At least in London, I have heard it claimed [1] that foreign investors buy properties and leave them vacant, as London's rising house prices represent a sufficient return on investment and remove the inconvenience and risk of dealing with tenants.

Of course, it's hard to measure this stuff precisely, because given the current attitudes, if you were doing that the last thing you'd do is report yourself to the government.

[1] https://www.theguardian.com/society/2017/aug/01/names-of-wea...

I thought it was a way of moving your cash (whether it is legit or not) outside your country.

To stop your home government expropriating your money and also as a bolt hole if the peasants revolt and start hanging people from lampposts.

> At least in London, I have heard it claimed [1] that foreign investors buy properties and leave them vacant,

Maybe it's just hearsay, but a friend of a close friend of mine works as a project-manager (not sure what the exact term is) on several construction sites in and around London. According to him the vast majority of the real owners behind said projects is unknown, as in he doesn't really know for whom he builds said projects.

Why on earth would somebody who's interested in profit leave a property empty, rather than cash in on rent from tenants? In other words, why would investors choose loosing money over getting income? It's not like its hard to get tenants. It's not like it's hard to manage tenants, and it's even easy to get rid of them if you need to in the UK (unlike in some other countries). There's a whole support industry for finding and managing tenants. It's almost effortless.

I'm afraid I don't believe stories like that quoted above. As an edge case it may occasionally happen (especially at the high-end, e.g. flats that cost > £2 mil), but the normal case is that buyers cash in on rental income. Moreover, I posit that the number of properties left vacant is so marginal that it doesn't affect London's housing market.

For example there has been lots of building activity in Aldgate, near Old Street, around Stratford (former Olympic area), and in the Docklands. They are mostly studio flats, 1-, or 2-bedrooms, all tiny, and all quickly snapped up. London public transport (e.g. Central Line) is insanely busy now in parts because so many new people have moved to e.g. Stratford.

Source: Anecdotal, I speak with a lot of builders, property developers, and architects in London.

> Why on earth would somebody who's interested in profit leave a property empty, rather than cash in on rent from tenants?

IANAL, but I did read once (apologies, can't find the citation), that depending on the ownership model, you can write down the cost of "no rent" on your tax bill. So if you have revenue from other sources other than property, it's not much of a hit to leave it empty and make the gains elsewhere in your portfolio.

I've worked with letting agents as a tenant, and it gave me the impression they're all borderline scam artists whose business model revolves around charging BS fees and penny-pinching with shoddy workmanship.

Do you suppose, when you're a foreign landlord with a poor command of English and no ability to visit the property in person, that the letting industry somehow becomes honest and straightforward?

Yes, there are a borderline scammers, I've been working with such people myself, as a tenant and a property owner.

   foreign landlord 

Why on earth would you buy in London in these circumstances, why not put you money in an ETF?

Let's quantify: what fraction of the London property market does that apply to? My hypothesis: < 0.2%

  Why on earth would you buy in London in these
  circumstances, why not put you money in an ETF?

Because you're a money-laundering oligarch (or a upper class person in an oppressive regime, worried the state will appropriate your assets) and if you're spending £10 million or so on a property, you can afford to conceal your identity with an intermediary in Jersey, Guernsey, BVI, Panama...

    conceal your identity 

You can also conceal your identity when buying an ETF. An EFT almost certainly has a higher ROI than empty property.

And if you are investing via intermediaries, then they can handles the letting process so as to maximise the ROI.

> Why on earth would you buy in London in these circumstances, why not put you money in an ETF?

Historically London property prices have risen much faster and fallen more rarely than ETFs, before even beginning to think about the possibility of rental incomes

Besides all that, TFA explicitly says that the rent is the clean money that was laundered.

How does buying a building with dirty money and later selling the same building clean the money anyway?

> Why on earth would somebody who's interested in profit leave a property empty, rather than cash in on rent from tenants? It's not like its hard to get tenants. There's a whole support industry for finding and managing tenants. It's almost effortless.

Wear and tear.

Cost of wear-and-tear is marginal in comparison with lost rental income.

Moreover, there is (some) wear-and-tear even if unoccupied, especially if not heated properly. Unoccupied properties are also more likely to be squatted, and vandalised.

Those are the tales people told by people who are not landlords. The real estate investment money comes from two different categories:

1. Landlord leverages the cashflow to acquire property and bets on appreciation of real estate. Margins are very thin. These are the people who buy buildings when the asking price is less than 10x of a yearly rent roll and sell building at 12x-13x of yearly rent rolls ( longer for commercial). They are leveraged to the max. Think Trump Organization or Kushner Companies or your average landlord/slumlord.

2. Purely investment plays. Buildings/units are owned outright. Those typically are multi-hundred thousand to multi-million dollar condos. They are either used for hedging, money laundering or diversification. Tenant in this cases is irrelevant unless it is a specific kind of a tenant. One can see this all over NYC for example. Storefront and condos that sit empty or years.

- An investor's margin on appreciation of real estate will be much higher if it's rented out rather than empty.

- An investor who owns whole buildings/units has massive economies of scale from renting out.

- Hedging, money laundering or diversification are orthogonal to letting/leaving-empty, see also the original article.

- I don't see empirical evidence of buildings/units are are owned outright and left empty in London and a substantial scale. Please supply quantitative evidence to the contrary if you have any. Where are all those empty building in London?

- Regarding landlord/slumlord. As far as I'm aware, most large developments are done by investment funds insurance etc. Names like Trump and Kushner are too emotionally charged to lead to a serious discussion, and I'd appreciate if you could quantify what fraction of the London property market is left empty for speculative purposes.

I lived in London and saw that first hand - also houses bought to rent out, but with no rush to bringing to market - they get to the market eventually, but this can take months.

I now live in a small seaside town and one of the issues here is people buying 'cheap' houses to own as a holiday house. They might be here every weekend, or maybe just a few weeks a year. This is taking away a house from a 'local' - someone who would either buy or rent to have as their main residence. To this end I'd rather see them on AirBnB than just empty - at least that way people are enjoying the house/location and spending money in the area. (Though I'd obviously rather see someone who lives and works here able to afford the houses in the area).

Yeah, that is certainly the reasoning that pushing prices up is based on in London.

Another angle is that more expensive properties are more efficient, so the bubble of foreign investment in property has lead to a rise in the construction of hyper-premium properties which the market does not especially demand, and a lack of construction of mid-range or lower tier housing, pushing the prices up in those sectors.

   rise in the construction of hyper-premium 
   properties which the market does not 
   especially demand,

If you look at the parts of London with extreme building activity over the last few years (Nine Elms, Battersea Power Stn, Docklands, Aldgate, Old Street, Stratford, Kings X), you'll find that almost everything falls into the studio, 1-bedroom or 2-bedroom range. There has also been a lot of development of commercial student accomodations, see e.g. [1]. Pretty much the antithesis of "leaving things empty".

[1] https://www.theguardian.com/education/2018/may/27/revealed-d...

Let's take a pass on the dingbat apartments and look at the single-family-home-wingdings, which can also be stuffed into REITs. The corrupt REIT doesn't care if it buys 1 or 10 houses, so long as they are bought. The local owners cheer the purchase even if the house sits empty. Anyone who wants to buy into that market has to make more money. So they negotiate salary. The companies then pay more in salary. Corporate profits are at an all-time high, so it's hard to justify not paying the salary, especially in the face of housing costs.

So now the would-be owner who finds themselves stuffed out of a remarkably expensive housing market (it increased significantly between the interview and the start date) moves into the rental market, which, while high, is nothing compared to the first few years of home ownership. Someone who could afford a house in the local market can afford the rent, particularly if they make the painful decision to forgo pets, or (as in our case) give their pets to their parents. "For a couple years, we'll be back".

I've been thinking about this lately because I want to rent out my flat and move abroad.

It turns out that, if I take into account my mortage, building charges, and expected empty time between tenants the minimum I can charge for rent is... actually kind of similar to the market rent.

It would seem like there is a floor to London rents, and it is related to the mortage payment, which is related to the value. If the value was 50% lower, then landlords renting at the current level would be undercut.

I understand why you think that is the minimum. But, let's say that your mortgage is 100, building charges 10, and expected empty time cost another ten, 120 in total. How is charging 0 (not being able to rent it because no one is willing to match your minimum) better than, say, renting it for 110? I assume that you already own the property, so you have no choice of directing that mortgage to other investment opportunities.

Do you pay income tax on the rental income as well? This would add about %30-45 to your mortgage payment breakeven as well, no?

If your mortgage payment is $1000/mo, you need that in after-tax dollars in addition to gap months and maintenance. This pushes rents up for single property landlords in the top marginal rate, or am I missing something.

You only pay income tax on your net profit (in the US at least).

Net expenses, but the equity in the property seems like income (as you can tell iana landlord).

Income taxes likely contribute a significant percentage of the difference between mortgage payments an rent prices. For a REIT, this is different, but for an individual owner renting out a second property and paying income taxes on the rent income, would this not create a significant difference?

This is all predicated on the idea that somebody else should pay your mortgage for you no doubt ...

Well if they rent it out without paying for their mortgage the renter will be evicted as well.

Yes, but I just wanted to be clear that’s what we’re talking about. The expectation that you should be able to claim the capital gains that somebody else has paid the maintenance on.

Rental value sets the sale value, not the other way around!