has the construction cost paid off by credit issued for that purpose (in a sane monetary credit system), cost of ownership transfer becomes just the paperwork cost of transfer of title. No appreciation. If the property has not been maintained to at least equal condition to the original construction, then the “seller” pays the buyer the cost of fixing it. That provides incentive to maintain the value of properties, but prevents the fundamental fraudulent nature of the existing real estate “markets”. The insane oligarchs I’m sure can devise other methods for “investors” to benefit at the expense of the less able, than by depriving them of savings they would otherwise have if not having to pay for the “appreciation” of housing.

  3. john kennedy says:

    hmmm,
    Posting with reference to UK economy!
    I also think that students are helping fuel this phenomena, I have thought this for about 2 years now.

    Students are offered credit so easily now, and they have to pay rent in city centres, keeping rents (thus prices) high.

    Students are encouraged, because they make unemployment statistics look better than they really are!

  4. Dan says:

    Yes. Renters are being squeezed. Can’t do this in any major metropolitan area though. Take Los Angeles: housing prices increased by >500% here. They retraced about 15% of that. It’s still a cool half-million for a cardboard box in this city.

  5. mthierauf says:

    wtf is hte problem here…. if i take out a loan and buy a property, putting my OWN money at risk, then rent to someone i am taking advantage of that person…. give me a break…. this is how the free market works idiots…. anything else and you have socialism, go ask someone from east germany how that worked out for them…

  6. karate kid says:

    Florida investors are in the process of buying the remaining 322 units in downtown Atlanta’s swank, Art Deco Atlantic Residences, with room service and maids, near Atlantic Station. The prices start at $180,000

    so we can pick this apart
    1 florida homes are cheap but we are to beleive they are running to atlanta for the deals hahhaah
    2 she fell threw the floor but renovated house and now is making money
    hahahah that house is a dump
    now she can get her money back she invested big deal

    For $19,000 in cash, investors can pocket $300 a month, after taxes and homeowner association dues, on each, a 19 percent annual return that compares to the zombie yields from most savings accounts

    yes yes unless dues go up and you have to find good tenants that pay
    they can stay 6 to 18 months if they have kids and not pay

    THE HOUSEING MARKET IS A SHAM
    50 PERCENT DROP FROM HERE
    ounce all the suckers are in then hold on
    that 200,000 grand investment will be worth -200,000 in bankruptcey court

    they should have bought gold and silver but what do i care when the new suckers end up bankrupt or massive inflation they will see the costs double in days.

    breath drink water relax stay calm
    enjoy the collapse thats coming.they will find out soon enough the collapse is in full gear
    and were the new bunch of suckers

    they print a trillion a year !
    THIS HAS NEVER ENDED GOOD IN HISTORY!!!!!!!!!!!!!7 THOUSAND YEARS
    new donald trumps hahhahahahaahhahahaahah

    the don made his money by bankrupteing his hotels and then selling at top of market.
    daaaa

  7. karate kid says:

    how do you bankrupt a 3 thousand dollar house?

    many will find out soon enough this wasnt the bottom but the middle.
    they wont be donald trump but be donald dum dums.
    what a joke we have become
    next the titanic will be refloated and they will be selling tickets
    all sold out
    hahahahha

  8. karate kid says:

    the houseing market is bankrupt
    haveing money in the bank doesnt keep up with inflation
    once you buy all the crap real estate
    do mark to market wipe everyone eles out
    you bankrupted everyone except the 1 percent all in the guise of freedom
    now you suckas are ready to send your kids off to war
    fight for another forgotten cause
    and thier dum kids will buy cars or what ever eles crap they make
    this is so easy
    buy gold and silver
    one day youll be glad you did

  9. mthierauf says:

    hey idiot Robert Mockam… a good or service is worth whatever someone is willing to pay in a free market, that includes a house… where are you going to find the angels to figure out whether a house has been “maintained to at least equal condition to the original construction”… lemme guess the building inspectors will know exactly whether a house has been kept up to date and if it hasnt, he will know exactly how much the seller must pay the buyer (or whatever your nonsensical solution calls for)…. go ask someone who lived in the soviet union how they liked all that central planning…

  10. Robert Mockan says:

    >mthierauf

    How much would you be willing to pay for water and food.
    How about fuel for you vehicle? Heating gas and oil?

    The real costs of these tangibles would be much greater in a free market. They are subsidized by government for that reason.

    In society, housing, or the more general term shelter, presently is open to free market forces. Except of course where there is subsidized housing and rent control.

    How much can you pay for your shelter? That is how much you do pay, in a free market.
    What happens when you do need savings beyond what you were able to acquire, because the cost of shelter appreciated took it paying the interest on your loans?

    Good luck with your free market, that you do not have, and probably never will.
    Not because it could not exist, but because people do not want it when it does not work for them.

  11. SilverMarks says:

    I can verify this is exactly the case in The Foreclosure Capital of the World Las Vegas Nevada.

    Once houses foreclose at fire-sale prices to investors, they come to your door demanding top dollar rents… if you do not sign a year lease they will evict you and move on to the next sucker…

    The Nevada Attorney General has proven to be useless after watching the theft go on for years… now The Nevada Supreme Court has Legalized MERS Contracts…

    Nevada Supreme Court holds MERS assignments valid
    http://www.housingwire.com/article/nevada-supreme-court-holds-mers-assignments-valid

    New York seems to get it…

    New York sues big banks over mortgage database
    ‎http://gcn.com/articles/2012/02/07/new-york-state-sues-banks-mortgage-database.aspx

    if your a renter facing foreclosure remember this…

    Obama Signs New Federal Law Protecting Renters after Foreclosure
    http://tenantstogether.org/article.php?id=723

  12. Daniel S says:

    With any luck these arbitrageurs will get these homes for free during a jubilee.

  13. Brent Lawrence says:

    The consolidation of wealth takes another step. All the people who had any liquidity are furiously buying up properties and the people who had all their wealth in their house before the bubble are losing. Age old moral, them with the money always make more them trying to make it get the boot!

  14. HongrySheep says:

    RISKS:
    Baby boomers selling…
    Higher taxes…
    Higher Insurance…
    Higher Utilities…
    Code enforcement…
    Evictions…
    Vandalism…
    Uhoh……..

    REWARDS:
    $$$ from a booming economy.
    You can fuggetaboutit!!!!

  15. Danny Cunnington says:

    It sounds good but there’s an awful lot of unstated downside. The value of a few houses in an economic collapse is affected by factors outside of the control of the new landlords. Areas can become virtually uninhabitable except to the type of people that that you don’t want.

    Upkeep can cost a fortune and it could get trashed in short order or the tenants could become squatters. The tenants have no real skin in the game. Just like the mortgage defaulters before them, they will play the game until it stops working out for them and then it becomes the landlord’s problem. It boils down to the same question. Is this an asset or is it a liability?

    My model would be to get some land and clear it for an urban farm with a modest dwelling. These will be worth something because they can provide support. Farmland is going up. residential housing is going down. If you took a run down area where many people had left, you could level the wrecks and build a series of farms. This could give long term value. Pretty soon you would have a farmers market and other people setting up more farms nearby.

  16. Hegelian Dialectic says:

    Well, that’s the plan, then isn’t it?
    Some people work to pay for something of value and then someone else forcefully takes it away from them.
    Remember, sports fans, things are the way that they are because that’s the way that they are set up to be in the first place.
    Here’s an idea: Wake the fuck up and take it back. Take it ALL back. And your pound of flesh. Literally.

  17. noone says:

    Question: how are all these foreclosure sales going to affect the pretend and extend asset values the banks selling them for $3000 cling to? Capice? Maybe the stone that broke the TBTF backs?

    Yes, a $3000 home “sounds” like a good deal, on the surface, even if a fixer-upper…but hold on, what did she say about the *location*? “….looks like a third-world country in these neighborhoods”..oh oh. What is the most important mantra of real estate investing, again? Location, Location, Location.

    And, she is going to pour @$20,000 into each of the 149 $3000 units she purchased? (She thinks…we shall see, prices going up for materials…..while incomes stagnant)

    Exactly where will the jobs come from in the rustbelt state of Ohio to populate these homes at a decent rate of rental? Section 8 rentals, maybe? In other words, government handouts…costing the taxpayers again?

    I mean…if there are no jobs, and energy prices going up, pressuring manufacturing and commuting and utility costs higher….I am guessing pouring $3, 427,000 into 149 homes into third-world neighborhoods is a risky bet, to say the least.

    I’ll put it like this: If Warren Buffet is fer it, I’m agin it. I’d be pouring my money into every dip when the take-downs by the paper shorts temporarily drop gold, silver and platinum down…and be happy, and not have to collect any rents, or perform maintenance on homes renters are sure to tear up (why should they give a fig about the condition?) , or property taxes rising (appraised values will go up with repair/renovations, correct?)

    No, the R.E. market is not done falling yet, the Bernanke-promised low interest rates until 2014 and the never-ending QE’s world-wide insured that….unless and until interest rates go up so people park savings into interest-earning accounts again…PM’s are the place to be.

    I’m guessing folks won’t be flocking to DeeeTroit while the city is so broke they cancel police patrols in some of these neighborhoods….or to O-hi-o.

    Now FLA…I can maybe see, because you won’t usually freeze your fanny off if you can’t heat your house. You won’t have to choose between eating or heating.

    Hahaha, everywhere you turn, you’re reading the “Green Shoots” articles again…Election Year, eh? How would Warren look in a Miami Dolphins cheerleader outfit?
    The mind boggles. Shuts down involuntarily.

  18. mthierauf says:

    to Rober Mockam… next time could you please refute my argument instead of spouting more nonsense

  19. Robert Mockan says:

    >mthierauf

    I suggest you try having a conversation with any of the other people who visit this forum and make comments. You may learn something.

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