How private equity is changing housing

One 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.

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.

And what about if rent into the next 10 years fully servicing the debt, and the maintenance with a margin on top?

If I am blackrock? If I am smaller PE deploying 10 million a year?

And ...?

Not sure what you're asking.

As the report points out, institutional investors purchase only 3% of homes nationwide (but much higher in some cities). Regular smaller investors likely buy more homes than the institutional ones.

> institutional investors purchase only 3% of homes nationwide (but much higher in some cities).

This is crucial. People are in cities - in the day and age of corporate consolidation, less and less jobs are available, and they are increasingly in-office, and increasingly in only a select few metro areas.

Nobody would give a damn if a glut of housing was built in the middle of South Dakota or Maine or Wyoming. That's because there's very little to no jobs growth in those regions.