> Josh shows that large investors enjoy cost advantages by paying fewer operating expenses, property taxes, and lower mortgage costs. One particularly interesting one is insurance costs, which have of course been rising all over the country. Large landlords appear to enjoy bargaining advantages and pay substantially lower insurance expenses as well.
Their having lower insurance costs totally makes sense. If you go to an insurance company and tell them you have 1500 properties in 12 states (hopefully none of which are Florida!) they're going to give you a nice discount.
But that just isn't possible with property taxes. If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval". Or flat laughed-at. The only way they could have lower taxes is by owning lower-valued properties - either because they bought cheap, or aren't maintaining them and they decline in value (which is the slow way to getting poor returns as a landlord).
I think there's just too much money being spent. One day in a few years the investors will find a new "sure-fire" strategy involving some other asset and the country will get a glut of properties up for sale. At first they'll be listed at market rates, and then much lower as they panic to sell at any price. Leading to housing crash 2.0
Depending on how many properties they have in their portfolio for a particular county, it could make sense for them to start donating to candidates for tax assessor that are favorable to them. If the goal here is to buy properties and flip them, having an assessor that only assess value once a decade is going to be better than one who requires a reassessment each time a permit is issued for a property. If they want to hold and rent, another assessment strategy would be beneficial for them.
I suspect this is the big one, at size, you can have people on staff that do nothing but fight property value increases. It may be like throwing a stick against the wind but some of them will land ahead and they get some reductions on annual increases.
> Professionalizing management, better bargaining over expenses, some degree of appeals over property tax, and better access to capital markets therefore enable institutional investors to improve their cost structure
>If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval".
1. Why would the assessor give bulk discounts in the first place? It's not like they can take their business (houses?) elsewhere if the assessor refuses. Many jurisdiction have transaction/transfer taxes, which mean even if they want to dump their holdings, the county would come out on top.
2. Is the assessor even allowed to give bulk discounts? Even if they could, given the political climate against big corporations, granting such discounts seems like political suicide. You're just asking to get challenged in the next election.
I suspect its more about the ability at scale to appeal prop value increases. At enough scale you have data points on maybe ways to get an edge in appealing the increase. Its on a county/state rule level so I could not say much more but my mental model is if you have 100 SFH in the same county, you may be able to come up with datapoints to appeal or reduce the increase which can provide an edge. They are definitely not negotiating though.
> But that just isn't possible with property taxes
I think what they mean is the overall hit from property taxes is marginal at their scale because of the better margins they get on other inputs like insurance.
That said, Zillow tried this strategy a couple years ago and it ended horribly for them.
I don't think yet another fund will be able to get an edge that local landlords and real estate companies have.
Their having lower insurance costs totally makes sense. If you go to an insurance company and tell them you have 1500 properties in 12 states (hopefully none of which are Florida!) they're going to give you a nice discount.
But that just isn't possible with property taxes. If you tell your county tax assessor that you want a quantity discount, you'll get "The Look of Disapproval". Or flat laughed-at. The only way they could have lower taxes is by owning lower-valued properties - either because they bought cheap, or aren't maintaining them and they decline in value (which is the slow way to getting poor returns as a landlord).
I think there's just too much money being spent. One day in a few years the investors will find a new "sure-fire" strategy involving some other asset and the country will get a glut of properties up for sale. At first they'll be listed at market rates, and then much lower as they panic to sell at any price. Leading to housing crash 2.0