Hesitancy to Invest - is it Morally Right?

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Hesitancy to Invest - is it Morally Right?

Nick Kenrick
Investor · San Jose, CA · Member since 2019 · 15 posts · 38 votes

Hi all,

I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

Thanks in advance.

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Jeremy Horton
Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
3y

Absolutely it's morally right to provide decent affordable housing - I provide good housing and restore old run down properties

It's not my problem if someone can't afford a house - it's not a "right" as many would have you to believe. Some people have bad luck and have just been dealt a bad hand. Many more take advantage of social assistance and continue on a path of horrible decision making. 

If anything blame the government for meddling in private market affairs.

Is it right I pay 24-32% in taxes while many people pay none? Is it right I pay for other people's housing, kids they can't afford, food stamps, college degrees?

I have 0 moral hesitancy when it comes to my properties - I'd own the entire city if I could. 

I actually had this come up recently - had to evict a lady. The court shuts down over Christmas, so it took an additional 3 weeks to get her out. She can't afford her rent, yet she can afford alcohol and cigarettes. I'd have evicted her Christmas eve, if I could have. 

The ONLY people I genuinely feel for are the kids of these people. Simply because they are innocent and cannot help themselves like a full grown adult

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


    U could always sell .  set a price far lower than they are worth and sell them to first time home buyers..  Keep in mind that if investors were not buying the sub 150k homes in most mid west markets those values would plummet B/C most folks in those cities that have enough credit to actually buy a home would not live in those homes or those neighborhoods.. Generally speaking.
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  • Jeremy Horton
    Rental Property Investor · Somewhere over the Rainbow · Member since 2021 · 1k+ posts · 1k+ votes
    3y

    Absolutely it's morally right to provide decent affordable housing - I provide good housing and restore old run down properties

    It's not my problem if someone can't afford a house - it's not a "right" as many would have you to believe. Some people have bad luck and have just been dealt a bad hand. Many more take advantage of social assistance and continue on a path of horrible decision making. 

    If anything blame the government for meddling in private market affairs.

    Is it right I pay 24-32% in taxes while many people pay none? Is it right I pay for other people's housing, kids they can't afford, food stamps, college degrees?

    I have 0 moral hesitancy when it comes to my properties - I'd own the entire city if I could. 

    I actually had this come up recently - had to evict a lady. The court shuts down over Christmas, so it took an additional 3 weeks to get her out. She can't afford her rent, yet she can afford alcohol and cigarettes. I'd have evicted her Christmas eve, if I could have. 

    The ONLY people I genuinely feel for are the kids of these people. Simply because they are innocent and cannot help themselves like a full grown adult

    41Reply
  • Ke Nan Wang
    Developer · St. Augustine, FL · Member since 2018 · 311 posts · 384 votes
    3y

    Here is another idea, how about buy land and build new houses? And sell them to first time home buyers. If inventory is low, we create our own inventory here. Cheers. 

    12Reply
  • Jacob St. MartinPro Member
    Investor · Charlottesville Virginia · Member since 2021 · 348 posts · 346 votes
    3y

    Hello Nick, I totally understand your concerns but there are a few things to consider. First, Someone is going to own the houses and people need to rent. Because you are asking this question it sounds like you are more conscious and thus probably are a better landlord than most. Would you rather you have the opportunity to give someone an excellent tenant experience or someone who doesn't care and just wants the money. 

    Second, if you feel burdened to support fair housing there are ways to do so. You could invest in developing opportunity zones or multifamily affordable housing. These types of properties typically give you big tax benefits. 

    You could also consider getting involved in your cities zoning board. Zoning policies are one of the main reasons housing is as difficult to find as it is. You could also consider volunteering at a homeless shelter to give back to the community

    13Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


     ask this question to people from Bangladesh and they will smile lol, 
    btw USA is still the lowest income to housing GDP in the world (it still the most affordable place in the world to purchase a house), meaning folks selling a hamburger in US is still have the higher purchasing power to buy a home (maybe in Ohio), but not so much for someone selling biryani in bangladesh.

    so try to visit bangladesh (or Mali) next time for this moral question lol

    10Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


     If it bothers you, than why not be an investor via making a solution? 

    There is investing strategies old as time that do exactly that, C4D. 

    A C4D investor is specializing in giving people a chance to own a home who otherwise wouldn't. And you make some $ while doing it. 

    3Reply
  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.

    Is it morally right for everybody in 6th grade to get a trophy for showing up?
    It distorts reality. Same with "everybody" owning a home.

    Besides, there would be no schools if investors and homeowners didn't own and didn't pay the property taxes. That is how most schools are paid for.

    Did you know that of the 35% of people who don't own a property, most don't want to because it takes work to buy, own & maintain. They don't want the responsibility. Check out the number of people who chose not to pay their rent when given the chance by the government. The others who do want to buy will do the work necessary to become property tax payers otherwise known as "home owners" 

    How Many Vacant Homes Are There in America?

    https://housegrail.com/how-man...

    "The number lags some, but currently, there are about 15 million vacant homes in the United States."

    7Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    We invest, dedicate our life and take on all the risk to make money, not solve affordability issues. If you're in a area that has no demand for the high pricing that's being offered I would suggest investing somewhere else. If you are holdings off because you think it's morally incorrect to charge market value for your product this isn't your business. Someone else will. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    3y
    Quote from @Ke Nan Wang:

    Here is another idea, how about buy land and build new houses? And sell them to first time home buyers. If inventory is low, we create our own inventory here. Cheers. 


    cost to build in low value markets were the median price point is say 250k or so.. cost more than existing houses.. unless our going to build PROJECTS type stuff.. 
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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    You do what works for you.  There will always be people who don't want to own or aren't ready to own and need a place to live.  If you are worried about affordable housing, then why not buy rentals and rent them to low income families at a lower rate?

    3Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


     I have heard that real estate investing has gotten harder and more complicated since I started investing in real estate. I do not agree with that. I think you need to look at how to make the deal work and get creative if required. A lot of times it just means people are not writing enough offers

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  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    3y

    @Nick Kenrick buying a home has always been a struggle and many folks are unwilling to pay the price of the struggle.

    There are alternatives like selling to a long-term renter on terms where you carry the contract. You will learn if they are decent people who respect you so return the favor. You make a profit and then say after 5 years you have a steady source of income. Rinse and repeat.

    Can you afford to not raise rents? If you stay small it is not a business and not your primary source of income so sit back and if you have reliable long-term tenants it is mail box money.

    Be an investor with an ambitious young family that wants their own home but can't scrape up the down. Buy and resell a junker they can fix up. Carry a short-term contract they can refinance after they have cleaned the place up. 3 years is a good term. Make sure the interest rate is higher than the going rate to motivate them.

    Buy for cash and resell on a lease option. Good credit with a good rental history required.

    Some people are programed to be renters. They grew up that way and it is very difficult to change their minds. To them the landlord has the problems and he takes care of them.

    Another way is to buy high end units where high income people want a great place to live and are willing and can afford to pay top rent.

    4Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Jeff S.:

    @Nick Kenrick buying a home has always been a struggle and many folks are unwilling to pay the price of the struggle.

    Some people are programed to be renters. They grew up that way and it is very difficult to change their minds. To them the landlord has the problems and he takes care of them.

    so lets say this average joe living in Birmingham, Toledo, or Milwaukee. The mortgage for decent house is only $300-$500 month even with 7% interest rate. That is equal to $16 a day to have a house and even duplex.   

    Now if someone is willing to work harder, even online, getting $20 per hour is super easy. Just open the excel sheets, click a button and that's it.

    It's not an affordability problem. There's always Ohio, Toledo when one can't afford to buy a house with decent skill sets.  You can still have the same Starbucks.

    In another place of the world, even if you're a Phd math rocket wizard from Russia, you still can't buy a even studio. That's true affordability problem.

    Here, It's not an affordability problem, it's where you could live that matched your job/skillset/lifestyle problem, but the country already offers them a solution to afford a house.

    6Reply
  • Tracy Ross
    Member since 2022 · 75 posts · 73 votes
    3y

    I hear you on this. I have had the same moral quandary. I come from Portland, Oregon originally and I was priced out of my home market in 2011. Investors were buying all the affordable homes. 

    One thing thing that has helped me with this though is the thought that if private investors weren't providing rental housing for the masses, then the government would have to. And we know what government housing/projects are like. I think we are actually doing a service to renters by providing really nice/well taken care of housing. It still doesn't change the issue of buying these houses from under first time homebuyers and raising the market. My only other takeaway on that is I am an agent in the Boise, ID area and a majority of my buyers are first-timers. We always find something great, even in competition with investors. 

    So in conclusion my advice is don't feel badly about it. Just create great sustainable housing for renters and knowing you are doing a better service than affordable government housing would. 

    14Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
    3y

    Agreed @Carlos Ptriawan. Good points.

    0Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    3y

    @Nick Kenrick You could buy a lot of one bedrooms. In our one bedroom apartments, we tend to have young people starting new households excited to have an apartment, people leaving relationships or moving for work, and then a few older people that are not interested in buying a house and are looking for a more permanent rental. Not everyone is in a place where they want to or are ready to buy a house there will always be a need for quality rental properties.

    3Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


     Don't confuse the right to own a house versus the right to afford shelter. It's not synonymous.

    The reason affordability has spiralled out of control for the average folk is our monetary policy primarily. If you feel guilty, donate. Business wise though, this will save you from becoming someone looking at the outside in. This is like when people feel guilty about being successful.

    3Reply
  • Jayson Velasquez
    Member since 2020 · 5 posts · 10 votes
    3y

    Maybe it's just me, but here in the Indianapolis area if you act your wage and save your pennies, anyone can eventually buy a home. There is no denying that the housing market has become much harder to access than when our great great grandpa working as a shoe salesman could afford a 4 bedroom home but the truth is that the opportunity to own a home is still very obtainable as long as you know your limits. 

    On the other hand, you should regard yourself to a higher standard, more than just a greedy landlord. Think of yourself as the caring landlord that actually cares about their tenants. At the end of the day you're doing all tenants a service by remaining in the industry! 

    4Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    3y

    Those who want to get ahead, get ahead (if they have a good plan).

    Those who want to drink beer and party will drink beer and party.

    Most of them could probably live with their parents until they have saved 100% of the price of a house and then move out.

    That takes the low paying job thing out of the equation. 

    But they don't, they want out ASAP for a rental, and that's what they get.

    Just my 2 cents.

    3Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    3y
    Quote from @Nick Kenrick:

    Hi all,

    I've done a little bit of real estate investing - I currently own 3 single family rentals in Indianapolis. I also own my primary residence and plan to convert the garage into a studio. I'm doing fine and see opportunities to grow my portfolio, but the housing affordability crisis has been bothering me lately and has got me questioning if scaling is a morally acceptable thing to do in this climate.

    For the longest time, owning a home was the only way for blue collar workers to achieve the American Dream. With interest rates rising and no real decline in demand, it's becoming harder and harder for regular folks to own their own place. And now regular folks who are hoping to afford their own place have to compete with institutional capital and hundreds of out of state individual investors who can afford to take some losses for long-term appreciation plays.

    It's just gotten harder and harder for the little guy and I'm wondering - is there more we as real-estate investors should be doing to help? Are we partly to blame? Or are my concerns overblown?

    Thanks in advance.


    Investors are not to blame as we don't have control of interest rates.  Several developers in the market are working in the niches trying to develop "affordable housing" If you're accredited, you may consider investing in one of those projects.   Another idea if you want to go it alone is to put an option in your leases for your renters to purchase your property. 

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    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    @Nick Kenrick It's like they say - "if you have to ask what it costs, you can't afford it." In your case, it would be - "If you ask that question, you aren't suited for the REI business".

    @Jeremy Horton said it well, so I won't repeat. Read his post over and over again until you get it.

    2Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    There is a lot to unpack here but itś great to hear that there are people who actually have a conscience, giving a damn about their fellow man. As a Black investor Iḿ commonly asked how I feel about gentrification and am even accused of working with the man to run out minorities. That´s another discussion but it rings of familiarity. In terms of the topic you introduced, I feel the blame or someone responsible for addressing this is our elected leaders. As an investor, I don´t set the price of real estate and whatever the value of the asset I´ḿ working  it falls directly in line with already established comps. Those comps are set back many factors including those who can afford to and are willing to pay. In addition, cities or areas under revitalization is driven by the advocacy, well being and interests of the citizens already there. Maybe big time corporate investing firms play a role but the average investors is not responsible in any way. Also, I disagree with the assertion that the only way for blue collar to build wealth is through homes. If needed, anyone has multiple forms of programs and assistance available to them to get a home. They have the federal govt and entire organizations devoted to getting people in homes. Also, this is the United States and there a countless stories where people who came from nothing and have nothing become wealthy in no time. Yes, everyone will not make it but many will. For me, I do feel I have some responsibility to give back to my community but I do advocacy through other means and for the most part (most but not all) it´s separate from my business. So in essence I personally feel I do my part for the better good and do not feel responsible for the direct destiny of others. Above my pay grade! 

    13Reply
  • Austin B.
    Member since 2021 · 24 posts · 32 votes
    3y

    I'm quite concerned about overseas investors overtaking the market. To have a local, like you, who owns a handful of units, that's a great thing.

    3Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Mark Cruse:

    So in essence I personally feel I do my part for the better good and do not feel responsible for the direct destiny of others.

    This is so well said! I wish I had said it.... :-)

    But I always looked at it like this....we (meaning RE Investors) are the ones that take the risks - we find the houses, put down our cash (or go into debt by getting a loan), fix them up, market them for sale (or rent) and usually do not make a killing financially. I'd bet most of us just really love this game and could make more money doing other financial pursuits....

    We are providing housing for our communities. Large corporations or the Govt could not do it as efficiently nor as benignly.

    Now I am talking about the smaller RE community such is as present here on BP.....we are a different breed methinks... Of course there are greedy landlords, both large and small, but I think they are rare nowadays.

    IMHO, the more private Re investors there are (like us on BP) the better off the country /world is...


    3Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    @Bruce Woodruff you are 100% on point with all that. I was going to add other stuff like that but didnt want the post to be so long. Actually, that is part of my answer to people who attack me over gentrification. Not sure of how many think like this, but yes, I have passion for this game. I´ve done pretty good over all but there have been times when I made nothing or lost. I took those risk others were not comfortable doing. I put my financial health on the line through the tune of hundreds of thousands of dollars. In that process I give low income residents nice housing and show them respect and dignity. Most of the people who have purchased my flipped homes have been minorities in the areas many are priced out of. Through the profits I earn Iḿ able to give back to my community more than I did. I didnt even mention all the people we employ and provide opportunities to. Yes, the list goes on and people can say or think what they want but it all comes full circle. Of course there are horrible people in this business who could care less and only do dishonest things but there are probably more on the other side. Either way, we are not responsible for the the current climate and many of us have most likely contributed positive things to the game! Great Post! 

    5Reply
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