Property Ownership and the American Dream Under Threat; The future of residential rental property corporate ownership: By Dan Harkey
According to CoreLogic, investment companies own about one-fourth of all single-family homes in the U.S. Because people cannot afford a down payment, corporate ownership is expected to increase, driving up rents and values.
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Never in our history has a young family home purchaser had to compete with large investment firms to own a piece of the American dream. Private parties wanting to purchase homes find it impossible while competing against mega-corporate enterprises, where government regulations give them preferential purchase and taxation benefits.
Creeping Marxism, a term used to describe the gradual adoption of Marxist principles in society always diminishes the bundle of rights:
State apparatuses, institutions, private foundations, and giant corporations aim to create a top-down central government planning as the preferred political ideal. The participants merged into a system of a mixed economy run by big government, state monopoly capitalism run by the central government in collaboration with big business, and big unionism. Their primary purpose is the status quo: to maintain power, continuously grow, and be financed by tax dollars with unique benefits from public coffers. They have symbiotic relationships to promote and protect each other’s energy and growth through cronyism. Support systems include three lettered agencies and corporate and media companies. Anytime a ministry, authority, or state-subsidized media outlet acts, they act in their interest rather than promoting the welfare of a private enterprise and competitive ordinary society.
Most of their activities are anti-private enterprise, anti-small business, and pro-establishment, and serve to diminish the bundle of rights that have historically supported real estate ownership.
How do these societal changes relate to the private money lending industry? The entire cycle of turbulent transformation offers industry professionals unlimited opportunities to adapt to these changes. The real estate market constantly evolves, providing industry professionals with limitless possibilities for adjustment and financial gains.
· Turbulence breeds opportunity for private money lenders and their investors. Banks or institutional sources finance fewer transactions during turbulent times. However, this presents a unique opportunity for private money lenders to step in and profit.
· When the economy is strong, interest rates are low, and institutional money to lend is abundant, the private money lending industry is less prevalent.
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· When interest rates rise, with threats of civil unrest and around-the-clock media of false reporting, propagandizing, gaslighting, mudslinging, and economic instability, institutional lenders pull back and tighten up on credit requirements. Fear, civil unrest, and cancellation of political advisories are common but cause financial instability.
· Private money becomes a viable option. The difference between institutional and private money loan rates is significantly less.
· Social engineering has created vast opportunities in the private money field for single-family lots to be converted to high-density residential and for commercial offices to be converted to residential rentals and condos.
· Residential properties are no longer valued solely based on comparable sales but now on the number of possible units that can be built as a high-density, low-cost replacement. Understanding this shift in valuation methods is crucial for anyone involved in the real estate market. It's essential to stay informed and knowledgeable about these changes.
· A residential property may also be valued based on the income of the primary dwelling and an accessory unit dwelling (ADU).
· Office and retail may no longer be based on projected income streams because there are few or none, and there are not likely to be any in the distant future. The value must be based upon speculative forecasting of conversion to residential rentals, condominiums, work-live spaces, and hybrids such as retail on the bottom and residential above.
According to the most recent estimates from Freddy Mac, the country is short about 3.8 million units of housing, both rental and owner-occupied. Family formations and the influx of millions of immigrants further exacerbate this shortage. If we assumed there are one billion vacant offices and hundreds of thousands of unoccupied retail space to convert to residential, and the average square feet is 1,000, the new formation would be two million new units. The conversion could take as much as ten years or longer. However, we must determine the demand for residential units ten years out and place that estimate into the equation. The need for action is clear and immediate.
A futurist from 1970 could have told us that commercial retail and offices within metropolitan areas would be transformed into high-density residential, rentals, condominiums, and full-service work-live housing some sixty years later; most people would not have believed it. Future Shock! The Third Wave! by Alvin and Adelaide Farrell Toffler; Now, The Shifting Landscape, by Dan Harkey.
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Thank You
Dan Harkey
Educator & Private Money Lending Consultant
dan@danharkey.com 949-533-8315