Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
7y
Yeah,
They get to live indoors instead of having to sleep in a cardboard box on the sidewalk.
They get the use of a furnace or other heating appliance rather than having to freeze to death, and many times an air conditioner so they don't have to be uncomfortable in the humidity and heat.
They get to cook their meals on a stove vs a campfire.
They get to not have to deal with rising property taxes, or maintenance on the home they live in.
That and a lot more.
All in return for a simple monthly payment smaller than many home owners pay to live in the same neighborhood.
And many of the so-called "Poor" have this paid for them by the rest of the Americans who work and pay withholding taxes taken from their take home paychecks.
Everyone needs a place to live, and in America this is how it's done, there are no 3rd world slums here.
The so-called "Poor" are not exploited by landlords.
19 Reply
Patrick M.
Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes
7y
"Nationally, landlords in poor neighborhoods derive a median profit of $298 monthly, compared with $225 in middle-class neighborhoods and $250 in affluent ones. In Milwaukee, the profit differential is even greater, with landlords in poor neighborhoods raking in $319 per month, more than double the profit ($174 per month) of landlords with properties in non-poor neighborhoods."
Wow- really... That is all. That is nothing for all the crap they have to deal with!
This has nothing to do with exploitation and everything to do with being upset at someone making a profit that they deem too significant.
23 Reply
Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
7y
A Princeton and an MIT grad came up with this crock of ****. They sound like two millennials that decided there was an injustice and they found a way to "prove it".
When Wilmers and Desmond control for regular expenses in the form of mortgage payments, property taxes, property insurance, utilities, and property management fees, they find the actual profits that landlords make to be significantly higher in poor neighborhoods.
I wonder if they accounted for the the higher levels of non-payment of rents, eviction costs, damage to the property, and time spent maintaining these properties?
26 Reply
Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
7y
@Roland S. I stopped reading at MSNBC.
34 Reply
Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y
Profs will write anything to get their name published on a paper. It's part of their job and not usually acknowledged outside of their own little world.
It's funny that poor Americans are being exploited when so mane of them are receiving free handouts from tax payers dollars. Only in America.
9 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Roland S. @Dennis M. What do you think lol? Of course the authors don’t mention all the crap that goes along with owning low income stuff.
I don’t put much weight on authors opinions who have probably never owned a rental in their life lol
3 Reply
Kris L.
San Antonio, TX · Member since 2019 · 930 posts · 836 votes
7y
Clearly the article was written by someone with 0 understanding of how this works.
7 Reply
Marc Winter
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
7y
All yall don't have the first clue what it's like to be poor and exploited by the man.*
*Especially the authors of this well-researched piece of _*T%#^^&*(.
3 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
7y
Class warfare is all talk and no action...it divides rather than solves.
3 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
7y
Matthew Desmond has been looking at this for a long time -- I've read his book. He has an ax to grind. It is true that landlording D'class housing is a LOT more profitable than working in C, B, or A class housing. This is not news. Anybody can calculate ROIs and figure this out.
What would be nice to see explained here is why, if landlording is so very profitable in D'class housing, why there are no D'class turnkeys and big D'class property management operations raking in the bucks. But to get that answer, Desmond and Wilmers would have to get their nice clean academic hands dirty and see why running these rentals is so difficult and unpleasant, takes so much time and effort, and carries with it as much risk as it does.
I'm not saying there aren't plenty of out-and-out slumlords whose business model is very clearly to take advantage of poor people by any means necessary, legal or illegal. Because landlording in the slums gets VERY profitable indeed if you're renting to shady people who understand that you're a player in a local gang and wouldn't dare pull half the crap we have to deal with for fear of illegal reprisals.
But as for me, with my borderline C/D rentals? As soon as I get to 25 or so, I'm getting out. This isn't the life I would choose for myself.
11 Reply
Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
Originally posted by @Patrick M.:

"Nationally, landlords in poor neighborhoods derive a median profit of $298 monthly, compared with $225 in middle-class neighborhoods and $250 in affluent ones. In Milwaukee, the profit differential is even greater, with landlords in poor neighborhoods raking in $319 per month, more than double the profit ($174 per month) of landlords with properties in non-poor neighborhoods."
Wow- really... That is all. That is nothing for all the crap they have to deal with!
This has nothing to do with exploitation and everything to do with being upset at someone making a profit that they deem too significant.
It’s not that simple though considering if I buy a place for 20k outright and you buy a place for 200k that required you to put 50 grand for a down payment .i could still in theory make significantly more in cashflow with much much less skin in the game . Obviously less appreciation and higher maintenance comes into play here but my point is it’s not an apples to apples comparison .
1 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
The author lacks a fundamental understanding and education of finance and investing. Yields are higher on assets in low income areas because the risk of the asset and market is higher. It is not exploitive....but rather the asset is cheap as measured against the rent because the risk is through the roof.
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21 Reply
John Nachtigall
Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
7y
It is hard to take any article serious when they call any Marxist economist “brilliant” given the track record of Marxism. They realize it is smoke, they just have an axe to grind. This researcher in specific just hates capitalism.
In the book Evicted evicted a telling summary of what happened to his primary subject. He thinks so little of the poor he does not think they can have self control.
Just ignore it
After Larraine’s food stamps were reinstated, she purchased lobster tails, shrimp, crab, salad and pie. Individuals like Larraine live with so many compounded limitations that it is difficult to imagine the amount of good behavior or self-control that would allow them to lift themselves out of poverty.
7 Reply
Greg M.
Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
7y
Originally posted by @Russell Brazil:

The author lacks a fundamental understanding and education of finance and investing.
This is because he is a professor of Sociology and his work is politically biased. His sidekick is an assistant professor of Behavioral and Policy Sciences. Neither sound educated enough in actual fields that could analyze risk/return of rentals.
The worst thing is that he won a bunch of awards for this garbage. Politicians will point to this as proof for needing change. Stupid people will believe it.
5 Reply
Lee Bell
Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes
7y
I read that and figured people here would have a different take on things.
I was right, lol.
1 Reply
Jill F.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
7y
The paper was written by the author of the book "Evicted," which I found to be instructive. My takeways from his book were:
- never, ever rent to a tenant that doesn't have 3x rent in income,
- avoid renting to unrelated roommates,
- require utility transfers before move-in, and
- avoid tenants with previous (esp. multiple) evictions as this is a giant red flag indicating that a person/family has intractable problems.
Most of the problems described in the book could have been avoided by the landlords by following the policies listed above. These are policies that I (and most here) routinely implement. I wonder though, how that would play out for the tenants that Desmond followed?
The other thing that drives me nuts in this article is the failure to consider cap expenses for old inner city housing stock when making claims about cash-flow.
@Jim K. I hate to hear you're getting out, it's a space where ethical operators like you are desperately needed. You would think that pundits like Desmond would try to find the good operators and look for ways to encourage them rather than painting everyone with the same brush. :(
4 Reply
Matthew Olszak
Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
7y
This very short-sighted logic is what is driving the rhetoric of rent control laws being implemented/proposed nationwide. Attack the party receiving the funds w/o investigating why they are charging as much as they do.
First, municipalities put into place absurd zoning codes, which limit the availability of units. Then they enforce extreme building codes which in turn limit improvements. So when landlords try to limit their losses by evicting scofflaw tenants swiftly, ordinances/laws get enacted to draw out the eviction process under the guise of protecting the 1 in a million good apple caught in the process, and even more recently to seal eviction records. Then landlords try to limit losses via their criteria - IE no felonies, stable rent history, etc. Then the socialists push to include that criteria as part of "Fair Housing". After that, landlords adjust their rents to account for the added risks, and are beaten down by rent control advocates.
What are we left with? A group of landlords who don't give a damn about the laws and since they'll skirt one law, might as well skirt them all (slum lords), and a group who adjust their asking rents much higher to account for this nonsense, with nothing in the middle. Let these folks reap what they sow - this is the traditional socialist utopia resulting in extremes.
6 Reply
David Moudy
Property Manager · Indianapolis, IN · Member since 2018 · 39 posts · 26 votes
7y
My thought on this is that free and open market dictates price on anything and everything.
No ifs ands or buts.
Price is too high no one will pay.
7 Reply
Wesley WhiteheadPro Member
Rental Property Investor · Depends on where my employer sends me · Member since 2018 · 171 posts · 142 votes
7y
@Patrick M. I agree. This is geopolitical rhetoric from someone who has an agenda to push.
2 Reply
Karen O.
NYC, NY · Member since 2016 · 617 posts · 456 votes
7y
0 Reply
William W.
Rental Property Investor · south Alabama · Member since 2018 · 121 posts · 88 votes
7y
4 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
7y
Directly from the article, the entire study is based on a faulty premise:
"Desmond and Wilmers invoke the definition of exploitation by the brilliant late Marxist sociologist Erik Olin Wright, who updated Marx’s theory of class for modern knowledge economies. Wright defined exploitation as occurring when a dominant and more powerful group enriches itself by excluding a less powerful and more subordinate group from a key productive resource, like technology, machinery, or land."
If anyone is being excluded, it is voluntary exclusion. I'm not aware of any laws or other legal impediments that prevents virtually anyone living in one of these rental properties to buy a property and become a landlord themselves. I wouldn't argue that there may be some de facto discrimination in some areas (i.e. difficulty getting a bank loan or financed within certain areas, aka "redlining"), but there are too many examples of people that knew that RAF @Alexander Felice's claim of "Broke is a choice" is true - many of them right here on this board - for this hypothesis to be true. @Anthony Gayden comes right to mind.
Some of the other claims are probably correct - more profit in the poor areas than wealthier areas - but the foundation for those results are shaky. As already noted, I doubt the higher costs of operation were taken into account by the author's 'study'.
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3 Reply
Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
The guy who wrote the article, Richard Florida, is a fairly respectable author/reasearcher/academic. I've enjoyed one of his demography books about the evolution of cities in the 21st Century. It should guide all of us where to invest.
But the answer to this article is they got it wrong. There is no exploitation if the market exists. Yes, landlords on the surface make more in lower income neighborhoods, because the cap rates are higher. This is called risk reward pricing. I'd love to swamp all of my properties for real estate in Beverly Hills, but so would everybody else. But it is priced much higher.
If they talked to real landlords in some of these areas, they would realize that it takes more resources and time to manage these properties. And the everyday "wear and tear" forces landlords to sink more capital on a continual basis into their properties.
I'll go further. Without the section 8 program, landlording in some lower income areas would collapse. The bottom sector of society do not have stable jobs and lives, where rent will be paid on a consistent basis. Go into eviction court, and you'll see the far majority of evictions come from the lower income neighborhoods.
The article suggests that "slums" were created for profit. Yet when a neighborhood declines, the real estate holder incurs big losses. Slum investing actually doesn't work. Because you get bad tenants who don't pay and don't take care of properties. Slum investing means you defer maintenance that costs you more in the end.
Low income housing providers is the proper word for those who professionally operate in this space. They are professional, they maintain their properties and they provide a fair product.  Even if a neighborhood looks a bit slummy, individual properties are judged on their own merit.
Poor academic research that hopefully will not influence policy much.
I do support municipalities cracking down on landlords who poorly maintain their buildings. Winding up in building court in Chicago is incentive enough to do things right.
10 Reply
Account Closed
Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
7y
No comment
3 Reply
Anthony Wick
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
7y
Well, let's see. I own in B class neighborhoods. Duplexes. And get about 1% rents to purchase price (tenants pay all utilities). I have looked in lower income neighborhoods where the return was much higher. But, as so many of us already know, so is the work! I decided less profit and less headache was for me. If you own in a D class neighborhood, you earn whatever profit you are churning.
2 Reply

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