September RIA Roundup: Buying vs. Renting, Interest Rate Cuts, & The Common Good
Greetings, investors! Welcome to the September roundup.
If you’re a homeowner, you’ll be VERY interested in this month’s lead story on Buying vs. Renting. Let me just put it this way: if you think your primary residence is a good investment…you might want to think again.
After that, you’ll find a summary of all the important real estate & economic news from September, my monthly portfolio report, and my picks from around the web. My final thoughts essay is about “the common good” — an old-fashioned idea that feels more relevant than ever.
Enjoy!
Lead Story: Buying vs Renting
You might assume that everyone who rents does so because they can’t afford to buy their own home. But this isn’t true — I should know, because I’m a committed renter. (You heard me right: I own 25 rental properties, but NOT my own home.) I read a recent WSJ piece about so-called “millionaire renters”, so I’m clearly not the only one who rents by choice.
There’s all sorts of reasons someone might choose to buy or rent. But there’s also the cold, hard numbers of the question.
In my latest article, I take a deep dive into the financial side of the buy-vs-rent question, and it reveals a surprising truth: if you own your home and you’re reading this, you’d almost certainly be better off renting. (Financially, at least.)
Don’t believe me? Check out the numbers for yourself…
Also on the RIA blog this month:
Portfolio Reports: It’s been a tough summer in my rental portfolio. August produced less than $4K in cash flow (not good) as I dealt with several big issues including a giant tree that fell on one of my houses. Check out all the gory details in the August Monthly Portfolio Report, if you dare!
A new “Property Spotlight”: Continuing my tour through my older properties, I published a new Spotlight on Property #6, which is a bit of an outlier because of how HUGE the house is — it weighs in at just over 2500 square feet (!). How has it performed as a rental, given its large size? Check out all the details.
An oldie but a goodie: If you’re curious about whether Section 8 is the right strategy for you, here is my complete guide to Section 8 investing for landlords, covering all the risks & rewards.
My picks from around the web this month:
Jonathan Clements, the long-time financial writer at the Wall Street Journal who later founded HumbleDollar.com (where I was honored to write a guest post last year), writes bracingly about his terminal cancer diagnosis, and why he’s still staying grateful.
Chad Carson takes an 18-year deep dive into his first rental property, and shows all the numbers to determine whether it was a winning investment. Great stuff here – this is the kind of “real talk” and transparency that I appreciate, and that I also try to create with my Property Spotlights.
Why can’t we quit the penny?
Do you see blue the say everyone else does? Test it here.
And now this!
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In Other News…
Photo Quiz!
Why were these three images in the news recently? Keep reading for the answers…
Real Estate & Business, Domestic News
Mortgage rates hit 18-month low. They just keep falling. And mortgage refinances continue to surge.
Inflation cools to 3-year low. This continues a long trend of falling inflation.
Fed cuts interest rates aggressively. The larger-than-expected 0.5-point reduction begins to unwind the inflation-fighting rate increases that began in 2022. More cuts are expected.
Rent growth slows in August. Zillow’s most recent Rental Market Report shows rent growth slowing to just 0.2% in August – but that’s still up 3.4% from last year and 33.6% since the start of the pandemic. Rents for single family homes have increased faster, up 4.5% from last year and 40.4% since the pandemic began.
The average American family’s net worth is now over $1M. But remember high school math: that’s the mean, while the median is $192,000. Read more analysis of the Federal Reserve’s most recent survey of consumer finances.
Americans expect to retire earlier. Maybe the FIRE movement is having a broader impact on retirement expectations that we thought.
Amazon ends remote work for office employees. As of January, Amazon will require it’s 350K corporate workers to return to the office five days per week – this after requiring three days per week earlier this year. It’s not clear if more companies will follow suit in the coming years – but if they do, it will provide support for the ailing office real estate sector.
Surge in small business creation continues. A pandemic-era rush to start small businesses has, somewhat surprisingly, not subsided. Around 450K business applications are currently being filed monthly in the U.S., up from a pre-pandemic average of ~250K.
Campbell’s declares: “No soup for you.” After more than 100 years, the iconic brand will drop “soup” from its name, becoming just “Campbell’s”. This acknowledges the company’s growing roster of non-soup items in its brand portfolio, such as snacks. Not to worry, though – soup production will continue as normal.
FBI stats show largest drop in murder rate in 20 years. Contrary to the false narratives being peddled by some politicians (I’ll let you guess who), the crime rate continues to fall to historically low levels. Finalized FBI statistics for 2023 show violent crime dropped 3% vs. 2022, while the most serious crimes dropped even faster: murders were down 11.6%, while rape was down 9.4%. Preliminary numbers for 2024 show even steeper year-over-year declines in both violent crime and property crime.
International News, Science & Technology
Israel and Hezbollah escalate attacks. After nearly a year of skirmishes and rocket attacks along their northern border, Israel ratcheted up the pressure with attacks on Hezbollah’s pager and walkie-talkie network, as well as an intense round of more traditional air attacks. Hezbollah has vowed retaliation. Meanwhile, some 60,000 Israelis remain evacuated from their homes along the border; the same is true for at least 100,000 Lebanese.
First commercial spacewalk (A). For the first time, a spacewalk was performed by the crew of a vehicle owned by a private company. (The US government, through NASA, performed its first spacewalk…in 1965.)
Drug-free nasal spray could offer complete protection from respiratory illness. This story blew my mind: what if a simple nasal spray with no drugs in it could offer you 100% protection from colds, covid-19, the flu, RSV, and pneumonia? It’s not hypothetical.
Arts & Culture, Sports, and All the Rest
James Earl Jones dies. The legendary actor of stage and screen, who also voiced the iconic characters Darth Vader and Mufasa, was 93.
Dame Maggie Smith dies. One of the most decorated and respected actors of her generation, she achieved worldwide fame in later life thanks to her roles in the Harry Potter movies and in Downton Abbey. She was 89.
Shohei Ohtani makes baseball history (C). Ohtani became the first player in MLB history to hit 50 home runs and steal 50 bases in the same season. Unique in the modern era of baseball, he’s ALSO an elite pitcher, though he’s not pitching this season due to an elbow injury. It’s far too early in his career for GOAT conversations, but he’s already one of the most remarkable baseball athletes of all time.
WNBA adds a Portland franchise. The expansion team will bring the number of teams in the league to 15, following a year in which the average TV viewership of its games increased 170% to 1.2 million. (Not a typo – viewership nearly tripled in one year.)
Adorable baby pygmy hippo becomes a viral sensation (B). Born at a zoo in Thailand, Moo Deng is an unstoppable internet force – so much so that the zoo will trademark her name and patent her image.
Michael Jordan can’t sell his mansion. See? The stars, they’re just like us.
Final Thoughts: The Common Good
We have a big election coming up. Fundamentally, elections are a statement from the people about what they want their government — federal, state, local — to be doing. One of the very few things that still seems to unite all strands of the current American political fabric is the conviction that rich people and huge companies have become too powerful and influential. This has long been a belief on the left, but it’s an idea now fully embraced by the populist right as well.
What should government do about this problem, if anything?
I’m a free market guy, through and through. Capitalism is a remarkably effective and efficient system, and its performance has inarguably been superior to any other economic system. When individuals and companies are free to pursue maximum profit, they innovate, create new efficiencies, and compete against each other for market share. All of this improves products & services, and drives prices down — which is good for consumers, and for economic progress. (How do you lift people out of poverty? History points to a one-word answer: capitalism.)
But left unsupervised, capitalism will plant the seeds of its own destruction. It has two fatal flaws: first, it privileges short-term results over long-term impacts; and second, it ignores everything outside the individual unit’s pursuit of profit, classically called “externalities”. The system is (somewhat intentionally) myopic, both in time and space.
Sure, companies will create great new products and make systems more efficient in the pursuit of profit. But they’ll also exploit child labor, and dump harmful toxins into the environment. They’ll rapidly exhaust resources without an eye toward long-term sustainability. They’ll even create monopolies, thereby destroying the free market system that gave birth to them — a sort of greed-fueled financial matricide.
Capitalism clearly needs an adult in the room. That role is often played by government. Through our government, we tell companies “you can do whatever you like, but definitely NOT these things.” We set the rules of the road, turning the levers to the optimal settings that will allow capitalism to work its magic while limiting harmful side-effects. In short, WE are the guardians of the common good.
Amidst a shared and growing sense that big companies and the obscenely wealthy are running through these guardrails with impunity, governments — and the people behind them — are reasserting themselves. Consider all this recent news:
The CEO of the encrypted messaging app Telegram was arrested in France, accused of complicity in various crimes facilitated on the platform, and for failure to cooperate with French law enforcement.
Brazil completely blocked Twitter (I refuse to call it "X”) across the country in response to the company’s failure to comply with Brazil’s orders to suspend accounts involved in the spread of misinformation and hate. (This appears to have worked — after three weeks of whining about it, Elon Musk has now acceded to the original demands in a bid to get the platform reinstated in Brazil.)
The US Surgeon General has called for a warning label on social media platforms, due to its adverse effects on the mental health of users, especially children.
Governments are looking to quickly regulate AI — across the pond, the Europe AI Act passed in March, and Congress is also considering legislation on a bipartisan basis.
Google loses landmark anti-trust case. The government prevailed against Google, finding that they have maintained an illegal monopoly in search.
The Department of Justice filed an antitrust case accusing RealPage of colluding to raise rents. Through its rent-recommendation algorithmic engine, the software maker allegedly colluded with landlords to raise rents.
The DOJ also just sued Visa for monopolizing the debit card market, alleging that it used its dominant market position to force businesses to use its network and to prevent new competitors from emerging.
Exxon Mobil is being sued by California over a decades-long campaign of deception about plastics recycling. Exxon is a main producer of the petrochemicals used to make single-use plastics. (Sound familiar? It should: Exxon also ran a decades-long campaign of deception to hide the truth about climate change.)
Kamala Harris made raising taxes on the rich and big corporations a centerpiece of her economic proposals. (A remarkable four in five Americans support raising taxes on the wealthy.)
As it turns out…there IS something governments can do about it.
If the idea of the common good is having a resurgence, it may be because of a growing realization that innovators are not here to save us. At the dawn of the current technological age in the 1990’s, and until the mid 2010’s, tech companies and CEOs were given a privileged perch in society. They were creating miracles — or extremely useful products and innovations, at least — so nobody wanted to get in their way. They were going to improve all our lives, and usher in an exciting new age. Founder/CEOs were heroes, even saviors.
We foolishly forgot about capitalism’s fatal flaws, and those pesky externalities came back to bite us — hard. Social media is the best-understood example of this: a technology that seemed so promising at first, that allowed us to connect seamlessly with others, is increasingly recognized as a major threat to our kids’ mental health, to the national discourse, and to truth itself as disinformation spreads unchecked on the platforms. Social media companies don’t want to connect us to others; they want to capture as much of our attention as possible, and then sell it to advertisers. We’re now collectively aware of the very serious externalities this business model creates that, for too long, we ignored. (Half of Gen Z wishes social media didn’t exist; even as their time is consumed by it, they can feel how corrosive it is.)
The same dynamics may explain why labor unions have achieved a string of historic successes in the past few years, and now enjoy the highest level of public support since the 1960’s. Big companies may create useful products and services, but people are no longer under the delusion that those companies are on the side of workers.
Other high-profile stories have further helped to break the spell: Elizabeth Holmes’ buffoonery and fraud at Theranos; Sam Bankman-Fried’s outrageous lies and thievery at FTX. (Both those former CEOs are now where they belong: in jail, serving long prison sentences.) We’ve seen this movie too many times now. The rose-tinted glasses are off, and we’re finally seeing the system clearly, in full-spectrum.
These people, and these companies, aren’t here to save the world. They’re here to make a buck.
Which is fine. That’s what individuals and companies in a capitalist system are SUPPOSED to do. We don’t need them to be altruists (something SBF always claimed to be, one of his many successful misdirections.) Rather, we simply need to do OUR job, and enforce reasonable guardrails in order to protect the common good from the potential ravages of unconstrained profit-seeking.
Fortunately, it seems we’re finally beginning to take that job seriously again. Because as effective as the private sector is in many areas, there are things it won’t ever be able to do, that we must instead do through government. Placing appropriate constraints on the excesses of capitalism is just one example — there are many others:
creating the vital shared infrastructure that is too big and expensive for any private company to build (e.g., the interstate highway system, airports, water & electricity delivery, and broadband internet)
funding/managing functions and services that promote the common good in which a profit motive would be inappropriate, counter-productive, or unethical (e.g., national defense, universal education, fire protection, and much else)
providing funding and support to areas in which there is insufficient profit motive (e.g., basic research)
intentionally shaping the economic landscape to promote the common good (e.g., farm subsidies to ensure a consistent, affordably food supply; tax incentives to encourage investment in clean energy; etc.)
You might be surprised to hear an investor and business owner like me make an affirmative case for good government. But the reality is that we need government to do its job so that (among many other things) favorable conditions are maintained for investors and businesses to thrive. The common good is, inescapably, for all of us.
I’ll leave you with the best two pieces of writing I encountered this month, both of which illuminate the workings of government in surprising ways, and may give you newfound appreciation for it:
Perhaps you heard about Apple’s new AirPods, which will also be able to function as hearing aids. Apple’s innovation engine roars to life again, right? Actually…not really. Read Matt Stoller’s excellent piece on how this was made possible by more than Apple’s engineering prowess. In fact, the real credit for this innovation belongs somewhere else entirely: the federal government.
You’re familiar with the Oscars, the Emmys, and the Grammys, but the “Sammies” are the most important awards you’ve never heard of, according to Michael Lewis, author of Moneyball and The Big Short. He takes a fascinating deep dive into the remarkable work of some unassuming government employees, and the awards designed to shine a spotlight on their achievements.
Happy investing,
Eric
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
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