Landlords are Bears, Rehabbers are Bulls

[James H.]

In another thread, Jake K. Said this. I found it a very interesting thing to say and would like to hear some opinions/ideas about this. Just as an interesting discussion. One thing Jake said, (cant get the @ symbol to call him up) is that landlords expect their properties do go down, by definition. I would guess this is in regards to depreciation for tax purposes (or maybe I just read to quick and misunderstood).

Anyways, kind of a philisophical conversation...

[Dion DePaoli]

I was in that thread and saw his post. An interesting correlation but I am not positive it makes too much sense.

A rehab/flipper can be seen as just as much of a bear. A flipper buys at a discount, improves the property and then resells for a higher amount. In today's market and over the last several years it is a race against time. Time = Value Fade. The flipper knows market is declining and just plans properly just like any other bear investor. In a bear market rental rates would decline. A bear market cash tends to be a better position, so the flipper who gets back to cash faster looks smarter, removing his market risk.

A landlord can be seen as bullish. A landlord uses income from the property to pay to stay in the market and receive appreciation. Additionally, a bear would also understand that interest rates will be rising so loading up early in the curve in order hedge interest expense. In a bullish market rental rates would also tend to rise and could play that upward curve in a more favorable position related to debt service or even return.

So I see what he was trying to do but I think I could make a strong arguement for the exact opposite.