alt Hacker NewsOne of the issues the article doesn't mention is that these houses are effectively cheaper to purchase for corporate owners. Generally they can borrow money at a lower rate, but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant. Effectively they are redirecting money that would be paid in taxes into the payments on the new purchase.
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As another commenter pointed out, buying a home to live in gets you lower interest rates than buying for any other reason.
> but the ability of corporate owners to use depreciation on a new purchase to offset profits from previous purchases is more significant.
If you're referring to cost segregation, this is probably less true now than in the past. It used to cost a lot of money to do a cost segregation analysis, and made sense only for apartment complexes (i.e. the cost to do the analysis vastly exceeded whatever savings you'd get on a single house). So only rich investors who owned 20+ unit complexes would do it.
I've heard that in the last few years, many accounting firms are providing it for relatively cheap, so ordinary investors can do it now.
RE people make a big deal about depreciation as a tax benefit, but it's minor in my experience. You're effectively reducing the cost basis, so when you ultimately sell, you have to pay a larger tax on the capital gains. Overall you gain, but not by a lot.
Perhaps if you combine with a 1031 exchange, you may get a greater benefit.
It's wild when you think about it: a family scrapes together a down payment and pays full freight on property taxes, while a corporate landlord can roll one property's paper losses into the next deal and keep building their portfolio, tax-deferred
What is this special depreciation corporate owners get? IIUC any landlord can use depreciation to lower their tax bill. Wouldn't the depreciation from a new purchase also apply to the rents from that new purchase?
Somewhat more outrageous is the 1031 exchange. Sell VTI at a profit to buy VOO and the government hits you with a capital gains tax. Sell your primary residence for $250k more than you bought it - same thing. But landlords are a special, privileged investor class to whom these rules don't apply. They can sell a house and pay no taxes on gains as long as they buy another property.
> Generally they can borrow money at a lower rate
There is some tax tricks you can play, but in general homes for primary residence is lower then secondary/rent, which is a big proportion of cost.
Build enough housing and all of the sudden it isn't such a sure thing investment.
Not easy to do of course, but the problems that come with building more housing are better then the problems we have now.
Our system is far more regressive than most people realize. The poor pay more for things, don't have access to all kinds of tax breaks and cheap money, and can't afford accountants and shell companies and all the other complicated tricks you can use if you are wealthier.
I wonder: if you added it all up, would a flat tax (which is nominally regressive) actually be more progressive than the regressive taxes we have?
This is not true at all. Corporate loan rates are generally pretty damn high, only exceptionally can they borrow for low rates. Mortages however are a special case since they are basically mandated to be low and safe by most governments in exchange for letting banks exist. Or in the US explicitily guaranteed through freddie mac and fannie may.