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“300 landlords who own more than 10,000 apartments” Wow, that’s allot of concentrated wealth. Anyone have some insight on these fine folk? If each landlord ow

“300 landlords who own more than 10,000 apartments” Wow, that’s allot of concentrated wealth. Anyone have some insight on these fine folk? If each landlord owns 100 apartments renting for $4k each(average) that’s $400k a month gross. That’s allot of potential venture capital money to capture monthly, over $20M in five years.

KoftaBob 6y ago
A lot of apartment buildings are owned by real estate developers and private equity firms. It's not always one dude that owns a ton of buildings.
- cephaslr 6y ago
  Honest question, wouldn’t the 80/20 rule in these cases still imply large majority owners in most cases? Wealth concentration figures I have seen (0.1% own 20% of the nations wealth for example) seem to support this view?
AnimalMuppet 6y ago
Sure, if they own outright, rather than having borrowed money to buy the apartment complexes, and if they don't have to pay maintenance, insurance, landscaping, and so on. It's not just free money. They're making money, sure, but considerably less than your calculation.
- jimmaswell 6y ago
  Lots of landlords don't pay any of those things.
  - AnimalMuppet 6y ago
    Lots of landlords don't insure their buildings? Lots of landlords don't pay for maintenance on their buildings? I call baloney.
    - iaw 6y ago
      Anecdotal experience: I rented an apartment where the bathroom was literally rotting away on itself. The landlord would do cosmetic fixes only as the walls sagged and warped. The incentive wasn't there for her to make a large capital expenditure on maintenance because the land appreciation was what she was banking on and rental demand was such that she could always rent the apartment. While this example is extreme I've seen similar deferred maintenance behaviors repeated over and over again by the most successful (read: largest portfolio holding) landlords.
    - ajzinsbwbs 6y ago
      https://en.m.wikipedia.org/wiki/NNN_lease https://en.m.wikipedia.org/wiki/NNN_lease
      - jeffbee 6y ago
        How do people not know this? Commercial landlords seriously have no risk. Taxes and insurance are passed straight through to tenants and the bank is carrying the capital risk.
        jedberg 6y ago
        Their risk is when they can't find a tenant or a tenant quits mid-lease. Then they owe the bank from their pocket. Commercial real estate is much more susceptible to the economy. Bad economy or good, people need a place to live. But in a bad economy, businesses just close up, declare bankruptcy, and leave.
        analyte123 6y ago
        When "they" owe the bank in a bad economy, "they" is a disposable corporate entity, not a normal person who might have to suffer consequences for their reckless behavior with debt. The actual people involved spent the last decade stuffing their pockets with rents and setting up asset protection strategies.
    - neilparikh 6y ago
- jeffbee 6y ago
  Not sure how much you know about the SF market. We only get glimpses, but it gives you an idea of how much wealth these landlords capture. The building at the corner of Fillmore and Waller was bought for $1.05 million, 20 years ago. It has 6 retail storefronts and 18 apartments upstairs. Just one of the retail doors rent for $10000/month, or it did before this rent strangled the tenant: https://hoodline.com/2020/04/cafe-du-soleil-shutters-after-15-years-in-the-lower-haight https://hoodline.com/2020/04/cafe-du-soleil-shutters-after-1... The building is assessed for $1.4m, so the taxes are around $15000/year (which the tenants pay under NNN terms) but the gross is probably well over $50000/month. And there's no landscaping, obviously. These people are absolutely stacking cash. They are just parasites.
  - titanomachy 6y ago
    How could the building you describe be assessed at only 1.4 million? In my city, a single condo that rents for $4k/mo would be assessed higher than that.
    - jeffbee 6y ago
      I'm so glad you asked. In 1978 Californians passes Proposition 13, written for and sponsored by the Los Angeles Apartment Owners' Association, which says that property assessments may not increase by more than 2% per year or CPI, whichever is less. Property tax rates may not exceed 1% of assessed value. So the max theoretical assessment of a building bought for 1.05 million twenty years ago is 1.56 million.
      - titanomachy 6y ago
        Ah, right. I've heard reference to this before. Very unfortunate.
    - tverbeure 6y ago
      Prop 13?
  - tartoran 6y ago
    There are parasites everywhere there’s some cash flow. We need laws to tame these
lastofus 6y ago
Something to keep in mind is that once you own a few rentals, it's easy to pull equity out for a down payment on another rental, and buy the rest with a loan. Leveraging is easy when there you are buying physical assets that retain value. In other words, even if you own 10 rentals, you are probably wealthy, but the bank my still own a majority % of those assets.
- toomuchtodo 6y ago
  The goal is not to own the rentals, the goal is to own the cashflow through the control of the properties (whether that's mortgages, leases, or option agreements with the owner). To your point, you want to be stripping equity whenever possible to accelerate asset acquisition. Very similar to private equity LBO operations. If you're highly levered (as a smaller landlord), and funneling that income into retirement accounts protected from creditors (varies by state for IRAs, 401ks are federally protected), it's all upside with no downside. Heads, you walk away with appreciated real estate you eventually cash out of. Tails, you walk away from your investment properties while your retirement assets are protected with credit blemishes that are quickly forgotten by lenders. It is rare to be pursued by lenders in recourse states, as being (mostly) judgement proof and the option of bankruptcy are significant hurdles.
  - kulig 6y ago
    Sounds like free money. And there aint no such thing as free money.
  - jb775 6y ago
    > you want to be stripping equity whenever possible to accelerate asset acquisition By "stripping equity" do you mean taking out home equity loans whenever possible? Or are there other efficient ways to strip equity?
    - toomuchtodo 6y ago
      Home equity loans or cash out refinances. What you pick is determined by your financial models based on interest rates, origination fees, etc. Typical carrying cost math. Once you have enough properties to bump up against Fannie or Freddie GSE underwriting guideline limits (~10 properties), you transition into commercial lending, where you build a relationship with a bank and they lend against your combined portfolio. EDIT: You can find more information regarding these strategies at https://www.biggerpockets.com/ https://www.biggerpockets.com/
jeffbee 6y ago
That's nothing. A single individual owns Raj Properties and Everest Properties which together own more than 1000 apartments in the much smaller city of Berkeley.
- jedberg 6y ago
  Technically it's different individuals who own each, because the owner of Raj properties had to turn them over to his family when he went to jail for sex trafficking and slavery. But when he got out only eight years later, his family "loaned" him a bunch of money to start up Everest properties. But yes, in reality, he is probably still in control of both.
  - jeffbee 6y ago
    The whole story is just amazing. I find it sad that our system of justice doesn't have a way to force the disgorgement of gains made from, seriously, enslaving teenage migrants. It's like sure we got our seed capital from sex slavery but the rest of these gains are totally above board. Makes no sense. Part of the fascination for me is that the Reddy headquarters is this absurdly tacky mansion[1] in Kings County, in the middle of nowhere, surrounded (at arm's length) by abject poverty. Supposedly a branch of the family is the most successful vascular surgeon in Hanford (this makes ~zero economic sense) but the giveaway is that according to public records all of the Raj tax bills are mailed here. So it's really the seat of their weird real estate empire. 1: https://www.google.com/maps/place/1751+Muscat+Pl,+Hanford,+CA+93230/@36.3509347,-119.6739867,3a,83.1y,165.01h,85.6t/data=!3m6!1e1!3m4!1sVeZwFIm1tg3CiRgvI03K1A!2e0!7i13312!8i6656!4m5!3m4!1s0x8094c3ca65d7fb63:0x3a0d9d87b407459!8m2!3d36.3504817!4d-119.6742255 https://www.google.com/maps/place/1751+Muscat+Pl,+Hanford,+C...
    - jedberg 6y ago
      Interesting, I had no idea. It's right near all the Kings county municipal buildings. I wonder if that's relevant.
- ambicapter 6y ago
  You can say his name https://en.wikipedia.org/wiki/Lakireddy_Bali_Reddy https://en.wikipedia.org/wiki/Lakireddy_Bali_Reddy
lr4444lr 6y ago
Could be REITs.
perl4ever 6y ago
You realize "landlords" are not all individuals? I've lived in a run-down multistory building owned by a stereotypical slumlord, but also in apartment complexes where the people I dealt with were employees of a company that managed it, and other similar places.

KoftaBob 6y ago

A lot of apartment buildings are owned by real estate developers and private equity firms. It's not always one dude that owns a ton of buildings.

cephaslr 6y ago
Honest question, wouldn’t the 80/20 rule in these cases still imply large majority owners in most cases? Wealth concentration figures I have seen (0.1% own 20% of the nations wealth for example) seem to support this view?

AnimalMuppet 6y ago

Sure, if they own outright, rather than having borrowed money to buy the apartment complexes, and if they don't have to pay maintenance, insurance, landscaping, and so on. It's not just free money. They're making money, sure, but considerably less than your calculation.

jimmaswell 6y ago
Lots of landlords don't pay any of those things.
- AnimalMuppet 6y ago
  Lots of landlords don't insure their buildings? Lots of landlords don't pay for maintenance on their buildings? I call baloney.
  - iaw 6y ago
    Anecdotal experience: I rented an apartment where the bathroom was literally rotting away on itself. The landlord would do cosmetic fixes only as the walls sagged and warped. The incentive wasn't there for her to make a large capital expenditure on maintenance because the land appreciation was what she was banking on and rental demand was such that she could always rent the apartment. While this example is extreme I've seen similar deferred maintenance behaviors repeated over and over again by the most successful (read: largest portfolio holding) landlords.
  - ajzinsbwbs 6y ago
    https://en.m.wikipedia.org/wiki/NNN_lease https://en.m.wikipedia.org/wiki/NNN_lease
    - jeffbee 6y ago
      How do people not know this? Commercial landlords seriously have no risk. Taxes and insurance are passed straight through to tenants and the bank is carrying the capital risk.
      - jedberg 6y ago
        Their risk is when they can't find a tenant or a tenant quits mid-lease. Then they owe the bank from their pocket. Commercial real estate is much more susceptible to the economy. Bad economy or good, people need a place to live. But in a bad economy, businesses just close up, declare bankruptcy, and leave.
        analyte123 6y ago
        When "they" owe the bank in a bad economy, "they" is a disposable corporate entity, not a normal person who might have to suffer consequences for their reckless behavior with debt. The actual people involved spent the last decade stuffing their pockets with rents and setting up asset protection strategies.
  - neilparikh 6y ago
jeffbee 6y ago
Not sure how much you know about the SF market. We only get glimpses, but it gives you an idea of how much wealth these landlords capture. The building at the corner of Fillmore and Waller was bought for $1.05 million, 20 years ago. It has 6 retail storefronts and 18 apartments upstairs. Just one of the retail doors rent for $10000/month, or it did before this rent strangled the tenant: https://hoodline.com/2020/04/cafe-du-soleil-shutters-after-15-years-in-the-lower-haight https://hoodline.com/2020/04/cafe-du-soleil-shutters-after-1... The building is assessed for $1.4m, so the taxes are around $15000/year (which the tenants pay under NNN terms) but the gross is probably well over $50000/month. And there's no landscaping, obviously. These people are absolutely stacking cash. They are just parasites.
- titanomachy 6y ago
  How could the building you describe be assessed at only 1.4 million? In my city, a single condo that rents for $4k/mo would be assessed higher than that.
  - jeffbee 6y ago
    I'm so glad you asked. In 1978 Californians passes Proposition 13, written for and sponsored by the Los Angeles Apartment Owners' Association, which says that property assessments may not increase by more than 2% per year or CPI, whichever is less. Property tax rates may not exceed 1% of assessed value. So the max theoretical assessment of a building bought for 1.05 million twenty years ago is 1.56 million.
    - titanomachy 6y ago
      Ah, right. I've heard reference to this before. Very unfortunate.
  - tverbeure 6y ago
    Prop 13?
- tartoran 6y ago
  There are parasites everywhere there’s some cash flow. We need laws to tame these

lastofus 6y ago

Something to keep in mind is that once you own a few rentals, it's easy to pull equity out for a down payment on another rental, and buy the rest with a loan. Leveraging is easy when there you are buying physical assets that retain value. In other words, even if you own 10 rentals, you are probably wealthy, but the bank my still own a majority % of those assets.

toomuchtodo 6y ago
The goal is not to own the rentals, the goal is to own the cashflow through the control of the properties (whether that's mortgages, leases, or option agreements with the owner). To your point, you want to be stripping equity whenever possible to accelerate asset acquisition. Very similar to private equity LBO operations. If you're highly levered (as a smaller landlord), and funneling that income into retirement accounts protected from creditors (varies by state for IRAs, 401ks are federally protected), it's all upside with no downside. Heads, you walk away with appreciated real estate you eventually cash out of. Tails, you walk away from your investment properties while your retirement assets are protected with credit blemishes that are quickly forgotten by lenders. It is rare to be pursued by lenders in recourse states, as being (mostly) judgement proof and the option of bankruptcy are significant hurdles.
- kulig 6y ago
  Sounds like free money. And there aint no such thing as free money.
- jb775 6y ago
  > you want to be stripping equity whenever possible to accelerate asset acquisition By "stripping equity" do you mean taking out home equity loans whenever possible? Or are there other efficient ways to strip equity?
  - toomuchtodo 6y ago
    Home equity loans or cash out refinances. What you pick is determined by your financial models based on interest rates, origination fees, etc. Typical carrying cost math. Once you have enough properties to bump up against Fannie or Freddie GSE underwriting guideline limits (~10 properties), you transition into commercial lending, where you build a relationship with a bank and they lend against your combined portfolio. EDIT: You can find more information regarding these strategies at https://www.biggerpockets.com/ https://www.biggerpockets.com/

jeffbee 6y ago

That's nothing. A single individual owns Raj Properties and Everest Properties which together own more than 1000 apartments in the much smaller city of Berkeley.

jedberg 6y ago
Technically it's different individuals who own each, because the owner of Raj properties had to turn them over to his family when he went to jail for sex trafficking and slavery. But when he got out only eight years later, his family "loaned" him a bunch of money to start up Everest properties. But yes, in reality, he is probably still in control of both.
- jeffbee 6y ago
  The whole story is just amazing. I find it sad that our system of justice doesn't have a way to force the disgorgement of gains made from, seriously, enslaving teenage migrants. It's like sure we got our seed capital from sex slavery but the rest of these gains are totally above board. Makes no sense. Part of the fascination for me is that the Reddy headquarters is this absurdly tacky mansion[1] in Kings County, in the middle of nowhere, surrounded (at arm's length) by abject poverty. Supposedly a branch of the family is the most successful vascular surgeon in Hanford (this makes ~zero economic sense) but the giveaway is that according to public records all of the Raj tax bills are mailed here. So it's really the seat of their weird real estate empire. 1: https://www.google.com/maps/place/1751+Muscat+Pl,+Hanford,+CA+93230/@36.3509347,-119.6739867,3a,83.1y,165.01h,85.6t/data=!3m6!1e1!3m4!1sVeZwFIm1tg3CiRgvI03K1A!2e0!7i13312!8i6656!4m5!3m4!1s0x8094c3ca65d7fb63:0x3a0d9d87b407459!8m2!3d36.3504817!4d-119.6742255 https://www.google.com/maps/place/1751+Muscat+Pl,+Hanford,+C...
  - jedberg 6y ago
    Interesting, I had no idea. It's right near all the Kings county municipal buildings. I wonder if that's relevant.
ambicapter 6y ago
You can say his name https://en.wikipedia.org/wiki/Lakireddy_Bali_Reddy https://en.wikipedia.org/wiki/Lakireddy_Bali_Reddy

lr4444lr 6y ago

Could be REITs.

perl4ever 6y ago

You realize "landlords" are not all individuals? I've lived in a run-down multistory building owned by a stereotypical slumlord, but also in apartment complexes where the people I dealt with were employees of a company that managed it, and other similar places.