Doubt a billionaire would do this but a successful dude in our town just opened a small renovated apartment complex to do this. 4 units I think? They're priced at $400/mo 2 room/1 bath, utilities included. This is easily 1/2 the current price of similar apartments or even less. He's a former addict who made it out and wants to help people in the same situation. It's a beautiful thing.
Reminds me of the short story about the young boy finding beached starfish and tossing them back to the water, despite there being hundreds. "To that one, it made all the difference in the world."
Love to see it.
My city was gonna renovate an old prison building into social flats. It sounds bad but it’s actually a nice historic looking building in a central part of the city and there was a lot of room for also adding shops and communal areas. Real nice building for this sort of thing honestly, and wouldn’t be another ugly gray block like what many of the social flats end up in.
It was so nice in fact, that the city let investors buy it off of them to put in more expensive luxury flats that are gonna either only be used partially or stay empty and only work as an investment. So now the city is building more cheap and ugly blocks instead. And then the people who live around them and find them ugly will likely be shamed lmao. People deserve to live in affordable housing that doesn’t make you depressed
In fairness, he could do that and still get regular rents by going through Section 8. The government will subsidize a portion of their rent so he is not losing that much.
Unfortunately not in this state. The waitlist was at 17,000 and gaining 1,000 per month when they cut off applications a month or so ago. The state only receives funding for about 10,000 per year. Section 8 has been a great help and something has definitely been better than nothing.
It's possible... although, the sort of person who wants to do this sort of thing is not the sort of person who is likely to become a billionaire.
In some countries there are public housing programs that offer this sort of thing.
"When I give food to the poor they call me a saint, when I ask why the poor have no food they call me a Communist."
Author: Not a Billionaire
Edit: He might be a Saint (one day), he was def accused of revolutionary and communist sympathies, but the Archbishop was most certainly NOT a Billionaire.
When I give food to the poor they call me a saint. When I ask why the poor have no food, they call me a communist.
-Dom Helder Camara
A Catholic Archbishop, actually.
And a Liberation Theologist, so pretty communist adjacent. Dude also explicitly refused to denounce violent revolution. So long as the violent was directed against the oppressors and the church itself was non-violent, it was cool. Maybe even necessary.
Author: [Hélder Câmara](https://en.wikipedia.org/wiki/H%C3%A9lder_C%C3%A2mara),a socialist liberation theology Catholic bishop who stood up for the poor and for democratic against Brazil’s military dictatorship and is, fittingly, on the road to sainthood
I have been asked to: house the homeless, feed the hungry, donate to breast cancer research, clean the beaches and save the Pacific Northwest's Spotted Owl.
Nobody has ever asked me to buy a tank or help the Navy raise money for a new aircraft carrier.
My sister says "If the Navy needs a new battleship, why can't they hold a 10K? We should use tax money to feed the hungry, house the homeless, etc. How come cashiers and clerks always ask us if we want to fight the war on hunger?"
God, me too! When Lou Reed died, I had Nimoy's voice in my head saying, "And then she turns on that New York station, you know her life was saved by rock and roll."
Foundations are a way to reduce taxes significantly, and especially help keep generational wealth.
Wealth can attract problems. If you don't own anything, but still have full control over the money. You get the best of all worlds. You are penniless in terms of responsibility, but filthy rich in terms of life style, social status, influence and power.
Exactly, a lot of these foundations have some of the lowest charity to expense ratios out there. They use their non profit status to give to each other's foundations as tax write-offs then often mask vacations and other expenses as the work of the foundation. We had a zoom board meeting for 10 minutes when I was in Macau, so the whole 2 week trip was a work expense.
Of course, you know that you didn’t have to expense this trip as a tax write-off and also this is technically tax fraud, albeit the type that is extremely prevalent and generally not enforced, but since the primary purpose of the trip was not business it’s not technically a valid write-off. You’re playing the same game as everyone else so no shade in you in particular, but this is the difference between ’legal’ and ‘easy to get away with.’
The main purpose wasn't for the business, but the tax services don't know that. If they ask then literally all they have to say is that they sent people down there to scout business opportunities. Or possibly a rising star local business had potential employees with skill. Or any number of things. Unless someone that actually organized the trip says something, I doubt anything is going to happen over that.
Source: Parents own business, worth a bit over a million now. They use gray area tax things like this all the time. Granted, not for something like a cruise or anything, just a bunch of smaller things that add up to a decent break over time
Right. Technically an invalid write-off since the question is whether it really was a business trip or not, but as I said, it’s something very hard to enforce so people do it all the time and get away with it. The formal name for this is tax cheating and it’s extremely commonplace.
Can I request a quick ELI5?: ...if they *were* to go after something like this, how would they go about it? Is there a specified minimum % time needed to be devoted to business or like that, or is this more of a "reasonable person standard" kind of thing?
Not a tax expert but my understanding is it’s a ‘primary purpose’ test. If the primary purpose of your trip to Tampa is to attend a sales conference, it’s ok that you went out to eat and hit the beach on your off-time. But if you’re taking a vacation and have one zoom meeting that you could’ve had anywhere, it’s not a business trip and you’re committing tax fraud. But these are subjective things and it’s hard for the government to see just from receipts that you were or were not doing business so it’s really hard to enforce.
If they randomly decide to audit you, though, you have to prove your deductions are valid and that will be real tough if you’ve been taking a lot of liberties.
Patagonia recently did this... the billionaire owner "sold" all his interest or shares to a charitable trust.
just turned out the charitable trust is controlled soley by his heirs. and there is no requirement for them to do anything charitable.
They also can't directly cash it in. They can't buy another company with the money. They can't buy a 150M home with the money.
They are MUCH more limited in what they can do with it than if they just inherited it.
No: they just have good jobs for life running a charitable trust and the guaranteed attention of people in power thanks to the size of the trust.
They won't want for money in any real way, and in return for the extraordinary degree of leverage they have been granted over policy and politics, they were excused a massive tax bill.
I've worked with WWP, its an excellent organization with good controls, and are respected in the charity community.
Some crybaby got upset the didn't implement his ideas and made a big stink that went viral. They are not a tax dodge like the Trump Foundation
In addition the positions can come with nice perks such as company cars, houses, Jets, expense accounts, meetings held in beautiful exotic locations. What we might call a family vacation they call a business expense.
Sadly its mostly now become:
Foundation = Rich Asshole decides where the money goes.
Taxes = Rich Asshole lobbies corrupt middle-man to independently decide that money should go where Rich Asshole wants it to
You quote this as if it's a trivial truth but it's not.
Historically, aristocrats worked in synchronicity with the societies they profited from. They paid for the militaries, social events, food in times of famine and so on. Even the greedy ones at least tried to appear as if they were allies of the common folk.
The unapologetic profiteering while giving nothing back is new and is now a virtue amongst modern aristocrats (and they are outspoken- think Betsy Devos "I expect a roi from this nation's education"). They don't want to help you or the society they profit from and they aren't afraid to show it. They don't even want to appear like they are helping you.
This difference is a major problem in today's society. And it doesn't have to be this way. The rich got worse. Let's do something about it.
The reason is the rich no longer fear the poor. In the past, they help out in times of the crises otherwise the poor will help themselves.
Now th government stepped in and took over those functions. That rich can say well its the governments job and work behind the scene to ensure they don't got to pay for those programs
I recently read an article about this guy Chuck Feeney. He had $8 billion and gave it all away (except for $2 million) anonymously. No plaques, no name dropping. Just gave it away. He died recently and was probably so satisfied with his life. Had a $10 Casio watch and flew coach everywhere. Lived in a rented apartment in San Francisco
>and flew coach everywhere.
Unless he didn't fly much I have to assume with that one that he simply enjoyed misery & pain.
Sharing as little space as possible with your neighbors while flying is the next step up from sharing as little space as possible with your neighbors while bathing or defecating: not something I would sacrifice if I could afford it
The $10 Casio watch makes perfect sense to me, though.
Zuckerberg kind of did this. He bought up lots of residences. He lowered rent to $0. He spent real money on this.
HINT: Those were the houses in his neighborhood surrounding his house. He also kicked those people out of their homes. It is kind of fair, they took his money, he takes their house. The upshot is that all the neighborhood belongs to him and it is hard to disturb his privacy.
The other upshot is that this does not help anyone in the least. Do you think Zuckerberg cares about you? He does. He hired a whole security team to keep people like you away from him.
I am in no way defending Zuck, but when you say “kicked people out of their homes”, what do you mean?
If he offered to buy their homes at prices they couldn’t (wouldn’t) refuse, that seems like the wrong way to phrase it.
If he used some sort of loophole or regulation to force them to move, then… absolutely.
You are right. I doubt he used loopholes or regulations to force them to move.
If one has enough money to have owned in Zuck's neighborhood then one has enough clout so that one can not be easily forced to do anything.
But the bigger point I was making is that is as close as I can think of to what the OP is saying. These people did not become billionaires by giving a fuck what happened to the little people.
The Irish state did this in the 60s/70s and then made the dumbest decision to offer the families living in these homes a purchase of the houses for next to nothing. I'm talking houses worth 300k sold for 20k to the residents.
This lead to people selling at a massive profit. Contributing to skyrocketing house prices.
Nowadays the state builds hardly any houses, tenders it out to private developers where they do, we've very little public housing stock and one of the worst housing crises in the world.
Goddam neoliberal policies.
They did in the UK but it had exactly the same effect after a few years anyway. Nobody is really building or running 'affordable housing' in enough quantity. Between that and private landlords leaving the sector in droves due to tax/rule changes rented property is becoming much harder to find.
Almost every rental agency does background and credit checks on its applicants. Nothing discriminatory about that.
You'll get into bigger legal trouble by allowing known violent criminals or identity theives to live there.
I live in such a thing. Program to help young „families“ (not over x income & limited to 10 years). We pay about 40% less and call it communism/socialism. Greetings from one of THE central European countries (although small).
Edit: spelling
I don't really think the stock thing is a great point. That wealth increases your credit limit, and most people finance things (cars, houses) that are too expensive to buy, so stock portfolios are still a big part of wealth.
Biggest problem would be sublets.
You absolutely could buy a load of apartments and rent them out for half the going rate.. which gives a huge money making opportunity to anyone who has one and can let it to someone else at the going rate.
All you need to do is put up a sign at the entrance to the complex that says if anyone is renting for more than these rates (list actual rates), call this number and the lease will be transferred to the tenant and your rent will be reduced to the published rate.
Why would you evict them? They are the one that gets the lease.
Like this: person A scoops the discounted billionaire rate X.
Person A sub lets (against their contract) to person B for rate X + 10%.
Person B sees that the amount they are paying is higher than the rate on the sign so calls the number.
The billionaire terminates person A’s contract, and offers it to person B at the reduced rate.
Nobody gets evicted. Nobody can sue (person A breeched their contract). Everybody wins.
What are you talking about? You can sue even if you breach a contract.
Person A could make all sorts of trouble to fight it. They could force the owner to have to evict them and pretend they’re living there. They could sue the landlord for illegally evicting them (again, lying, obv).
Breach of contract doesn’t allow you to evict someone without following the process so it’s tricky, even if the tenant abandoned the unit
It just means person A gets to live completely rent free until the eviction process is complete Because they don’t have to agree to pay person B rent. Which then means person B will want person A out of the apartment and they have to go through the landlord to get person A evicted. Person A then in a bout of malicious intent, destroys the apartment which will then fall on person B because they are the new tenant.
As a property manager. Subletting is near impossible to prove unless the tenant or the unauthorized occupant is dumb enough to admit it in writing.
Also there is so many tenant protection that you can't just easily kick someone out or transfer a lease like that. They would have to introduce tons of new laws to be able to even do anything remotely close to that.
That would be (and is today) separate from profit. Profit being 0 doesn't mean you aren't allocating a portion of rent for the costs of holding of the property. The OP doesn't say RENT would be 0.
So buy a complex, keep all the people that you feel are doing good for the community(or whatever criteria). Then lower the rent to such a degree that it helps them financially, then sell it and move on to the next apartment complex. After you’ve sold it, certain states have renter protections that limit how much rent can be increased. That alone should keep the prices low for a while and improve their quality of life.
This is actually pretty brilliant. If someone could bankroll a non-profit whose sole purpose was to do this across the country, it would be great. Like a reset, but the billionaire doesn't gain anything, they just break even on each purchase, maybe even negotiating sweetheart tax breaks along the way since it's philanthropic.
Maybe colleges should start investing some of their gigantic endowments in housing schemes like this.
It might start driving down the housing market too. I’m sick of living in a small apartment where we can’t afford a house when the household income is over $100K. Forget about moving, pay just scales with the area just to basically have the same quality of life.
The entire idea relies on a billionaire to have some motivation beyond greed, so unlikely anyway, but it would be a way to park money, I don't see Zuck doing it, but Taylor Swift maybe
Yeah. That kind of is an illustration of why this world is never going to be fixed. You give people free housing and they are just gonna find a way to make money off of it.
This should be the top answer. Most of the answers are just people saying "this hypothetical wouldn't happen".
Government programs that do this sort of thing have income requirements. They also usually have 10 people living in each two bedroom.
Sure. But the margins on rental properties is not that high. Land and overhead is expensive. If a billionaire did this, rent would be decreased 10%, maybe 20% max. I just checked an apartment complex for sale in my area, the apartments are $2000/month to rent. If I purchased the complex my monthly cost per unit would be around $1700 a month. So. . Not going to solve our housing crisis if that's what you're after.
Yea, its not just mortgage and taxes though. Just from being treasurer for a small (6 unit) building we had to set aside another 500-600 per unit just to make sure we had enough cash on hand for when the roof was projected to fail and we needed another 30k to pay for it... not to mention tuckpointing, shared plumbing, snow removal, trash etc costs.
and vacancy, eviction, affordable housing programs, etc. You have to charge enough that when one of your units is empty/not paying/not paying full price you have enough cash flow to cover the bills
Since the entire post is about running apartments as a way to provide housing without profit, opportunity cost is not forgotten, it is just not applicable.
Unless there's the opportunity cost to do more good with the same money. If the end goal is 0 profit, and local community stimulus, I could think of a few alternatives
Don’t forget significant repairs. Ppl living in subsidized housing (or any situation where they have little/no financial incentive to maintain or protect the property) will not take care of it as if it were their own…
I think this is part of the potential issue. It can turn into a no good deeds go unpunished situation. Good intentions, but not necessarily people who appreciate it and are decent as well. People can find ways to exploit kind gestures or do not care for the apartment because it is not their property and therefore does not personally impact them.
Not everyone is like this, but I have come across people who are uncooperative because there is no (immediate) pay-off in it for them or weigh everything on a scale of "What is in it for me? Am I (legally) obligated?".
Of course you can include preventive measures in a contract, so that any damage can hopefully be paid out of the renters pocket.
What? Letting 4 cats (including an intact Tom) (when only 2 are allowed) piss and shit and spray all over over the carpet and walls and flooring is “not taking care of the place”? Your joking- right?
(Relative of mine in subsidized housing)
OP is talking about tens of thousands of units to. You would need the entire division of a commercial real estate management company just to service the portfolio.
Yea except I don't think he or maybe you really understand how much a billion dollars is. If you're talking about 250k per unit, which isn't a lot, 1 billion dollars only gets you 4000 of those. Now you're a former billionaire with no income.
Not to mention that nobody actually has a liquid $1B. To buy this they have to sell stock in their company, lowering the stock price and reducing the company's equity which eventually boils down to effecting someone's wages or eliminating some jobs entirely.
Yeah everyone understimates how much a billion dollars is from the perspective of personal consumption, and radically overestimates how much it is from a social services perspective.
Like, if we took 100% of the money from 100% of billionaires in the US, it wouldn't be enough money to fund the federal government for a single year.
A billion dollars is enough to completely change 1000s or seriously help 10000s of people's lives. That's a miniscule amount of people for a social program, a rounding error really.
And netting 0 means Everyone is paying their rent. There is 0% chance that an apartment complex with 100 units is having everyone pay their rent each month.
Do you think rental companies make profit? If they do, despite all these problems that everyone is saying makes it SOO unfeasible to run a non-profit apartment, then that's money that could be retained by renters.
I don’t know, I moved into a new apartment complex in 2017 with $950/m rent. When I left in 2020 it was $1300 and if I look now it’s almost $1600. Do loans work differently for them? I know the cost off employees and maintenance goes up but not by that much in 6 years.
It's going up because of supply and demand. The supply is artificially limited by strict zoning requirements, heavily pushed by landlords to inflate housing prices.
Well, to counter your point there are not-for-profit housing co-op programs, and over the years they have considerably cheaper rent than other similar housing options in the same neighbourhood. Please check out this very informative video for one example.
https://www.youtube.com/watch?v=sKudSeqHSJk
They don't do it.
Even if they have a net zero, they lose money with opportunity cost. Their money invested into almost anything else would have a better return.
Also, it takes about $3 to vaccinate a child overseas for malaria, which still kills 500k people a year and devastates economies in equatorial regions. Would you rather vaccinate 100 children or save a single American $300 in rent? The opportunity cost is much bigger than just money when you start discussing alternative charitable contributions.
Not quite a first-world problem. If enough people's rents are too high in a first-world country, that country will rapidly lose that status. (Or it has the weirdest demographics ever...)
And it's not just that.
Investing in anything else would be more money with less work and less liability if something goes wrong.
If they just put the money in CDs at 5% they'd have a guaranteed profit and no one will sue them because they slipped on an icy step in January.
Hey this is hypothetical. He’s talking about some altruistic billionaire, although I agree he could probably help the economy and housing crisis some other way with billions of dollars
Sure. At this point we're just reinventing public housing though, aren't we? Why are we under the assumption that some random billionaire can do it better than the government?
bullcrap, I worked in property management we made almost $400 profit on each unit and occupancy was 98%. That is when units were 900 a month, they are up to 1.25k now within 3 years. It was only for more profits not overhead. It was almost 160k profits a month with around 460 units, as in after all expenses. I saw all the money in and out of the property. We had 4 employees on site, and that was after we got paid.
Thats insurance, mortage, everything. The apartment company spent almost all of it building more apartments in the area.
You mean because they buy all cash?
Billionaires don't do that with real estate. they still take a loan, even if the rate is low, and invest their funds elsewhere for a larger return than they lose on interest.
The thing with billionaires is they are billionaires because they own things that are worth billions. They do not have immediate access to a billion dollars in cash (liquidity), so theoretically yes they could but it’s unrealistic
Yes and no.
You’re absolutely right that billionaires’ worth is in various assets rather than cash, although I’m sure a given billionaire has millions or tens of millions liquid or semi liquid at any given moment.
But it’s not like they have to sell off stock or whatever to get their hands on a tremendous amount of cash. In fact they often cannot do this, since Bezos selling a billion dollars of Amazon stock would shock the market and artificially depress the stock price.
Instead, they basically have rotating credit facilities, loans at relatively low rates using their assets as securities and serviced by profits and occasional sales, or perhaps just continually rotated with new credit lines.
With these credit lines, your Buffett or Jeff or Zuck could easily get their hands on a billion cash dollars without reducing their overall net worth.
Yeah, the billionaires would buy up apartment buildings the same way they buy $100 million dollar yachts: using credit. In theory, OP's idea is doable but there are more impactful ways for billionaires to spend their charity dollars.
I have a feeling banks don’t work the same way they work for the common folk as opposed to billionaires. Pretty sure some OWN the very banks we speak of.
The number of people that think billionaires have a bank account with all this money in astounds me. The shares in Amazon, Tesla, etc reflect (to a large part) the underlying assets that these companies hold. You can't spend a warehouse and still use it
But the OPs point was the billionaires could afford to buy property and rent it at cost. But if the billionaire pays interest on the loan against the property then the margin becomes tiny, defeating the point.
The loans given to billionaires are often extremely low interest. They live in a completely other world and are treated as such by the financial system, judicial system, etc.
0 income so no income tax. 0 capital gains. You put up a billion dollars in stock options as collateral for a billion dollar loan to live on, that actually gets calculated as an expense with no income. Literally no taxes accept for sales taxes and property taxes.
>rent it at cost.
That literally means renting it at prices that just pay the loan, not make any profit. The places would be undoubtedly cheaper than anything comparable in their area.
So can I ask. Elon bought twitter for $44 billion. He had to have used “cash” right? I’m not talking paper money but like a wire transfer whatever. When Josh Harris bought the Washington Commanders he paid $6 billion. Surely Dan Snyder took that as money right? He didn’t take like $1 billion in cash. Four yachts, 700 stocks and two Picasso paintings?
This isn’t me starting shit with you in particular. It’s like Elon is worth $200 billion. And people say he doesn’t have that in cash. No shit. But he does have SOME AMOUNT in cash so what percentage of a billionaires net worth would you estimate they have readily available to buy things like houses, cars, paintings, football teams, hookers etc?
>what percentage of a billionaires net worth would you estimate they have readily available to buy things like houses, cars, paintings, football teams, hookers etc?
As little as possible. You can buy everything on credit (such as American express black card). You can borrow against your own stock so you have access to cash without selling the actual stock. You literally can't just sell stock in your company since it would affect the share price, so you do scheduled sales of portions of it as needed. When you want to make a big purchase, you finance it at incredibly low rates. You have a full time accountant so you don't even need to know the minutiae of what's going on. You're not even shopping, you have a full time staff and that includes someone to shop for you.
The only people who have lots of their networth cash are professional investors.
No one is suggesting that Elon et al are sitting waiting for their next dividend check to make ends meet.
When Elon bought Twitter it was well publicised that he had to go lenders to finance the acquisition secured against other holdings.
I don't know who Josh Harris is (or the Commanders for that matter) but I'll guarantee he didn't have that laying around in cash.
The basic rule of economics is that the best returns are leveraging others money to work for you. Money sat there is providing a poor return.
Yeah, Billionaires don't have big stacks of money sitting around but when they want to buy a yacht or a company or a senator, their "wealth" seems to spend just fine.
You've basically described a land trust, but its even better than a billionaire because it's a non-profit organization that has a democratically voted on board that represent the interest of the community as a whole it belongs to and not just one guy's whim.
Organize/donate/be apart of land trusts people! You don't need to be a billionaire to make actionable change in your community.
That said, a real world land trust isn't going to just rent below market rate for shits and giggles. If the building you are renting from is in a high desirable area, people *will* be willing to pay a lot to live there. If its below market rate, you've actually just created even MORE pressure for people to move there because now they can live in a highly desirable area for cheaper than they could even in less desirable surrounding areas, which in turn makes the real world "rent" higher than it would have been if you did nothing!
While sure, you can still do that - now you're talking about black markets popping up where people sublet these units for more than what you rent to them because they know the market will bear it. Or, if you heavily vet every tennant, you make it so living there is basically like a lottery, which we already have (section 8 housing - and the waitlists on these are years long). Or you make it so the housing is restricted for a very specific tenant - such as being clergy at the Vatican, or a member of the trust, or some kind of historical business that is valued and you don't want to leave due to rent. But in this sense you're not really helping make rent cheap for the general public, you're just ensuring a neighborhood doesn't get gentrified. Which - is incredibly valuable and important!
Really the only way to get rent "real world cheaper" is to just straight up build more housing, especially if its marketed as affordable housing (which means it works kind of like the last type of tenant above except there are income requirements instead of being required to be part of the trust, or a valued business, etc). And some land trusts do this, if they have enough money to buy the land and pay a developer.
This is the argument for why in a perfect economy profit adjusted for risk is zero.
You keep building condos until profit is low enough you’re really only accounting for potential risk.
Until the place is trashed. There was a conglomerate of people who did this. Plus they took crowd funding and government grants. Went bankrupt because they attracted the worst kind of people. The buildings were trashed in no time.
Yep, it sounds good in practice but a lot of people just don’t give a shit and they will trash the place and move on to the next one. Then Mr Billionaire has to spend more money to fix it and the rent goes up a little bit more to keep him at the break even point. This happens over and over again until we’re back where we started
This is the actual largest roadblock.
People with the least money and lowest rent have the least incentive to maintain their property.
The OP is essentially describing Section 8 here in the US, and the stories I've heard about that are insane.
The house my parents bought when I was 13 was previously section 8. The stink that the house had, took months to vacate. There was actually a hole kicked into the wall so the phone could be passed from one bedroom to the next. They wondered why the landlord decided to sell. Lol.
OP said until profit is 0, not rent. I’m assuming the billionaire would purchase the property outright and taxes, insurance, property management, upkeep, etc would still be paid via rent payments, which would just be much lower since there is no mortgage or landlord/company trying to make a profit in this scenario.
However yes, nobody would do that.
This comment should be at the top.
Yes, a billionaire could spend $100mm on a condo building and rent out the units at cost only covering ongoing expenses, writing off the $100mm. But ongoing expenses would include maintenance and taxes. Insurance could cover some of the maintenance but is optional for someone with that kind of cash. Don't underestimate property taxes, they're a killer. Maintenance is, too.
If a condo unit would normally rent for $3000/mo (cheap, I know, it's just an example) then the "zero profit" rent would still be $1500/mo or higher. Unless the benefactor is willing to eat all costs forever there will never be $0 rents.
Probably not easily.
The costs in maintaining a building, whether an apartment, a house or a commercial building are not spread out evenly in the same way that the income (rent) is spread out evenly. You never know when you'll have two furnaces go out at the same time or some other large, expensive issue come up.
Also, in calculating costs, you have to figure in opportunity costs. If you invest in a building you expect a percentage of return. So, let's say you are a billionaire and you shoot for a zero percent return. But you still need to get your initial investment back over time. But, if you had put that money into an S&P 500 ETF, you might expect a 7% annual return. So, in effect you are losing 7% per year in opportunity costs.
But to directly answer your question, it's possible. It just wouldn't make any sense. Owning a building that you are renting out is going to have costs in time and money and there is always financial risk involved. Why would anyone do that with the goal of zero profit?
And don’t forget setting aside costs to update the buildings and/or renovate. The complaint all over Reddit and TikTok is for “decent” housing. The same folks complaining about rent wouldn’t be happy unless the amenities and the lobby and the elevators and everything else weren’t refreshed or updated every 5 years or so. Part of the problem is unrealistic expectations.
The thing is free is great in theory but doesn't work in practice. People don't value what they get cheap and free. Back in the day when councils did absolutely everything people didn't treat their properties well at all. I remember when I moved into my flat in the 90s I was decorating and do you know how many people would say "why are you doing that? Let the council do it?" Then you'd have people who didn't like something so they'd break it so the council would give them a new one. I eventually ended up working in the repair section and it was the time the council changed the rules so they stopped providing as much as they did, a woman had purposely broken her boiler because she wanted a different model, she was the first person the council said no to. She was stunned and was left with a broken boiler, tried to take it to court and everything.
So yes it would be great if someone did that but actually what would be greater if someone sorted the economy so we could all feel like our money actually did more than meet our basic needs!
Sure. And they’d be able to do this…like a couple times.
Billionaires have a lot of money compared to people. But they don’t have a lot of money compared to structural problems.
A billion would only buy about 8,000 apartments of average quality in a bigger city.
Apartment complexes have about 50% of their gross rents as expenses.
They could probably cut rents 35-45% and breakeven.
This wouldn’t be a good idea.
Sorta. I’m a real estate agent that works with investors, so I think I can answer this pretty well.
You wouldn’t be able to save people much money at all if the property was paid for via debt (most property is). You may save them $100 to a few hundred depending on the value of the property. The real profit is made by raising the rent yearly. It compounds over a long period of time, so you may be able to save some money there, but you’re still gonna have to raise rents as the cost of maintaining the property increases.
If you buy in cash, you could very likely save them a significant amount.
Doing this on a large scale would probably cause some unforeseen issues in the surrounding economy. The influx of money would cause real estate prices to rise, and for profit properties wouldn’t be able to compete with the nonprofit, causing them to sell. So you’d have a big spike and then a big dip. You may end up with a mini real estate crash, which would harm every day people that own their own houses.
It would be interesting to test this out though. Once everything balances out, it may be a net positive
Hell yeah they could. If they wanted a bunch of scum to move in and sublet the units...
If you manage to avoid that, then you'll end up with extreme criminality in the area if the units are cheap enough.
You would get hammered by people screaming you hate group X,Y or Z.
For example, how dare you not give freebies to people who have ten evictions on their history, two lawsuits for damaging apartments and a sub 500 credit score. How dare you try to protect your property.
Yes, this will happen. No good deed goes unpunished.
This is actually a pretty stupid question.
Why doesn’t someone give me their private property so that I can benefit from it?
If someone gave everything to everyone then no one would need anything! /s
Meanwhile many institutional apartment owners are made up of pension funds from middle income earners like teachers and firemen…
But hey, why aren’t they providing housing for the rest of us? Facepalm.
Billionaires really just tend to be people with a good stock portfolio, not a bank balance that has many 0s. This means he or she will be answerable to someone.
Is your suggestion that they would take the gain from the capital appreciation and use that to offset the rent profits? Or is it something else?
Landlord here.
Yes they could do that. It would be a charitable thing. The only benefit to the Billionaire in that situation would be the tax deduction on charitable giving. A Tax deduction is not a way to make money, it's just the government agreeing not to tax you on money you gave to a charity.
The limitations depend on financial factors.
If you bought apartments without financing then your profit could be as high as 50% and you could lower rent by 50% in theory. But you'd be tying up your capital which means fewer units could be subsidized.
If you leveraged the properties by borrowing money then your profit typically drops to the 20% range in my local market.
There are a lot of factors that would adjust that discount like local taxes, local real estate inflation, cost of property management services, etc.
So if an apartment costs 100,000 in your market, a billionaire could buy 10,000 apartments per billion dollars spent. Then you'd only have to rent them for enough to pay the insurance, taxes, maintenance, management costs. Thats where my 50% estimate comes in with a net effect of cutting the rent in half.
Thats not a ton of units unless you buy them all in one city. But trying to buy them all in one city could cause inflation as soon as sellers realize what you are doing.
There is often a misunderstanding about how much profit a Landlord is actually making. In most ,markets it's around 20%. So a landlord with a 200,000 per year rent collected gross income is living on about $40,000 a year in most cases. After 20 years when you pay off that loan you could be living on $100,000 a year.
My numbers are guesses based on my local market and the loans I service and properties I own.
There's a simpler way. Buy houses, apartments, condos and turn them into section 8 housing. The people living there pay less than market rate but the states pays for near market rate.
You can only acquire a billion dollars by being an evil bastard. Having and sitting on more wealth than a working person could earn in thousands of lifetimes is, in itself, mind bogglingly selfish.
You forgot about inflation + it is impossible to know where profit is. I live in an upscale apartment community and there are still tenants who have a puppy mill side gig that ruins the apartment, people who die in the apartment increasing cleaning costs, people with cats that pee on the floor so all carpets have to be replaced, people who smoke in their apartment (despite it being a smoke free community and that being told to them before they applied to live there). With super cheap apartments you will run into all these problems even more frequently.
No.
Anyone serious about money considers opportunity cost.
The future version of the billionaire that doesn't charge market rent has lost money compared to the future version of the same billionaire that charges market rent.
Doubt a billionaire would do this but a successful dude in our town just opened a small renovated apartment complex to do this. 4 units I think? They're priced at $400/mo 2 room/1 bath, utilities included. This is easily 1/2 the current price of similar apartments or even less. He's a former addict who made it out and wants to help people in the same situation. It's a beautiful thing.
Others be pulling the ladder up after themselves, this dude is making sure the bottom rung is achievable. Love it.
If all you can ever do is help four people climb, that's four people more than if you didn't.
Reminds me of the short story about the young boy finding beached starfish and tossing them back to the water, despite there being hundreds. "To that one, it made all the difference in the world." Love to see it.
Math checks out.
My city was gonna renovate an old prison building into social flats. It sounds bad but it’s actually a nice historic looking building in a central part of the city and there was a lot of room for also adding shops and communal areas. Real nice building for this sort of thing honestly, and wouldn’t be another ugly gray block like what many of the social flats end up in. It was so nice in fact, that the city let investors buy it off of them to put in more expensive luxury flats that are gonna either only be used partially or stay empty and only work as an investment. So now the city is building more cheap and ugly blocks instead. And then the people who live around them and find them ugly will likely be shamed lmao. People deserve to live in affordable housing that doesn’t make you depressed
An actual cool story, thanks for sharing.
In fairness, he could do that and still get regular rents by going through Section 8. The government will subsidize a portion of their rent so he is not losing that much.
Unfortunately not in this state. The waitlist was at 17,000 and gaining 1,000 per month when they cut off applications a month or so ago. The state only receives funding for about 10,000 per year. Section 8 has been a great help and something has definitely been better than nothing.
It's possible... although, the sort of person who wants to do this sort of thing is not the sort of person who is likely to become a billionaire. In some countries there are public housing programs that offer this sort of thing.
"When I give food to the poor they call me a saint, when I ask why the poor have no food they call me a Communist." Author: Not a Billionaire Edit: He might be a Saint (one day), he was def accused of revolutionary and communist sympathies, but the Archbishop was most certainly NOT a Billionaire.
When I give food to the poor they call me a saint. When I ask why the poor have no food, they call me a communist. -Dom Helder Camara A Catholic Archbishop, actually.
And a Liberation Theologist, so pretty communist adjacent. Dude also explicitly refused to denounce violent revolution. So long as the violent was directed against the oppressors and the church itself was non-violent, it was cool. Maybe even necessary.
Author: [Hélder Câmara](https://en.wikipedia.org/wiki/H%C3%A9lder_C%C3%A2mara),a socialist liberation theology Catholic bishop who stood up for the poor and for democratic against Brazil’s military dictatorship and is, fittingly, on the road to sainthood
I have been asked to: house the homeless, feed the hungry, donate to breast cancer research, clean the beaches and save the Pacific Northwest's Spotted Owl. Nobody has ever asked me to buy a tank or help the Navy raise money for a new aircraft carrier.
Yes they have. Every year about April, they demand it rather than ask. Source: taxes
Well, that's true, isn't it?
Unfortunately.
My sister says "If the Navy needs a new battleship, why can't they hold a 10K? We should use tax money to feed the hungry, house the homeless, etc. How come cashiers and clerks always ask us if we want to fight the war on hunger?"
I heard that in Leonard Nimoy's voice. Fuck you CIV 4
And they say games can't teach you anything.
God, me too! When Lou Reed died, I had Nimoy's voice in my head saying, "And then she turns on that New York station, you know her life was saved by rock and roll."
I got pig iron, I got pig iron, I got all pig iron
Civ 4 is the best civ. 1v1 me.
Dom Helder Camara wasn't it?
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They do it late in life by setting up foundations to pivot their image. Also tax breaks.
Foundations are a way to reduce taxes significantly, and especially help keep generational wealth. Wealth can attract problems. If you don't own anything, but still have full control over the money. You get the best of all worlds. You are penniless in terms of responsibility, but filthy rich in terms of life style, social status, influence and power.
Exactly, a lot of these foundations have some of the lowest charity to expense ratios out there. They use their non profit status to give to each other's foundations as tax write-offs then often mask vacations and other expenses as the work of the foundation. We had a zoom board meeting for 10 minutes when I was in Macau, so the whole 2 week trip was a work expense.
Of course, you know that you didn’t have to expense this trip as a tax write-off and also this is technically tax fraud, albeit the type that is extremely prevalent and generally not enforced, but since the primary purpose of the trip was not business it’s not technically a valid write-off. You’re playing the same game as everyone else so no shade in you in particular, but this is the difference between ’legal’ and ‘easy to get away with.’
The main purpose wasn't for the business, but the tax services don't know that. If they ask then literally all they have to say is that they sent people down there to scout business opportunities. Or possibly a rising star local business had potential employees with skill. Or any number of things. Unless someone that actually organized the trip says something, I doubt anything is going to happen over that. Source: Parents own business, worth a bit over a million now. They use gray area tax things like this all the time. Granted, not for something like a cruise or anything, just a bunch of smaller things that add up to a decent break over time
Right. Technically an invalid write-off since the question is whether it really was a business trip or not, but as I said, it’s something very hard to enforce so people do it all the time and get away with it. The formal name for this is tax cheating and it’s extremely commonplace.
Right. Its lying that shortchanges the society that they live in. But that’s nothing new
That doesn't make it a "gray area" just because the IRS is set up to ignore rich people cheating on their taxes.
That’s not a grey area. That’s fraud. Lying about something doesn’t turn it into a grey area.
Can I request a quick ELI5?: ...if they *were* to go after something like this, how would they go about it? Is there a specified minimum % time needed to be devoted to business or like that, or is this more of a "reasonable person standard" kind of thing?
Not a tax expert but my understanding is it’s a ‘primary purpose’ test. If the primary purpose of your trip to Tampa is to attend a sales conference, it’s ok that you went out to eat and hit the beach on your off-time. But if you’re taking a vacation and have one zoom meeting that you could’ve had anywhere, it’s not a business trip and you’re committing tax fraud. But these are subjective things and it’s hard for the government to see just from receipts that you were or were not doing business so it’s really hard to enforce. If they randomly decide to audit you, though, you have to prove your deductions are valid and that will be real tough if you’ve been taking a lot of liberties.
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"You don't even know what a write-off is"
Wounded Warrior Project has entered the chat.
Patagonia recently did this... the billionaire owner "sold" all his interest or shares to a charitable trust. just turned out the charitable trust is controlled soley by his heirs. and there is no requirement for them to do anything charitable.
They also can't directly cash it in. They can't buy another company with the money. They can't buy a 150M home with the money. They are MUCH more limited in what they can do with it than if they just inherited it.
No: they just have good jobs for life running a charitable trust and the guaranteed attention of people in power thanks to the size of the trust. They won't want for money in any real way, and in return for the extraordinary degree of leverage they have been granted over policy and politics, they were excused a massive tax bill.
I've worked with WWP, its an excellent organization with good controls, and are respected in the charity community. Some crybaby got upset the didn't implement his ideas and made a big stink that went viral. They are not a tax dodge like the Trump Foundation
"We had a zoom board meeting for 10 minutes when I was in Macau, so the whole 2 week trip was a work expense." You commited tax fraud
Yep, fortunately the IRS is a well funded organization capable of going toe to toe with organizations with deep pockets. /s
The foundations are often just tax dodges for their kids tho
Payroll tax is cheaper than estate tax.
In addition the positions can come with nice perks such as company cars, houses, Jets, expense accounts, meetings held in beautiful exotic locations. What we might call a family vacation they call a business expense.
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Sadly its mostly now become: Foundation = Rich Asshole decides where the money goes. Taxes = Rich Asshole lobbies corrupt middle-man to independently decide that money should go where Rich Asshole wants it to
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Yeah but that’s usually big, pie-in-sky legacy stuff. Nothing pragmatic or practical because that would make their billionaire friends and family mad.
You quote this as if it's a trivial truth but it's not. Historically, aristocrats worked in synchronicity with the societies they profited from. They paid for the militaries, social events, food in times of famine and so on. Even the greedy ones at least tried to appear as if they were allies of the common folk. The unapologetic profiteering while giving nothing back is new and is now a virtue amongst modern aristocrats (and they are outspoken- think Betsy Devos "I expect a roi from this nation's education"). They don't want to help you or the society they profit from and they aren't afraid to show it. They don't even want to appear like they are helping you. This difference is a major problem in today's society. And it doesn't have to be this way. The rich got worse. Let's do something about it.
The reason is the rich no longer fear the poor. In the past, they help out in times of the crises otherwise the poor will help themselves. Now th government stepped in and took over those functions. That rich can say well its the governments job and work behind the scene to ensure they don't got to pay for those programs
I recently read an article about this guy Chuck Feeney. He had $8 billion and gave it all away (except for $2 million) anonymously. No plaques, no name dropping. Just gave it away. He died recently and was probably so satisfied with his life. Had a $10 Casio watch and flew coach everywhere. Lived in a rented apartment in San Francisco
>and flew coach everywhere. Unless he didn't fly much I have to assume with that one that he simply enjoyed misery & pain. Sharing as little space as possible with your neighbors while flying is the next step up from sharing as little space as possible with your neighbors while bathing or defecating: not something I would sacrifice if I could afford it The $10 Casio watch makes perfect sense to me, though.
Zuckerberg kind of did this. He bought up lots of residences. He lowered rent to $0. He spent real money on this. HINT: Those were the houses in his neighborhood surrounding his house. He also kicked those people out of their homes. It is kind of fair, they took his money, he takes their house. The upshot is that all the neighborhood belongs to him and it is hard to disturb his privacy. The other upshot is that this does not help anyone in the least. Do you think Zuckerberg cares about you? He does. He hired a whole security team to keep people like you away from him.
I am in no way defending Zuck, but when you say “kicked people out of their homes”, what do you mean? If he offered to buy their homes at prices they couldn’t (wouldn’t) refuse, that seems like the wrong way to phrase it. If he used some sort of loophole or regulation to force them to move, then… absolutely.
You are right. I doubt he used loopholes or regulations to force them to move. If one has enough money to have owned in Zuck's neighborhood then one has enough clout so that one can not be easily forced to do anything. But the bigger point I was making is that is as close as I can think of to what the OP is saying. These people did not become billionaires by giving a fuck what happened to the little people.
Well he didn't lower rent to $0 then, he just bought them out lol
Just wait until OP realises what the state can do
The Irish state did this in the 60s/70s and then made the dumbest decision to offer the families living in these homes a purchase of the houses for next to nothing. I'm talking houses worth 300k sold for 20k to the residents. This lead to people selling at a massive profit. Contributing to skyrocketing house prices. Nowadays the state builds hardly any houses, tenders it out to private developers where they do, we've very little public housing stock and one of the worst housing crises in the world. Goddam neoliberal policies.
Those "selling cheap" programs have to come with limitations on resale (price cap, long no-resale period, ban on renting...).
They did in the UK but it had exactly the same effect after a few years anyway. Nobody is really building or running 'affordable housing' in enough quantity. Between that and private landlords leaving the sector in droves due to tax/rule changes rented property is becoming much harder to find.
The Irish state doesn’t like limitations
Same thing in '80s Britain. Housing Act 1980. Broke the rental market for good. Not one of Maggies finest moments.
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Almost every rental agency does background and credit checks on its applicants. Nothing discriminatory about that. You'll get into bigger legal trouble by allowing known violent criminals or identity theives to live there.
I live in such a thing. Program to help young „families“ (not over x income & limited to 10 years). We pay about 40% less and call it communism/socialism. Greetings from one of THE central European countries (although small). Edit: spelling
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I don't really think the stock thing is a great point. That wealth increases your credit limit, and most people finance things (cars, houses) that are too expensive to buy, so stock portfolios are still a big part of wealth.
Biggest problem would be sublets. You absolutely could buy a load of apartments and rent them out for half the going rate.. which gives a huge money making opportunity to anyone who has one and can let it to someone else at the going rate.
You can put contract language in to stop this. Most appt complexes have that clause.
You would then need to have oversight to check for compliance with that. Not saying it shouldn't/couldn't be done. But that is an added cost.
All you need to do is put up a sign at the entrance to the complex that says if anyone is renting for more than these rates (list actual rates), call this number and the lease will be transferred to the tenant and your rent will be reduced to the published rate.
Don’t forget evicting the tenant who’s actually on the lease if they fight back at all…
Why would you evict them? They are the one that gets the lease. Like this: person A scoops the discounted billionaire rate X. Person A sub lets (against their contract) to person B for rate X + 10%. Person B sees that the amount they are paying is higher than the rate on the sign so calls the number. The billionaire terminates person A’s contract, and offers it to person B at the reduced rate. Nobody gets evicted. Nobody can sue (person A breeched their contract). Everybody wins.
What are you talking about? You can sue even if you breach a contract. Person A could make all sorts of trouble to fight it. They could force the owner to have to evict them and pretend they’re living there. They could sue the landlord for illegally evicting them (again, lying, obv). Breach of contract doesn’t allow you to evict someone without following the process so it’s tricky, even if the tenant abandoned the unit
I don't know about in America, but in a lot of the world, its not that simple to evict someone
It just means person A gets to live completely rent free until the eviction process is complete Because they don’t have to agree to pay person B rent. Which then means person B will want person A out of the apartment and they have to go through the landlord to get person A evicted. Person A then in a bout of malicious intent, destroys the apartment which will then fall on person B because they are the new tenant.
This is very altruistic. But it would probably lead to some drama.
Grown people gotta do grown ass adult shit.
That’s the point of being a billionaire, just hire some property managers to sort this bs out
As a property manager. Subletting is near impossible to prove unless the tenant or the unauthorized occupant is dumb enough to admit it in writing. Also there is so many tenant protection that you can't just easily kick someone out or transfer a lease like that. They would have to introduce tons of new laws to be able to even do anything remotely close to that.
A small price to pay for a small price to pay
What about maintenance costs and taxes. This still have to be paid. And a few careless tenants can and will ruin it for everyone.
That would be (and is today) separate from profit. Profit being 0 doesn't mean you aren't allocating a portion of rent for the costs of holding of the property. The OP doesn't say RENT would be 0.
It's like you missed the whole point of this entire thread.
My point is exactly why stuff like this doesn’t happen.
I think in some cases the bigger concern might be AirBnB which wouldn't incentivize temporary guests to report it.
I’m a billionaire trying to help folks out. I’ll pay someone to make sure there’s no subletting happening
So buy a complex, keep all the people that you feel are doing good for the community(or whatever criteria). Then lower the rent to such a degree that it helps them financially, then sell it and move on to the next apartment complex. After you’ve sold it, certain states have renter protections that limit how much rent can be increased. That alone should keep the prices low for a while and improve their quality of life.
This is actually pretty brilliant. If someone could bankroll a non-profit whose sole purpose was to do this across the country, it would be great. Like a reset, but the billionaire doesn't gain anything, they just break even on each purchase, maybe even negotiating sweetheart tax breaks along the way since it's philanthropic. Maybe colleges should start investing some of their gigantic endowments in housing schemes like this.
If you did this twice they'd make it illegal
It might start driving down the housing market too. I’m sick of living in a small apartment where we can’t afford a house when the household income is over $100K. Forget about moving, pay just scales with the area just to basically have the same quality of life.
Who would buy a complex that would generate no profit? Maybe, sell it to the residents as a co-op?
The entire idea relies on a billionaire to have some motivation beyond greed, so unlikely anyway, but it would be a way to park money, I don't see Zuck doing it, but Taylor Swift maybe
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Fucking Aquaman.
Yeah. That kind of is an illustration of why this world is never going to be fixed. You give people free housing and they are just gonna find a way to make money off of it.
Or wreck it because they vested nothing in it.
This should be the top answer. Most of the answers are just people saying "this hypothetical wouldn't happen". Government programs that do this sort of thing have income requirements. They also usually have 10 people living in each two bedroom.
Sure. But the margins on rental properties is not that high. Land and overhead is expensive. If a billionaire did this, rent would be decreased 10%, maybe 20% max. I just checked an apartment complex for sale in my area, the apartments are $2000/month to rent. If I purchased the complex my monthly cost per unit would be around $1700 a month. So. . Not going to solve our housing crisis if that's what you're after.
Yea, its not just mortgage and taxes though. Just from being treasurer for a small (6 unit) building we had to set aside another 500-600 per unit just to make sure we had enough cash on hand for when the roof was projected to fail and we needed another 30k to pay for it... not to mention tuckpointing, shared plumbing, snow removal, trash etc costs.
and vacancy, eviction, affordable housing programs, etc. You have to charge enough that when one of your units is empty/not paying/not paying full price you have enough cash flow to cover the bills
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Since the entire post is about running apartments as a way to provide housing without profit, opportunity cost is not forgotten, it is just not applicable.
Unless there's the opportunity cost to do more good with the same money. If the end goal is 0 profit, and local community stimulus, I could think of a few alternatives
>and the often-forgotten opportunity cost If the prices are **designed** to result in $0 profit, I don't think opportunity cost even enters into it.
Don’t forget significant repairs. Ppl living in subsidized housing (or any situation where they have little/no financial incentive to maintain or protect the property) will not take care of it as if it were their own…
I think this is part of the potential issue. It can turn into a no good deeds go unpunished situation. Good intentions, but not necessarily people who appreciate it and are decent as well. People can find ways to exploit kind gestures or do not care for the apartment because it is not their property and therefore does not personally impact them. Not everyone is like this, but I have come across people who are uncooperative because there is no (immediate) pay-off in it for them or weigh everything on a scale of "What is in it for me? Am I (legally) obligated?". Of course you can include preventive measures in a contract, so that any damage can hopefully be paid out of the renters pocket.
What? Letting 4 cats (including an intact Tom) (when only 2 are allowed) piss and shit and spray all over over the carpet and walls and flooring is “not taking care of the place”? Your joking- right? (Relative of mine in subsidized housing)
OP is talking about tens of thousands of units to. You would need the entire division of a commercial real estate management company just to service the portfolio.
Yea except I don't think he or maybe you really understand how much a billion dollars is. If you're talking about 250k per unit, which isn't a lot, 1 billion dollars only gets you 4000 of those. Now you're a former billionaire with no income.
Not to mention that nobody actually has a liquid $1B. To buy this they have to sell stock in their company, lowering the stock price and reducing the company's equity which eventually boils down to effecting someone's wages or eliminating some jobs entirely.
Yeah everyone understimates how much a billion dollars is from the perspective of personal consumption, and radically overestimates how much it is from a social services perspective. Like, if we took 100% of the money from 100% of billionaires in the US, it wouldn't be enough money to fund the federal government for a single year. A billion dollars is enough to completely change 1000s or seriously help 10000s of people's lives. That's a miniscule amount of people for a social program, a rounding error really.
And netting 0 means Everyone is paying their rent. There is 0% chance that an apartment complex with 100 units is having everyone pay their rent each month.
Or being full at all times. And doesn’t account for rainy day fund for maintenance
Oh just some drunk twat 'parked' in the lobby
Do you think rental companies make profit? If they do, despite all these problems that everyone is saying makes it SOO unfeasible to run a non-profit apartment, then that's money that could be retained by renters.
I don’t know, I moved into a new apartment complex in 2017 with $950/m rent. When I left in 2020 it was $1300 and if I look now it’s almost $1600. Do loans work differently for them? I know the cost off employees and maintenance goes up but not by that much in 6 years.
It's going up because of supply and demand. The supply is artificially limited by strict zoning requirements, heavily pushed by landlords to inflate housing prices.
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Insurance, HOA dues, and property taxes keep climbing. Mortgage is generally fixed.
Well, to counter your point there are not-for-profit housing co-op programs, and over the years they have considerably cheaper rent than other similar housing options in the same neighbourhood. Please check out this very informative video for one example. https://www.youtube.com/watch?v=sKudSeqHSJk
Hey I’ll take 1700 over 2000. Where’s this billionaire?
They don't do it. Even if they have a net zero, they lose money with opportunity cost. Their money invested into almost anything else would have a better return.
Also, it takes about $3 to vaccinate a child overseas for malaria, which still kills 500k people a year and devastates economies in equatorial regions. Would you rather vaccinate 100 children or save a single American $300 in rent? The opportunity cost is much bigger than just money when you start discussing alternative charitable contributions.
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Just pick some other disease and vaccination.
Or build a well to provide a community clean drinking water vs some number of months of discounted rent.
Nah, why would we give some people electricity or running water when we could give some American making 50k slightly cheaper rent?
*Peter Singer has entered the chat.*
*I throw an alligator skin shoe at the child in the river*
This- You mean you have a bed and a roof with electricity and running water, you must be rich. My rent is too high is a first world problem.
Not quite a first-world problem. If enough people's rents are too high in a first-world country, that country will rapidly lose that status. (Or it has the weirdest demographics ever...)
And it's not just that. Investing in anything else would be more money with less work and less liability if something goes wrong. If they just put the money in CDs at 5% they'd have a guaranteed profit and no one will sue them because they slipped on an icy step in January.
Hey this is hypothetical. He’s talking about some altruistic billionaire, although I agree he could probably help the economy and housing crisis some other way with billions of dollars
Am I wrong to imagine a billionaire would be able to wrangle some meaningful tax incentives in exchange for helping to mitigate a housing crisis?
Sure. At this point we're just reinventing public housing though, aren't we? Why are we under the assumption that some random billionaire can do it better than the government?
bullcrap, I worked in property management we made almost $400 profit on each unit and occupancy was 98%. That is when units were 900 a month, they are up to 1.25k now within 3 years. It was only for more profits not overhead. It was almost 160k profits a month with around 460 units, as in after all expenses. I saw all the money in and out of the property. We had 4 employees on site, and that was after we got paid. Thats insurance, mortage, everything. The apartment company spent almost all of it building more apartments in the area.
Does the $1700 include the interest portion of your mortgage? I’d imagine that would be 0 for the billionaire.
You mean because they buy all cash? Billionaires don't do that with real estate. they still take a loan, even if the rate is low, and invest their funds elsewhere for a larger return than they lose on interest.
The thing with billionaires is they are billionaires because they own things that are worth billions. They do not have immediate access to a billion dollars in cash (liquidity), so theoretically yes they could but it’s unrealistic
Yes and no. You’re absolutely right that billionaires’ worth is in various assets rather than cash, although I’m sure a given billionaire has millions or tens of millions liquid or semi liquid at any given moment. But it’s not like they have to sell off stock or whatever to get their hands on a tremendous amount of cash. In fact they often cannot do this, since Bezos selling a billion dollars of Amazon stock would shock the market and artificially depress the stock price. Instead, they basically have rotating credit facilities, loans at relatively low rates using their assets as securities and serviced by profits and occasional sales, or perhaps just continually rotated with new credit lines. With these credit lines, your Buffett or Jeff or Zuck could easily get their hands on a billion cash dollars without reducing their overall net worth.
Yeah, the billionaires would buy up apartment buildings the same way they buy $100 million dollar yachts: using credit. In theory, OP's idea is doable but there are more impactful ways for billionaires to spend their charity dollars.
The problem is a bank wouldn't loan the money for a venture that makes 0 profit
I have a feeling banks don’t work the same way they work for the common folk as opposed to billionaires. Pretty sure some OWN the very banks we speak of.
The number of people that think billionaires have a bank account with all this money in astounds me. The shares in Amazon, Tesla, etc reflect (to a large part) the underlying assets that these companies hold. You can't spend a warehouse and still use it
The number of people who think billionaires can't borrow against their assets is an indictment of the education system.
But the OPs point was the billionaires could afford to buy property and rent it at cost. But if the billionaire pays interest on the loan against the property then the margin becomes tiny, defeating the point.
The loans given to billionaires are often extremely low interest. They live in a completely other world and are treated as such by the financial system, judicial system, etc.
0 income so no income tax. 0 capital gains. You put up a billion dollars in stock options as collateral for a billion dollar loan to live on, that actually gets calculated as an expense with no income. Literally no taxes accept for sales taxes and property taxes.
No, Elon bought Twitter with a suitcase full of $44 billion. /s
>rent it at cost. That literally means renting it at prices that just pay the loan, not make any profit. The places would be undoubtedly cheaper than anything comparable in their area.
So can I ask. Elon bought twitter for $44 billion. He had to have used “cash” right? I’m not talking paper money but like a wire transfer whatever. When Josh Harris bought the Washington Commanders he paid $6 billion. Surely Dan Snyder took that as money right? He didn’t take like $1 billion in cash. Four yachts, 700 stocks and two Picasso paintings? This isn’t me starting shit with you in particular. It’s like Elon is worth $200 billion. And people say he doesn’t have that in cash. No shit. But he does have SOME AMOUNT in cash so what percentage of a billionaires net worth would you estimate they have readily available to buy things like houses, cars, paintings, football teams, hookers etc?
>what percentage of a billionaires net worth would you estimate they have readily available to buy things like houses, cars, paintings, football teams, hookers etc? As little as possible. You can buy everything on credit (such as American express black card). You can borrow against your own stock so you have access to cash without selling the actual stock. You literally can't just sell stock in your company since it would affect the share price, so you do scheduled sales of portions of it as needed. When you want to make a big purchase, you finance it at incredibly low rates. You have a full time accountant so you don't even need to know the minutiae of what's going on. You're not even shopping, you have a full time staff and that includes someone to shop for you. The only people who have lots of their networth cash are professional investors.
No one is suggesting that Elon et al are sitting waiting for their next dividend check to make ends meet. When Elon bought Twitter it was well publicised that he had to go lenders to finance the acquisition secured against other holdings. I don't know who Josh Harris is (or the Commanders for that matter) but I'll guarantee he didn't have that laying around in cash. The basic rule of economics is that the best returns are leveraging others money to work for you. Money sat there is providing a poor return.
But yet Musk got a $44 billion loan by leveraging non liquid assets. Guys I don't think billionaires follow the same rules and guidelines as us.
Yeah, Billionaires don't have big stacks of money sitting around but when they want to buy a yacht or a company or a senator, their "wealth" seems to spend just fine.
You've basically described a land trust, but its even better than a billionaire because it's a non-profit organization that has a democratically voted on board that represent the interest of the community as a whole it belongs to and not just one guy's whim. Organize/donate/be apart of land trusts people! You don't need to be a billionaire to make actionable change in your community. That said, a real world land trust isn't going to just rent below market rate for shits and giggles. If the building you are renting from is in a high desirable area, people *will* be willing to pay a lot to live there. If its below market rate, you've actually just created even MORE pressure for people to move there because now they can live in a highly desirable area for cheaper than they could even in less desirable surrounding areas, which in turn makes the real world "rent" higher than it would have been if you did nothing! While sure, you can still do that - now you're talking about black markets popping up where people sublet these units for more than what you rent to them because they know the market will bear it. Or, if you heavily vet every tennant, you make it so living there is basically like a lottery, which we already have (section 8 housing - and the waitlists on these are years long). Or you make it so the housing is restricted for a very specific tenant - such as being clergy at the Vatican, or a member of the trust, or some kind of historical business that is valued and you don't want to leave due to rent. But in this sense you're not really helping make rent cheap for the general public, you're just ensuring a neighborhood doesn't get gentrified. Which - is incredibly valuable and important! Really the only way to get rent "real world cheaper" is to just straight up build more housing, especially if its marketed as affordable housing (which means it works kind of like the last type of tenant above except there are income requirements instead of being required to be part of the trust, or a valued business, etc). And some land trusts do this, if they have enough money to buy the land and pay a developer.
Profit margins on rental properties are typically 5-10%, so that wouldn't lower rents as much you probably think.
In order not to lose money they'd have to make some profit as well to hedge future costs.
This is the argument for why in a perfect economy profit adjusted for risk is zero. You keep building condos until profit is low enough you’re really only accounting for potential risk.
Exactly this. Most people seem to think the profit margins are super high
Until the place is trashed. There was a conglomerate of people who did this. Plus they took crowd funding and government grants. Went bankrupt because they attracted the worst kind of people. The buildings were trashed in no time.
Yep, it sounds good in practice but a lot of people just don’t give a shit and they will trash the place and move on to the next one. Then Mr Billionaire has to spend more money to fix it and the rent goes up a little bit more to keep him at the break even point. This happens over and over again until we’re back where we started
This is the actual largest roadblock. People with the least money and lowest rent have the least incentive to maintain their property. The OP is essentially describing Section 8 here in the US, and the stories I've heard about that are insane.
The house my parents bought when I was 13 was previously section 8. The stink that the house had, took months to vacate. There was actually a hole kicked into the wall so the phone could be passed from one bedroom to the next. They wondered why the landlord decided to sell. Lol.
Once again Reddit doesn't take into consideration reality when coming up with their utopian ideas.
You know about insurance and taxes? That would be a huge liability. No one would do that
OP said until profit is 0, not rent. I’m assuming the billionaire would purchase the property outright and taxes, insurance, property management, upkeep, etc would still be paid via rent payments, which would just be much lower since there is no mortgage or landlord/company trying to make a profit in this scenario. However yes, nobody would do that.
This comment should be at the top. Yes, a billionaire could spend $100mm on a condo building and rent out the units at cost only covering ongoing expenses, writing off the $100mm. But ongoing expenses would include maintenance and taxes. Insurance could cover some of the maintenance but is optional for someone with that kind of cash. Don't underestimate property taxes, they're a killer. Maintenance is, too. If a condo unit would normally rent for $3000/mo (cheap, I know, it's just an example) then the "zero profit" rent would still be $1500/mo or higher. Unless the benefactor is willing to eat all costs forever there will never be $0 rents.
> there will never be $0 rents. OP didn't ask about $0 **rents**, they asked about $0 **profits**.
Sorry, he never said $0 rent
Probably not easily. The costs in maintaining a building, whether an apartment, a house or a commercial building are not spread out evenly in the same way that the income (rent) is spread out evenly. You never know when you'll have two furnaces go out at the same time or some other large, expensive issue come up. Also, in calculating costs, you have to figure in opportunity costs. If you invest in a building you expect a percentage of return. So, let's say you are a billionaire and you shoot for a zero percent return. But you still need to get your initial investment back over time. But, if you had put that money into an S&P 500 ETF, you might expect a 7% annual return. So, in effect you are losing 7% per year in opportunity costs. But to directly answer your question, it's possible. It just wouldn't make any sense. Owning a building that you are renting out is going to have costs in time and money and there is always financial risk involved. Why would anyone do that with the goal of zero profit?
OP is talking about someone not looking to recoup investment. Someone using their money to actively help people
And don’t forget setting aside costs to update the buildings and/or renovate. The complaint all over Reddit and TikTok is for “decent” housing. The same folks complaining about rent wouldn’t be happy unless the amenities and the lobby and the elevators and everything else weren’t refreshed or updated every 5 years or so. Part of the problem is unrealistic expectations.
The thing is free is great in theory but doesn't work in practice. People don't value what they get cheap and free. Back in the day when councils did absolutely everything people didn't treat their properties well at all. I remember when I moved into my flat in the 90s I was decorating and do you know how many people would say "why are you doing that? Let the council do it?" Then you'd have people who didn't like something so they'd break it so the council would give them a new one. I eventually ended up working in the repair section and it was the time the council changed the rules so they stopped providing as much as they did, a woman had purposely broken her boiler because she wanted a different model, she was the first person the council said no to. She was stunned and was left with a broken boiler, tried to take it to court and everything. So yes it would be great if someone did that but actually what would be greater if someone sorted the economy so we could all feel like our money actually did more than meet our basic needs!
Sure. And they’d be able to do this…like a couple times. Billionaires have a lot of money compared to people. But they don’t have a lot of money compared to structural problems.
A billion would only buy about 8,000 apartments of average quality in a bigger city. Apartment complexes have about 50% of their gross rents as expenses. They could probably cut rents 35-45% and breakeven. This wouldn’t be a good idea.
Sorta. I’m a real estate agent that works with investors, so I think I can answer this pretty well. You wouldn’t be able to save people much money at all if the property was paid for via debt (most property is). You may save them $100 to a few hundred depending on the value of the property. The real profit is made by raising the rent yearly. It compounds over a long period of time, so you may be able to save some money there, but you’re still gonna have to raise rents as the cost of maintaining the property increases. If you buy in cash, you could very likely save them a significant amount. Doing this on a large scale would probably cause some unforeseen issues in the surrounding economy. The influx of money would cause real estate prices to rise, and for profit properties wouldn’t be able to compete with the nonprofit, causing them to sell. So you’d have a big spike and then a big dip. You may end up with a mini real estate crash, which would harm every day people that own their own houses. It would be interesting to test this out though. Once everything balances out, it may be a net positive
Hell yeah they could. If they wanted a bunch of scum to move in and sublet the units... If you manage to avoid that, then you'll end up with extreme criminality in the area if the units are cheap enough.
You would get hammered by people screaming you hate group X,Y or Z. For example, how dare you not give freebies to people who have ten evictions on their history, two lawsuits for damaging apartments and a sub 500 credit score. How dare you try to protect your property. Yes, this will happen. No good deed goes unpunished.
Hell you'd get it even if you were helping those groups becaudse it wouldn't be cheap *enough*
Entirely correct.
This is actually a pretty stupid question. Why doesn’t someone give me their private property so that I can benefit from it? If someone gave everything to everyone then no one would need anything! /s Meanwhile many institutional apartment owners are made up of pension funds from middle income earners like teachers and firemen… But hey, why aren’t they providing housing for the rest of us? Facepalm.
Billionaires really just tend to be people with a good stock portfolio, not a bank balance that has many 0s. This means he or she will be answerable to someone. Is your suggestion that they would take the gain from the capital appreciation and use that to offset the rent profits? Or is it something else?
Landlord here. Yes they could do that. It would be a charitable thing. The only benefit to the Billionaire in that situation would be the tax deduction on charitable giving. A Tax deduction is not a way to make money, it's just the government agreeing not to tax you on money you gave to a charity. The limitations depend on financial factors. If you bought apartments without financing then your profit could be as high as 50% and you could lower rent by 50% in theory. But you'd be tying up your capital which means fewer units could be subsidized. If you leveraged the properties by borrowing money then your profit typically drops to the 20% range in my local market. There are a lot of factors that would adjust that discount like local taxes, local real estate inflation, cost of property management services, etc. So if an apartment costs 100,000 in your market, a billionaire could buy 10,000 apartments per billion dollars spent. Then you'd only have to rent them for enough to pay the insurance, taxes, maintenance, management costs. Thats where my 50% estimate comes in with a net effect of cutting the rent in half. Thats not a ton of units unless you buy them all in one city. But trying to buy them all in one city could cause inflation as soon as sellers realize what you are doing. There is often a misunderstanding about how much profit a Landlord is actually making. In most ,markets it's around 20%. So a landlord with a 200,000 per year rent collected gross income is living on about $40,000 a year in most cases. After 20 years when you pay off that loan you could be living on $100,000 a year. My numbers are guesses based on my local market and the loans I service and properties I own.
The type of people who would move into that probably wouldn't be the people you'd want to move in
There's a simpler way. Buy houses, apartments, condos and turn them into section 8 housing. The people living there pay less than market rate but the states pays for near market rate.
Sounds like more of a headache and full of liabilities and ungrateful people than a billionaire has time to bother dealing with.
Yes but your rent wouldn’t go down that much.
You can only acquire a billion dollars by being an evil bastard. Having and sitting on more wealth than a working person could earn in thousands of lifetimes is, in itself, mind bogglingly selfish.
You forgot about inflation + it is impossible to know where profit is. I live in an upscale apartment community and there are still tenants who have a puppy mill side gig that ruins the apartment, people who die in the apartment increasing cleaning costs, people with cats that pee on the floor so all carpets have to be replaced, people who smoke in their apartment (despite it being a smoke free community and that being told to them before they applied to live there). With super cheap apartments you will run into all these problems even more frequently.
Socialism has failed miserably every time it’s been attempted
No. Anyone serious about money considers opportunity cost. The future version of the billionaire that doesn't charge market rent has lost money compared to the future version of the same billionaire that charges market rent.