When is enough enough? How many homes does one need!?

184 Replies

Perhaps I have an inner socialist I’m not aware of, but I have to ask the community, when is enough enough as it pertains to number of units owned?

How often they ask on the podcasts “where are you going from here?” And the answer is something like “oh, we plan to have 500 doors” or 1500, or whatever. To me that qualifies as greed if I’m speaking honestly. Why on earth would you want so many units!? I can see it if they’re lower income apartments and/or you’re syndicating, bit that’s not what I’m talkig about here.

Another case in point; Invitation homes. 82,000 units they own and rent! Ridiculous. 

The world would be a better place (I’d argue) if so many weren’t trying to commoditize or hoard everything. Honestly, that’s 20,500 families who could otherwise gain substantial financial stability through owning four rental properties each. I hate the concept of “fairness” and all that is embodied by socialism, but at some point this sort of behavior shoud fall under antitrust laws and be illegal. At some point I’d think that there’s a reasonable (high) standard of living and anything beyond that is just sheer excess. It’s as if we as a society don’t want a solid middle class. Why not step aside at some point and let the next guy have a little easier time of it? Seems the right mentality. 

Is it just me???

Well invitation is a publicly traded company with many different owners.  As for the others I don't think most people who own 1,000+ units spend the majority of their income on consumption for themselves the majority is either reinvested or put towards causes that are important to that person in particular.  Some people care about art others science, others humanitarian causes

@Aaron K. I know that invitation is public rather than private, still, all that is in the end of the day is a vehicle for mass wealth redistribution. Very few truly reap the benefits of such an outfit as far as the underlying operations go. Sure the stock may do well but unless they’re an MLP they’re just buying more and more homes and fattening the books. And sure it creates jobs, but there’s that rat race again opposed to “financial freedom”.

First, why is that greed?

Second, you are of course assuming that those..."20,500 families who could otherwise gain substantial financial stability through owning four rental properties each." you speak of, would actually go out and become Real estate Investors.

Third, If someone owned, and was responsible for providing homes to those 20,500 families, more power to them.

First, no I don’t think what you’ve described is greed. 

I’m curious in your paradigm who would be making these  choices about how to limit units? You? The government? 

As Joe said, I think you are making a lot of assumptions. The US has a very clear path to home ownership, yet there are plenty who still rent. The same is true of MF ownership. And for those that do want to own MFs that’s simple too, they just need to go out and buy one (or 1000).

@David Smit I think it's just you. It's not greedy unless they are being greedy. It's not greedy to provide quality housing to renters at a reasonable price. It's no where near anti trust levels. 82k units is a drop in the bucket. There must be at least a hundred million potential units out there for antitrust to apply they would need at least 25% of the total available unites ie 25 million plus and even then it would debateable. I for one hope to have 1000 units min when I quit the game and would be super happy if I could accumulate 50k units and take a company public so many other stock investors could get fair returns off those units. Groups like that a prime examples of capitalism and are what motivates the system as a whole. Further there is so much opportunity out there. It's not fixed sum you and I can easily both have tens of thousands of units and leave plenty of opportunities for people who want 4 to 6 units.
@David Smit I think your assumption is that everyone wants to be a homeowner, or more specifically, an investor. Thats simply not the case. Only a small percentage of people want to be landlords so they have to own nearly all available rental units. I think that as long rental rates are less volatile than housing, and you dont see outside forces influence rates and big spikes in prices, I see no issue in companies owning large amounts of rentals

No no, I understand that there’s only so many who want to be a landlord, the “20,500 families” is just to point out the magnitude of this one outfit in the marketplace. Most of us will read articles on the decline of the middle class and we cringe to read of it, yet this is a good example of somthing that makes matters worse in that regard. Many of us like the concept of “support small business”. But how many people are on these forums mentioning how few deals there are and how they can’t get the numbers to work? If the Blackrocks of the world are buying 82k properties in a matter of five years or so, we all know they’re overpaying for these homes merely because they can and because they drive intense effieciencies in management. That pushes all of us out of the market to an extent, and that hurts the middle class in a real way. Same holds for those with 500 plus units; they buy sight unseen, often tie up a contract just to lay claim to it while they do further research. I know I can do the same, but that doesnt make it a tasteful practice. 

I just feel such numbers and inevitable practices bring little good to society. 

@Joe Villeneuve Why is that greed? I suppose it doesn’t necessarily have to be greed but what else is it if one already has every necessity  in life financially covered 3x over if not many times more? It’s true that some may give most of it away but we all know that’s the exception, not the rule. Is it a high/fix? Seems if you’ve done it hundreds of times already that might just wear off eventually and move on to other interests? No? It’s not like they even see the property... they buy it, rent it, and they see their balance sheer increase a little. If that’s a person’s main satisfaction in life, then yes, I would deem that a form of greed, most certainly. What is greed if not that? I just want one more... just one more. Greed doesn’t have to be manifested in distasteful manner to be greed. 

@David Smit if you feel that being very wealthy automatically makes someone greedy or evil, then it is highly unlikely that you will ever achieve wealth. So, you don't have to worry about how much is enough because you will stop sooner than later. For me, being very wealthy means security from evil and greed. I do not have to be a victim of someone else because wealth give me choices. If at some point I gain so much wealth that I cannot possibly spend it, then there isn't much else to do except give lots of money away. The super rich don't just give money to charity, they start charitable foundations. You will have a hard time finding wealthy people who don't give. You can't give what you don't have, so being poor is not more noble. Socialism only benefits the government, not the people.

@David Smit   You bring up an interesting item for conversation.  However, let me give you two hypothetical companies.

Company A owns 10 houses.  They have acquired them from elderly owners who were duped into selling them for less than market value and fees that were shady and possibly illegal.  

Company B own 1000 houses.  They were completely transparent in all business proceedings from acquisition cost and fees to legal matters.    

Which company poses more of a "threat" to the greater good?  If the companies you referenced acquired said properties legally and fairly, and the sellers were satisfied, I have zero issue with it.  Thats just my two cents.  

Originally posted by @David Smit :

@Joe Villeneuve Why is that greed? I suppose it doesn’t necessarily have to be greed but what else is it if one already has every necessity  in life financially covered 3x over if not many times more? It’s true that some may give most of it away but we all know that’s the exception, not the rule. Is it a high/fix? Seems if you’ve done it hundreds of times already that might just wear off eventually and move on to other interests? No? It’s not like they even see the property... they buy it, rent it, and they see their balance sheer increase a little. If that’s a person’s main satisfaction in life, then yes, I would deem that a form of greed, most certainly.

 ...or, it's what that person does for a living, and just keeps doing it.  The fact that they are good at it, and get enjoyment from the success of doing it well, means more than the money.

...and, that's a pretty big assumption that "we all know that's the exception..."  Who, exactly is this "we" in "we all know"?  That person, and their relative "everyone", as in "everyone knows", are touted as being great experts...but they are not.  What I have found, is when those two are referred to as experts, a little research finds that they are not as smart as they are made out to be.

In this case, I would believe (from experience), that these that are supposed to not give it away, in fact do.  They just don't advertise it.  Have you ever seen the movie Brewster's Millions"?

Wealth happens when knowledge and action meet opportunity.  All three are free, and available to all.  Those that do combine the three deserve everything they get.  They earned it.

@Anthony Dooley I actually agree with most of what you say there. For me it’s not a matter of wealth. I have drive and that might very well make me wealthy some day, but at a certain point there’s family, poor, widows, etc. If I own a public company and the valuation goes nuts, that’s one thing; I’m responsible for those employees and an creating a lot of jobs. To me real estate investing is different. There’s no patents and significant operating differences; anybody with a decent head on their shoulders can do it and a lot more would if it wasn’t hyper competitive the way it is. Not everybody starts a Google or other large business entity however.

I’m looking at this from the perspective of actively working to just get one more house constantly, all the while you’re sitting on 200 of them, paying off your mortgages, realizing appreciation. The wealth is already growing organically and that’s great, but why then expend your time acquiring more and more actively? For every dollar you actively corner somebody else out there will have to find an alternate way of making it, more than likely somebody who could use it a lot more than you can in that instance. Chances are that person ends up in the rat race, the same one so many of us seem so happy to escape through real estate. Here we are sharing ideas and helping each other. Seems a contradiction to me. 

@Michael S. Completely irrelevant. I shouldn’t have to get legalistic in disclaiming everything as “in an apples to apples scenario”. That’s why statistics are so often of little use to society; they get twisted for benefit of argument when that only corrupts the underlying data and purposely so. Ceteris parabus people, please! 

@David Smit I don't see it as a contradiction, I see it as evidence of the truth. The truth is, for every dollar you corner, another dollar is created. There isn't a "fixed pie." I have found that only the strong can help the weak. I want to be strong and not reliant on the kindness of others. I have found that the wealthier people are, the more generous they are. Not just in money, but in advice, time, and genuine care for others. Nobody wants to see others struggle, but with success comes a price. Nothing is free. Hustling to find a deal, due diligence, financing, repair, and management is work. I cannot relate to Invitation Homes, but at some point, I will have more than enough and I will turn my focus on helping others get there. Most are not willing to do the work, so they will be left behind.

@Joe Villeneuve I find you to be a convincing debater. I do hope you and others are absolutely correct regards the philanthropy of those who achieve such success. I’ve never perceived it as such though perhaps I’ve simply seen too many outrageous homes, products, etc. I admit it’s easy to get the impression that’s just how people behave when they have an excess of income. Again, just to clarify, I have no problem with the person putting the wealth to good use, even if that means they have 500 and counting, so long it’s not a game of “look at me! And I can even get more!” 

Honestly, there’s few things I respect more than a person who’s wealthy of whom you’d never know it, so long they’re out doing something to help others.

Nonetheless, I do still find it a curious state of mind when I see those who want to help the investor community and subsequently try and dominate their local markets. What better way to help the next guy by calling enough enough? Personally that would be my mentality but maybe my mentality will indeed prevent me from ever coming to that point in the first place for lack of that level of drive. 

Although I vehemently disagree with the concepts of socialism, I have had this thought before. What happens if a huge company buys up an entire city of houses and owns the market, not allowing any investor to play ball. But then I looked on the MLS in a couple markets - Cincinnati, Columbus, and Cleveland. You can find plenty of multi's for $20-30k/unit that cash flow. That's such a low barrier to entry and MANY people can do this.

The reason why they don't is why you have no cause for concern.  They don't because it's hard.  It's hard to make sacrifices and save up for a couple of years to afford a down payment.  It's hard to find a good property manager.  It's hard dealing with the stresses of buying an investment property.  It's hard dealing with a lender.  It's hard finding qualified contractors or handymen to fix problems with your units.

Real estate investing is hard and those who want to succeed have 100% opportunity to become successful, especially since many markets have a very low entry price point.

@Anthony Dooley agreed with exception of the argument that every dollar cornered is a dollar created, that’s simply not true. For the most part, there’s a finite amount of resources in the economy at any given time, we’re all fighting for those resources. Over the long term wealth is created, yes, but for the most part, if you rent to a tenant today, that’s one less person competing for the rest of the housing supply today which puts negative pressure on rents for other landlords. We’re a very small piece of the creation of wealth in that sense; it’s more of a trickle up effect. 

@Spencer Cornelia all good points. What scares me is the likelihood of our nation being zero-bound in respect to interest rates for the foreseeable future. Why? Because that’s the only thing that caused Blackrock to seek returns in such an unusual market in the first place. Sure they only own about 1% of the rental housing market, but that was done in what, 5-7 years by just one entity? If their formula is successful others will dive in and eventually they will drive returns down to that of other assets. 

The reason I feel interest rates are sure to be zero-bound is because this nation has 20 trillion in debt and counting. The only way this can be managed long term is through a mix of extremely low interest rates (I have no problem using 5/1 arms) and inflation. But that unfortunately means that corporate entities will come into this market in search of yield, and obviously it’s working for Blackrock if they’re buying homes by the thousands yet.

@David Smit The fixed pie has been disproven repeatedly throughout history, which is why it is a concept taught in basic economics. With that said, there are about 150 Million homes in the U.S. Nobody can own them all and about half the population either cannot or does not want to own a house. Renting fulfills a basic need for shelter, which will always exist. If you provide that need to people, they will pay you for it. Very simple. Weather you agree with it or not doesn't change anything.

@David Smit I agree with what most have already said - it isn't greed and more competition in a true free market sense is good. But here is a thought that should give you some comfort - typically when an investor has hundreds of units, they have most likely moved from acquiring single family and 1-4 units to acquiring larger apartments etc. So in effect, their "greed" causes them to stop competing with the "little guy" who is trying to start investing in single family or small multi family.  So that in fact helps the small investors :) 

I don’t think it’s greed... some people just have that drive ... it’s just something that they love to do and it’s hard to stop from doing that.  It’s like shopaholics who shop...  it’s hard for them to stop.  Same with real estate people,  they just love doing real estate and It’s hard for them to stop

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you