I don't buy into any of that argument too much. The "get rich quick" idiots have been around this game for as long as I can remember. They were getting burnt in good cycles and in bad.Therein is the rub... you're right. The larger deals and properties are not for small investors. People who have the money to invest will go for the tax benefits -- especially business owners who aren't as limited to take advantage of those benefits. But, the small investors will try to play the game with the big boys and quickly get their wing trimmed.
I am saying this influx of renters will create a lower and mid-level market. That movement will bring out the marginal investors who think they can get rich quick. Those investors will create a "shake-out" market when they actually are faced with the hard day-to-day truths.
(I have known a few people with money who followed these hapless investors around to pick up the windfall deals. And, yes, the money guys did quicky make pretty good profits.)
We saw a mini version of this type of market in LA at the end of the 1970s, the mid to late 1980s and the first part of the 2000s. Everybody wanted to invest with OPM (other people's money) and get on the bandwagon. It ended badly for them as a group in each one of those cycles.
The basics have never really changed.
What people don't understand is that the money is in the delta, and you have to underwrite the delta. Capitalizing value on an NOI, while not technically wrong, is not the right way to underwrite. This, however, is what is taught in the mainstream, and therefore it's what everyone does. And with this approach, you'll lose money in good cycle and bad...
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