San Francisco rent raised 400% (houses, buyer, high school)

[Perma Bear]

Originally Posted by neutrino78x

I doubt it. The free market doesn't work that way. Other people, who are fine with less profit, would sell for a much lower price, and the people who are selling for "too much" would lose business.

This 400% rent increase is a case in point. The guy will move out and rent a cheap room somewhere else in SF. The guy who wants 8k for one room in an apartment won't find a renter and will have to lower the rent.

You're joking right? You're saying asking 4000 dollars for a studio for instance isn't going to net you a profit when you're paying say 100 dollars in property taxes? You could redo the kitchen every year and still make a profit.

[Ultrarunner]

Always welcome to give it a try... no college or specialty license/certification required.

It does amaze me those never having managed/owned residential rentals and more so in a city such as SF profess to know every minute detail of the business yet wouldn't waste their own time giving it a go.

[Perma Bear]

Originally Posted by Ultrarunner

Always welcome to give it a try... no college or specialty license/certification required.

It does amaze me those never having managed/owned residential rentals and more so in a city such as SF profess to know every minute detail of the business yet wouldn't waste their own time giving it a go.

It's simple math Watson. There are houses in SF that pay 1200 a year in taxes because of prop 13. I'm relegated to stocks because I can't qualify for a mortgage because I wasn't born in 1946 which is also easy money but still.

[jm1982]

Originally Posted by Perma Bear

It's simple math Watson. There are houses in SF that pay 1200 a year in taxes because of prop 13. I'm relegated to stocks because I can't qualify for a mortgage because I wasn't born in 1946 which is also easy money but still.

Can't quality for a mortgage because you weren't born in 1946?...

In retrospect it looks like it was a no brainer to buy property in SF back then, but I'm sure there were a lot of people saying it was risky back then too. Also property taxes are just one expense of owning a rental property.
There are utilities, maintenance, insurance, trash fees and don't forget the lawyers fees to deal with evictions or frivolous tenant lawsuits!

You will be waiting a long time and probably forever for real estate prices in the desirable parts of CA to come down to 'affordable' levels.

[Perma Bear]

Originally Posted by jm1982

Can't quality for a mortgage because you weren't born in 1946?...

In retrospect it looks like it was a no brainer to buy property in SF back then, but I'm sure there were a lot of people saying it was risky back then too. Also property taxes are just one expense of owning a rental property.
There are utilities, maintenance, insurance, trash fees and don't forget the lawyers fees to deal with evictions or frivolous tenant lawsuits!

You will be waiting a long time and probably forever for real estate prices in the desirable parts of CA to come down to 'affordable' levels.

Tenants almost always pay for utilities, sometimes even trash and people
Are so
Desperate they won't dare threaten a lawsuit in order to live their
Hipster dreams.

I don't expect it to. My best bet is stocks

[jm1982]

Originally Posted by Perma Bear

You're joking right? You're saying asking 4000 dollars for a studio for instance isn't going to net you a profit when you're paying say 100 dollars in property taxes? You could redo the kitchen every year and still make a profit.

Can you show something that shows that there's a large number of people in SF paying $100 month in property taxes?

Cap rates need to be based on what the return is at current market value.
That equity/money could be put to another use.

Even if someone bought a property in the 50s or paid nothing the cap rate is still based on the rate of return based on current market value.

Let's say a property is worth 10,000,000 and the landlord is making a profit of 100k a year. You might say wow $100,000 that's great income . But that's only a 1 percent return!

It doesn't make too much sense to operate at 1% return since you could make more than that in a zero risk CD (certificate of deposit) at a bank or credit union..without the tenants headaches etc.

[Perma Bear]

Originally Posted by jm1982

Can you show something that shows that there's a large number of people in SF paying $100 month in property taxes?

Cap rates need to be based on what the return is at current market value.
That equity/money could be put to another use.

Even if someone bought a property in the 50s or paid nothing the cap rate is still based on the rate of return based on current market value.

Let's say a property is worth 10,000,000 and the landlord is making a profit of 100k a year. You might say wow $100,000 that's great income . But that's only a 1 percent return!

It doesn't make too much sense to operate at 1% return since you could make more than that in a zero risk CD (certificate of deposit) at a bank or credit union..without the tenants headaches etc.

You'd get way more than that. You'd probably yield 500,000 a year since 10M gets you a large multi family apartment complex.

[jm1982]

Originally Posted by Perma Bear

Tenants almost always pay for utilities, sometimes even trash and people
Are so
Desperate they won't dare threaten a lawsuit in order to live their
Hipster dreams.

I don't expect it to. My best bet is stocks

Less advantages with stocks leverage is a big one. None of those "Stock versus real estate ' articles ever take leverage into account. They usually assume that people are buying real estate for cash , which happens but it's not the norm. There is FHA 3.5% down ,20% down, etc.

Another thing is it's possible to buy a property under market value people do it all the time.
With stocks you have to pay what the market price is.
This is a big difference, because real estate investors can 'force' equity , making their returns even greater especially combined with leverage.

[rose88]

so the landlord suddenly decided to increase the rent? why it was only 1800? and why increase it immediately to 8000?

[Perma Bear]

Originally Posted by jm1982

Less advantages with stocks leverage is a big one. None of those "Stock versus real estate ' articles ever take leverage into account. They usually assume that people are buying real estate for cash , which happens but it's not the norm. There is FHA 3.5% down ,20% down, etc.

Another thing is it's possible to buy a property under market value people do it all the time.
With stocks you have to pay what the market price is.
This is a big difference, because real estate investors can 'force' equity , making their returns even greater especially combined with leverage.

Equity also means your gains can easily be wiped out as well during down turns plus homes can be purchased over market price and you pay a ton of transaction fees