because the value of the property goes up more if it isn’t rented. it’s used as an asset to borrow against.
renting a property is work and risk. not renting it… is no work and no risk.
the issue is you are thinking like a poor person. not a rich person. rich people don’t need more income… they need assets which they can borrow against. often they borrow against one building… to buy another, now they have two buildings they can borrow against… and as long as the value keeps going up they win.
just like stock. rich people don’t sell their stock. they borrow against it. and it’s tax-free that way. poor people sell their stock to make money.
it’s also why rich people want the interest rates to be near zero. because it makes borrowing dirt cheap.
In Austria, where I am from, there’s an average yearly appreciation of property value of 6% (average over the last 25 years, average inflation over the same time was around 3%). Yearly rent is on average 3% of the property value.
So investors have the choice of either taking 6% with no risk and no work or taking 9% but having to service the appartment, having the trouble of satisfying a renter and their legal rights and always having the risk of getting a renter who trashes the apartment and/or doesn’t pay the rent.
And yes, legally a landlord can sue for damages, but if the renter has no money, then all the landlord has is the security deposit, which might be far less than required to cover the damages.
So if you are looking for a super-secure low-risk low-interest investment option, keeping a flat you own empty is a good choice.
A way to counteract this would be a vacancy tax that is as high as the property appreciation. That way, keeping a flat empty nets you 0% ROI, while renting it out nets you 9%. This would disincentivize harmful behaviour (hoarding empty property for investment) while not affecting the behavior we want (renting out property).
IDK about the American tax system but here in Australia this argument gets trotted out a lot but it just doesn’t hold water.
Why wouldn’t an investor want to rent their property and make more money?
because the value of the property goes up more if it isn’t rented. it’s used as an asset to borrow against.
renting a property is work and risk. not renting it… is no work and no risk.
the issue is you are thinking like a poor person. not a rich person. rich people don’t need more income… they need assets which they can borrow against. often they borrow against one building… to buy another, now they have two buildings they can borrow against… and as long as the value keeps going up they win.
just like stock. rich people don’t sell their stock. they borrow against it. and it’s tax-free that way. poor people sell their stock to make money.
it’s also why rich people want the interest rates to be near zero. because it makes borrowing dirt cheap.
Can you cite statistics that show vacant properties increase in value more quickly? Im incredulous.
Renting a property is work and risk, but in exchange you receive rent income.
If you have a portfolio of properties, you’re not about to leave that free money on the table.
The issue here is that youre thinking like an idiot.
The problem is the same in most places.
In Austria, where I am from, there’s an average yearly appreciation of property value of 6% (average over the last 25 years, average inflation over the same time was around 3%). Yearly rent is on average 3% of the property value.
So investors have the choice of either taking 6% with no risk and no work or taking 9% but having to service the appartment, having the trouble of satisfying a renter and their legal rights and always having the risk of getting a renter who trashes the apartment and/or doesn’t pay the rent.
And yes, legally a landlord can sue for damages, but if the renter has no money, then all the landlord has is the security deposit, which might be far less than required to cover the damages.
So if you are looking for a super-secure low-risk low-interest investment option, keeping a flat you own empty is a good choice.
A way to counteract this would be a vacancy tax that is as high as the property appreciation. That way, keeping a flat empty nets you 0% ROI, while renting it out nets you 9%. This would disincentivize harmful behaviour (hoarding empty property for investment) while not affecting the behavior we want (renting out property).
If you have multiple properties the risk of a single tennancies damages exceeding the deposit is manageable.