Galway isn't much better either, even in 2016. I was looking for long-term accommodation there for a masters program at NUIG and pretty much everything was taken up by short-term for the summer. I could hop around place to place until October, when they basically agreed to some winter long-term. It was awful.
Last year I did a gig as VP Growth at a Debit-Card-Company. The agreement was 3 weeks London and one week remote in Vienna (with my Family).
The company was pretty central in Camden, my fitness center, too. I found it more cheaply and uncomplicated to just rent Airbnbs in the area for 3 weeks, sometimes jumping apartment every second day, then go through the completely hostile long term rental market with substandard flats far away which would have cost me 1h+ in each direction each day.
So yeah, Airbnb was great for me but is prop. toxic for London as a whole.
It might just happen. The government paying to have rental properties siting empty. I guess some new chapters in the economics textbooks need to be written on what comes after negative interest rates ...
Some cases like that will definitely slip through. There is a balance between the governments doing strict checks and building a bureaucratic process and providing quick cash injection into the whole economy. It's one of the learnings from TARP [1] where help requests were thoroughly screened and as a result it came too late in many cases.
It was the first bailout they announced - rates (property tax for business) are free for 20/21, and then a £10,000 grant for the smallest of rate payers, rising for businesses with larger premises. That covers loads of smaller short let owners.
For my 3 properties that covers maybe 50% of the shortfall I'll see this summer.
It's fantastic for "tourists" (even though you were there 6 months you were essentially a tourist) at the expense of residents.
Unfortunately see it every day as I'm based in New Orleans which is a tourism-dependent city and ABNB has just been devastating for locals who can't afford to buy property.
Agree 100% that there is blame that should go towards local government. Especially in the U.S. local government is far too slow to react to an effective paradigm shift like AirBnb has been in the rental market. Far too slow.
The distinction is short term vs long term, that has nothing to do with xenophobia. AirBnB reduces the price of short term stays (six months is short term - long term rental contracts typically start at 1 year), but has a significant negative effect on people that stay in the city long term. AirBnB converts homes intended for long term residents and repurposes them as housing for short term stays. This significantly reduces the supply of houses in a market that already has a low supply, causing an immense spike of housing cost for those staying in the city long term. The fact that something else exists that also contributes to this problem does not take away the immense negative effects that AirBnB has, that's just whataboutism.
City hall is 100% responsible for housing shortage. High rise build would fix low supply problem pretty quickly (see Tokio).
How many apartments are on Airbnb? 10%? And probably only in centre.
And some people like me actually stay in airbnbs long term. It is easy to negotiate reasonable price outside of tourist season. Normal landlord is way too expensive and does not bother with basic maintenance.
It is xenophobia, because many cities are blaming their problems on 'tourists'. But those are often foreign workers and students.
You get some extra legal protections with a normal landlord.
With an assured shorthold tenancy in England it's quite difficult to evict tenants in the first six months; deposits must be protected and held by an independent organisation; there are some legally mandated safety checks, etc etc.
“I’ve always been a survivor, in life and in business. This coronavirus epidemic is not going to put me or my companies down,” says one Airbnb influencer on YouTube.
To be fair, it was pretty hard to fathom what might knock out the entire tourism industry of a whole city, let alone the world. I mean it's been written about by various people, but who really considers pandemic risk while doing the rental arbitrage?
And likewise with risk in general, we tend to think of things that can specifically happen to an investment, eg the tenants wreck your place, or the mortgage rate changes. We tend not to think so much about this sort of thing, even though infectious disease is a thing everyone has heard of.
After how Airbnb dealt with my reservation in regards to their Coronavirus policy, I have the feeling they're not only bleeding cash but that they'll be losing tons of customers.
I had to wait two weeks to speak to someone, yet had been immediately notified on the site, twice, that I qualified for a full refund (which I took screenshots of). The wording in their policy also qualifies me. However, they're reneging.
Perhaps they can take advantage of a legal loophole, just like you were happy to by using airbnb to rent in an urban area with no real right to be there.
It enabled whole masses of people to rent their properties out, something they maybe haven't even considered before, be it due to social stigma or technical difficulties, with relatively strong protections of a major corporation behind it. Previously if you wanted to rent an apartment out in a small rural town in Poland, you could.....print some fliers? Buy an ad in a newspaper? Massive pain in the ass basically. But thanks to AirBnb lots of people were able to do it with relative ease, at a benefit to them and those staying in the area. If that isn't benefit to a society then it's only because of a definition of either benefit or society that you picked.
People rented out holiday cottages long before Airbnb existed, even long before the internet. There were sections in classified listings in newspapers, and later specialised websites.
Yes. This has nothing to do with holidays though. I'm thinking a mid-size town where the only attraction is a local coal mine - the only hotel option was an old post-soviet hotel where you'd only stay if you absolutely had to. But even if it's not a holiday destination people still have to stay short term occasionally - be it for work or for things like weddings, funerals etc. Not that long ago finding a place to stay that wasn't the mentioned dingy hotel was very hard to do, nowadays there's always at least a few listings on AirBnB so you can stay somewhere that it's a dump.
I always think it's amusing that people assume that before the internet nothing like this could possibly have been done.
Here's how it worked before the internet: You the property owner would engage a local estate agent [realtor] and they would find tenants for your property. There were both short and long term rentals. Most of the time it would be rented out to someone local. But if someone from another country wanted to do a short term rental, they would contract a company who would have a presence in the foreign country and would in turn be able to contact local estate agents by telephone, get particulars sent through the mail or fax (or if it was really urgent, read out on the phone), and these would find their way back to the prospective tenant.
Sure it's not as smooth as clicking on a website, but it was still a thing that was done.
(In fact these intermediary companies still exist and are still used especially by businesses that want a full service and don't want to deal with the randomness of Airbnb. I knew someone who worked in a Japan-England company back in the 90s http://www.redacstrattons.com/)
Counterpoint: This increased short-term rental market in a lot of cities displaces long-term renters who were priced out...and this disproportionately affects the poor who can't afford to buy property.
Travelling businessmen, university lecturers, coaches of various kind, tourists, all benefit a society greatly in a number of ways. There's a reason every country has a department in one ministry or another that's solely focused on promoting tourism. Rising housing prices are not the fault of a single company but that of bad policymaking.
> Someone please tell me one benefit of Airbnb for society
It has been an enormous benefit to travelers of all kinds. It has made a huge variety of properties available for short-term rental, and because these rentals are often less expensive than alternatives, it has made travel possible for many who previously couldn't afford it.
The benefits are greatest for those who want to travel to expensive places, and to places that have few hotels -- that is, for travelers interested in most of the world's destinations.
Airbnb has also helped ordinary people to fight back against the powerful hotel lobbies. Perhaps this isn't a problem in some countries. But it is a grave problem in the United States, where the hotels fight hard to prevent any competition. See especially New York: https://www.nytimes.com/2017/04/16/technology/inside-the-hot....
(I've used Airbnb a few times but otherwise have no connection to it.)
> It has been an enormous benefit to travelers of all kinds. It has made a huge variety of properties available for short-term rental, and because these rentals are often less expensive than alternatives, it has made travel possible for many who previously couldn't afford it.
At the expense of the local populations, especially the working-class and lower socioeconomic classes. Not to mention they've basically become hotels without any regulations. I wouldn't call this a good thing, and certainly don't think travellers should benefit over locals.
I'm not sure understand the rationale behind your question. Does a company in general have to provide benefit to the society overall? If so then rather to erase a lot of companies.
Airbnb seems to provide a service where their clients are fine with.
Like it or not, Airbnb is just the consequence of number of decisions made in the past and they simply put a foot in the highly réglemented real estate, builder, and tourism business by providing a service that was more in line with the current needs.
It's not Airbnb s fault if this so difficult to increase the number of new building every year, not Airbnb's fault if a simple landlord can offer better service than an hotel chain, not Airbnb's fault if landlord prefer to deal to less complicated short rent.
Airbnb is just taking advantage of a more ugly situation ( sure you have witnessed displeasant adventures encountered in buying house, going to holiday or move out from a flat).
However I wouldn't be surprised if they have speeded up the process you blamed.
Please note that I do not work nor ever used Airbnb before.
> Airbnb seems to provide a service where their clients are fine with. .. Airbnb is just the consequence of ..
I don't understand your statement. Surely there's any number of organizations which provide illegal and/or immoral services, which their clients are fine with. That doesn't mean those services should be allowed to continue, does it?
In US history, the Pinkertons were a private detective agency/security force. Its clients hired them (among other things) as strikebreakers. Their anti-union activities included using machine guns, tear gas bombs, and clubs to break up union meetings.
Their clients were "fine with" their services, which were "just a consequence of a number of decisions made in the past" and which met "the current needs" of their clients.
I don't think these actions of the Pinks were beneficial to society, or morally correct, or something that should be allowed to continue.
While, if I understand it, your argument seems to accept that anything which happened (and was legal, and of benefit to its customers), should be allowed to happen in the future, rather than recognizing that some behaviors are so detrimental that they should be made illegal, even when they benefit some.
Airbnb as so many other startup that came out of the "sharing economy" are all about internalising profits and externalising risk and costs. I pretty much would argue that most of them don't have do not have any societal benefit.
It's even worse many of these don't even have sustainable business models it's all about growth and increasing stock prises while leaving a trail of burned soil in their wake. Prime example uber or all the bike and scooter rental companies.
Well, since it says right there in the article that takings for a property rented on AirBNB could be 3-5 times the basic rental rate there will be little sympathy I fear. I mean, if that property has already been rented out since the start of the year (2.5 months) then that should keep them out of the red for the next 7.5-12.5 months, no? I am pretty sure that some of these properties will have been on AirBNB for longer than that.. It says one specific blood-sucker has lost £35,000 income already! I'm wondering at that level of income, why he doesn't have any cash reserves to carry him through?
Stocks will recover. Of greater concern are workers who cannot afford to miss a paycheck while being otherwise financially responsible, even more so if they have children to provide for.
That's exactly my point with stocks and being overleveraged on them. You may not be able to wait for them to recover if you lose your regular incone. Also recovery can take decades, depending on how this plays out. May also be rather quick.
Some Eastern European countries had investment products offered by insurance companies, where you sign up for investing a fixed amount monthly for 10-15y with huge exit fees if cancelled prematurely. The high fees are meant to cover for the commissions for the sales people of those products.
I can imagine that other countries also have similar products where it's difficult to pause the regular investments unless invested manually.
I have one of these (called an endowment policy). It was a spectacularly terrible investment. Luckily the amount I pay in (£10/month) isn't going to make me go broke. Until the beginning of this year it looked as if I might make slightly more than the nominal money I paid in - yes it really was that bad. But with another dose of bad luck it matures this year so it'll likely be worth 30-60% less. Oh well, it was a learning experience.
That's not what overleveraged means[1]. For younger people at least the conventional wisdom is it's completely fine to have 80% or more of your wealth tied up in the stock market.
For me leverage is any kind of a bet that "I'll be able to support this situation". There's no practical difference between a "brokerage margin call" and a "need money in my life call" and "oh shit I'm out call".
The conventional wisdom is based on theoretical returns, not actual performance of investors. Look up how did the average investor do in the legendary Magellan Fund. Much much worse than the fund.
Selling stock because you need money is easy and to be honest, a 20% drop is really not that bad. Stocks are still super liquid right now. Also, investing in corporate bonds, "safe" mortgage REITs, foreign bonds, which are all usually considered to be safer than equities would have caused a much bigger loss. All things considered, equities are holding up quite well. Unless you think they should've been in cash, but it would've been weird to miss years of good returns just because a black swan event could happen
That's why saying leverage isn't just "a technicality" at all. Being leveraged means that you could have lost everything with just a 20% drop. You can't just ride it out if you get liquidated because you couldn't meet your margin calls. See, I don't know how such a "mild" drop would affect most people in the short/medium term unless we are assuming they have to cash out most of their portfolio or are retired. But that's not the case with leverage. There's a big difference between -20% and -100%
I have ~100% of my net worth invested in ETFs around the world. You can always sell your stocks if you find yourself needing liquidity, as I've done multiple times.
Yes, it sucks to sell at a loss. But it's still a smaller loss than the opportunity cost of not investing that money.
I would probably qualify for that group, since I have about 80% of my net worth in stocks. Or, to be more correct: I had. Now it's 20% stocks, 80% cash. I sold a good part in December and January, because I considered that heavy upward price action to be unreasonable and a harbinger for at least a modest correction in the near-term, for which I wanted to have cash on hand to buy the dip. Turned out to be a bit early, I left some potential gains on the street, but I considered that Coronavirus situation (in China, back then) to be too risky for jumping back in, and when the first signs of uncontrolled Coronavirus outbreaks surfaced in Europe, I sold most of the remains at the beginning of the slide, while the market was still within 5% of its peak and just kept a few, some small positions that have been at huge losses already anyway and some larger positions in the healthcare sector (which have fared pretty well until now, I even realized some profits day-trading them in the meantime).
So: just because people have had most of their money in stocks doesn't mean they necessarily still have. The beauty of stocks, especially for small private retail investors, is that they are extremely liquid, and not everyone uses a "buy-and-hold" strategy.
-> rented on AirBNB could be 3-5 times the basic rental rate
He has more expenses than your average long-term rental. He's probably making more money (thanks to his active management) but it's not crazy profitable, far from it.
One possibility is that he is renting long-term and then subletting on Airbnb. If the bookings stops, then he'll be burning lots of cash rapidly.
Airbnbs have destroyed the housing market here and recently the hosts have had to switch to long term rentals... Bringing relief temporarily, but they will be right back to their old ways as soon as this Pandemic is over.
Also the massive bailouts, the drop in real GDP, may finally lead to inflation and higher interest rates and an end to world wide booming property markets.
I agree AirBnB is used as a scapegoat. The problem in fact is much more complex - low interest rates, house flipping, short term rentals, influx of foreign cash to the countries where real estate prices are only catching up with rich countries, and to the countries where prices dropped significantly after 2008, local oligarchs parking cash in real estate, and many more reasons...
So from reading the article, it seems that most hosts don't actually own the apartments, but rent them from landlords and then AirBnb them? That seems more different from North America where most of the hosts own (at least for whole apartment rentals) although for condos at least in Toronto it often is against the condo bylaws.
In London it's now apparently common for whole blocks of flats to be arbitraged this way. There was an investigation in Wired recently: https://www.wired.co.uk/article/airbnb-scam-london There are bylaws about this in the UK too, but enforcement is very weak to non-existant. In fact the government recently refused to renew powers that some local councils were using to enforce registration and minimum standards on landlords (https://www.bbc.co.uk/news/uk-england-merseyside-51076128).
Something related is happening with commercial real estate in Germany: Big retail chains like H&M, adidas, Deichmann have stated they won't be paying rent beginning in April (they were forced to close their stores). Ironically democratic socialists have complained about that. My guess is that this will be a rude awakening for the rent seeking individuals that profited from record low credit to finance and then rent out properties at record rental rates.
Well the reason why people are complaining about this is that these companies are sitting on huge cash reserves but are abusing the system meant to give short term relief to small businesses and individuals.
It might even that they are planning to put those owners that they are renting from into so much financial trouble that they could buy up properties at a discount.
I don't have much sympathy for property speculators etc., however I have even less sympathy for big corporations abusing systems not meant for the to concentrate even more wealth onto themselves
They don't really need to "abuse" these relief regulations (I'm not sure they are even doing it, because I'm not sure if the protective regulations actually cover commercial rentals, which are generally much less protected by law than private rentals).
The landlords of these shops don't have any incentive to throw these merchants out because of a few months of missing rent during a time in which most retailers are forced to close. Where should they find any alternative tenants for these properties? Nobody could even move in right now, much less sell anything there. The first time at which they could potentially find someone to market these properties to is when the restrictions on the already-existing tenants are most likely being lifted as well, which means they will start paying rent again.
The only risk for the merchants is that the landlords might take them to court in order to make them pay the missing rent. But that is a rather calculable risk, these big merchants all have legal departments able to handle this risk, and even in the worst case (they are made to pay the full sum) these court decisions will take months until they come into effect, so the primary goal of conserving liquidity during the forced business shutdown time has already been achieved.
Interestingly in Germany I'd encountered analogical but reversed situation. Landlords coming up with made up fees and deducting them from the deposit, incorporating the unlikely risk that tenant will fight for their money in the court. In no other place in EU where I have been living in, the relationship between tenant and landlord has been so tense and stressful.
Yes, this happens, mostly between private landlords (of which Germany has a lot) and tenants of (seemingly or actually) limited legal competence (because private tenants are in fact relatively well-protected by law except for some gaping loopholes ("Eigenbedarf" being the most-exploited one), but of course accessing that protection often means they have to go to court first, which is a considerable financial and cognitive bar not everyone is able to jump over). I am not sure if it's more often than in other European countries, because I refuse to believe it doesn't happen there as well. You have a large difference in power, it gets exploited, one way or the other way round.
> I am not sure if it's more often than in other European countries, because I refuse to believe it doesn't happen there as well. You have a large difference in power, it gets exploited, one way or the other way round.
Imagine that in places in Czechia and Poland where I was renting long term, the landlords were returning the full deposit in cash, in exchange for the apartment keys.
In Germany the looser will have to pay the winners legal cost so this would be a sure way to pay significantly more than just the missing rent. Also regarding they could just move out, you realise that these type of shops usually have very long term leases, so it's unlikely that they would get out within the time frame of the pandemic.
Companies producing their stuff in the sweatshops, by exploited workforce, in the poorest regions of the globe. Then selling this stuff with an absurd markup. Companies held by family clans which have become richest on the entire continent. They don't have money for their rent, hmm....
As someone who lives in a (already expensive) US-based short term & seasonal rental hotspot, I have been consistently subjected to 10-25% annual rental increases for going at 7 years straight now.
Many peers and locals have emotionally or otherwise fought against the rise of these short term real estate schemes. Something to the effect of "Neighborhoods are for neighbors" as the slogan goes...constantly griping about it one way or the other.
But it's a personal choice to putup, so I just shutup and carryon while appreciating the city that much more. Yes, the trend has caused me financial challenge and the inconvenience of having to relocate around town more often that I'd like, creating stress and sacrifice, but I've always accepted and adapted.
Now here we have the black swan of 2020 and the airbnb money tree has dried up died in the scope of <2 weeks. Properties that typically gross 10-15-20k monthly during peak seasons are suddenly at or approaching ZERO rental income.
The amount of these properties in my area is conservatively 50%, though would some say 75-90%. Tough to know forsure given the 'rougue' players. If you add up the volume, density, and exorbitant prices - this is going to be a massive overdue fallout in residential rental rates.
So let the market correct itself and find a new low/equilibrium. May the highly-leveraged, over-extended, get rich quick get lost quick ... and with that put all these prime properties within reach again for those who do call this city home and hold it down year round.
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[ 3.1 ms ] story [ 169 ms ] threadThe company was pretty central in Camden, my fitness center, too. I found it more cheaply and uncomplicated to just rent Airbnbs in the area for 3 weeks, sometimes jumping apartment every second day, then go through the completely hostile long term rental market with substandard flats far away which would have cost me 1h+ in each direction each day.
So yeah, Airbnb was great for me but is prop. toxic for London as a whole.
[1] https://www.resilience.org/stories/2017-08-03/book-day-corru...
[2] https://www.theguardian.com/artanddesign/2019/sep/10/push-fi...
[3] https://www.theguardian.com/money/2019/apr/17/who-owns-engla...
[1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
For my 3 properties that covers maybe 50% of the shortfall I'll see this summer.
(I'm not saying it's right, but it's happened)
It's fantastic for "tourists" (even though you were there 6 months you were essentially a tourist) at the expense of residents.
Unfortunately see it every day as I'm based in New Orleans which is a tourism-dependent city and ABNB has just been devastating for locals who can't afford to buy property.
Why you don't blame city hall that refuses to build new housing, and d milks tourism for everything at expenses of locals?
How many apartments are on Airbnb? 10%? And probably only in centre.
And some people like me actually stay in airbnbs long term. It is easy to negotiate reasonable price outside of tourist season. Normal landlord is way too expensive and does not bother with basic maintenance.
It is xenophobia, because many cities are blaming their problems on 'tourists'. But those are often foreign workers and students.
With an assured shorthold tenancy in England it's quite difficult to evict tenants in the first six months; deposits must be protected and held by an independent organisation; there are some legally mandated safety checks, etc etc.
“I’ve always been a survivor, in life and in business. This coronavirus epidemic is not going to put me or my companies down,” says one Airbnb influencer on YouTube.
To be fair, it was pretty hard to fathom what might knock out the entire tourism industry of a whole city, let alone the world. I mean it's been written about by various people, but who really considers pandemic risk while doing the rental arbitrage?
And likewise with risk in general, we tend to think of things that can specifically happen to an investment, eg the tenants wreck your place, or the mortgage rate changes. We tend not to think so much about this sort of thing, even though infectious disease is a thing everyone has heard of.
I had to wait two weeks to speak to someone, yet had been immediately notified on the site, twice, that I qualified for a full refund (which I took screenshots of). The wording in their policy also qualifies me. However, they're reneging.
It has ruined housing for the neady, and broken the diversity within cities.
Someone please tell me one benefit of Airbnb for society? Not the individual, and I will eat my words.
Thanks.
Here's how it worked before the internet: You the property owner would engage a local estate agent [realtor] and they would find tenants for your property. There were both short and long term rentals. Most of the time it would be rented out to someone local. But if someone from another country wanted to do a short term rental, they would contract a company who would have a presence in the foreign country and would in turn be able to contact local estate agents by telephone, get particulars sent through the mail or fax (or if it was really urgent, read out on the phone), and these would find their way back to the prospective tenant.
Sure it's not as smooth as clicking on a website, but it was still a thing that was done.
(In fact these intermediary companies still exist and are still used especially by businesses that want a full service and don't want to deal with the randomness of Airbnb. I knew someone who worked in a Japan-England company back in the 90s http://www.redacstrattons.com/)
You couldn't misrepresent the effect on regular working people more.
It has been an enormous benefit to travelers of all kinds. It has made a huge variety of properties available for short-term rental, and because these rentals are often less expensive than alternatives, it has made travel possible for many who previously couldn't afford it.
The benefits are greatest for those who want to travel to expensive places, and to places that have few hotels -- that is, for travelers interested in most of the world's destinations.
Airbnb has also helped ordinary people to fight back against the powerful hotel lobbies. Perhaps this isn't a problem in some countries. But it is a grave problem in the United States, where the hotels fight hard to prevent any competition. See especially New York: https://www.nytimes.com/2017/04/16/technology/inside-the-hot....
(I've used Airbnb a few times but otherwise have no connection to it.)
At the expense of the local populations, especially the working-class and lower socioeconomic classes. Not to mention they've basically become hotels without any regulations. I wouldn't call this a good thing, and certainly don't think travellers should benefit over locals.
Airbnb is just taking advantage of a more ugly situation ( sure you have witnessed displeasant adventures encountered in buying house, going to holiday or move out from a flat). However I wouldn't be surprised if they have speeded up the process you blamed.
Please note that I do not work nor ever used Airbnb before.
Is your question one of corporate citizenship, or legal obligations?
If the former, yes.
If the latter, then some countries have legal requirements, like https://ec.europa.eu/info/business-economy-euro/company-repo... regarding reporting requirements about certain social practices, for large companies in the EU, or https://www.lexology.com/library/detail.aspx?g=f2e36590-95bd... which suggests that Germany may "require businesses to establish a sophisticated compliance management system to protect human rights in their global supply chains."
> Airbnb seems to provide a service where their clients are fine with. .. Airbnb is just the consequence of ..
I don't understand your statement. Surely there's any number of organizations which provide illegal and/or immoral services, which their clients are fine with. That doesn't mean those services should be allowed to continue, does it?
In US history, the Pinkertons were a private detective agency/security force. Its clients hired them (among other things) as strikebreakers. Their anti-union activities included using machine guns, tear gas bombs, and clubs to break up union meetings.
Their clients were "fine with" their services, which were "just a consequence of a number of decisions made in the past" and which met "the current needs" of their clients.
I don't think these actions of the Pinks were beneficial to society, or morally correct, or something that should be allowed to continue.
While, if I understand it, your argument seems to accept that anything which happened (and was legal, and of benefit to its customers), should be allowed to happen in the future, rather than recognizing that some behaviors are so detrimental that they should be made illegal, even when they benefit some.
It's even worse many of these don't even have sustainable business models it's all about growth and increasing stock prises while leaving a trail of burned soil in their wake. Prime example uber or all the bike and scooter rental companies.
Just to think how many of my friends have an incredibly high percentage of their net worth in stocks ...
I can imagine that other countries also have similar products where it's difficult to pause the regular investments unless invested manually.
[1] https://www.investopedia.com/terms/l/leverage.asp
For me leverage is any kind of a bet that "I'll be able to support this situation". There's no practical difference between a "brokerage margin call" and a "need money in my life call" and "oh shit I'm out call".
The conventional wisdom is based on theoretical returns, not actual performance of investors. Look up how did the average investor do in the legendary Magellan Fund. Much much worse than the fund.
Selling stock because you need money is easy and to be honest, a 20% drop is really not that bad. Stocks are still super liquid right now. Also, investing in corporate bonds, "safe" mortgage REITs, foreign bonds, which are all usually considered to be safer than equities would have caused a much bigger loss. All things considered, equities are holding up quite well. Unless you think they should've been in cash, but it would've been weird to miss years of good returns just because a black swan event could happen
That's why saying leverage isn't just "a technicality" at all. Being leveraged means that you could have lost everything with just a 20% drop. You can't just ride it out if you get liquidated because you couldn't meet your margin calls. See, I don't know how such a "mild" drop would affect most people in the short/medium term unless we are assuming they have to cash out most of their portfolio or are retired. But that's not the case with leverage. There's a big difference between -20% and -100%
Yes, it sucks to sell at a loss. But it's still a smaller loss than the opportunity cost of not investing that money.
So: just because people have had most of their money in stocks doesn't mean they necessarily still have. The beauty of stocks, especially for small private retail investors, is that they are extremely liquid, and not everyone uses a "buy-and-hold" strategy.
Leveraged to the hilt most likely... Lots of fools have discovered how to run their private Ponzi scheme on themselves.
He has more expenses than your average long-term rental. He's probably making more money (thanks to his active management) but it's not crazy profitable, far from it.
One possibility is that he is renting long-term and then subletting on Airbnb. If the bookings stops, then he'll be burning lots of cash rapidly.
Airbnbs have destroyed the housing market here and recently the hosts have had to switch to long term rentals... Bringing relief temporarily, but they will be right back to their old ways as soon as this Pandemic is over.
Reddit threads of this discussion on Toronto:
https://www.reddit.com/r/toronto/comments/fplfke/scumbag_air...
https://www.reddit.com/r/toronto/comments/fpz6yj/update_scum...
Also the massive bailouts, the drop in real GDP, may finally lead to inflation and higher interest rates and an end to world wide booming property markets.
But I think Airbnb is just a scapegoat for broken market. You can see similar problems in commercial rental market.
In London it's now apparently common for whole blocks of flats to be arbitraged this way. There was an investigation in Wired recently: https://www.wired.co.uk/article/airbnb-scam-london There are bylaws about this in the UK too, but enforcement is very weak to non-existant. In fact the government recently refused to renew powers that some local councils were using to enforce registration and minimum standards on landlords (https://www.bbc.co.uk/news/uk-england-merseyside-51076128).
It might even that they are planning to put those owners that they are renting from into so much financial trouble that they could buy up properties at a discount.
I don't have much sympathy for property speculators etc., however I have even less sympathy for big corporations abusing systems not meant for the to concentrate even more wealth onto themselves
The landlords of these shops don't have any incentive to throw these merchants out because of a few months of missing rent during a time in which most retailers are forced to close. Where should they find any alternative tenants for these properties? Nobody could even move in right now, much less sell anything there. The first time at which they could potentially find someone to market these properties to is when the restrictions on the already-existing tenants are most likely being lifted as well, which means they will start paying rent again.
The only risk for the merchants is that the landlords might take them to court in order to make them pay the missing rent. But that is a rather calculable risk, these big merchants all have legal departments able to handle this risk, and even in the worst case (they are made to pay the full sum) these court decisions will take months until they come into effect, so the primary goal of conserving liquidity during the forced business shutdown time has already been achieved.
Imagine that in places in Czechia and Poland where I was renting long term, the landlords were returning the full deposit in cash, in exchange for the apartment keys.
https://rdrn.substack.com/p/20204-the-crash-of-rent-to-let
There is a pandemic.
You don't know who stayed there before you
The owner has zero safety/cleanliness standards to comply to
You are putting your trust in a company whose only innovation is a regulatory loophole
The price reflects the good.
Many peers and locals have emotionally or otherwise fought against the rise of these short term real estate schemes. Something to the effect of "Neighborhoods are for neighbors" as the slogan goes...constantly griping about it one way or the other.
But it's a personal choice to putup, so I just shutup and carryon while appreciating the city that much more. Yes, the trend has caused me financial challenge and the inconvenience of having to relocate around town more often that I'd like, creating stress and sacrifice, but I've always accepted and adapted.
Now here we have the black swan of 2020 and the airbnb money tree has dried up died in the scope of <2 weeks. Properties that typically gross 10-15-20k monthly during peak seasons are suddenly at or approaching ZERO rental income.
The amount of these properties in my area is conservatively 50%, though would some say 75-90%. Tough to know forsure given the 'rougue' players. If you add up the volume, density, and exorbitant prices - this is going to be a massive overdue fallout in residential rental rates.
So let the market correct itself and find a new low/equilibrium. May the highly-leveraged, over-extended, get rich quick get lost quick ... and with that put all these prime properties within reach again for those who do call this city home and hold it down year round.
Clearly, I welcome the chaos ;)
I’m sure that will be a shorted lived occurrence. Opportunity for quick money always brings out the rogues. :|
Banks will only lend at greater than 40% deposit, because that's how much they feel the market might fall.
Not a strong recovery signal in that sector.