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Originally Posted by jaxsurf
Why is this? Because you can?
Like tripled eluded to, expenses rise. Manager, leasing agent, maintenance, utilities, insurance and property taxes all rise with inflation. Rents increase to keep pace with the market a.k.a inflation. The only thing that doesn't rise is the monthly mortgage payment. That stays fixed based on the rate and loan amount on the day of purchase. That is where you make money over time in real estate.
For simplicity sake, lets say that for every dollar in rent, there is 50 cents worth of expenses and capital reserves, 40 cents worth of debt service and 10 cents of positive cash flow. Over time the pressure of inflation eventually doubles the cost of everything. We now collect $2 in rent instead of $1, expenses are now $1 instead of 50 cents. The debt service remains fixed at 40 cents because the loan payment doesn't change. Cash flow is now 60 cents instead of 10 cents or 600% greater. This is how inflation benefits property owners with sustainable amounts of leverage.
In addition, the value of the property has doubled, because the rents have doubled. If you put 25% down, you now have your original 25% back plus 100% of the original purchase price or a 400% return on your original investment. This is how you beat inflation with reasonable leverage on income producing real estate.
This type of financial education isn't taught in school. Students either learn it at the dinner table or must seek it out on their own. We should be doing more to educate our children on the basics of personal finance and economics. The more they know, the less likely they are to be taken advantage of.
<Political Rant> Racial inequality is being politicized do divide the country and occupy the minds of the population. This division and distraction is what keeps the elite in power. We should really be focusing on reducing "systemic poverty" thru financial education. The more people learn about how the system is rigged against them, the sooner it will be corrected to work for all.
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Originally Posted by Cookenbauer
The cliche of attacking those who "flip burgers" will never go away. Opponents of minimum wage get way too caught up on the concept of low skill. And they miss the point. Skills are obviously important and not all jobs are equal,, but labor is a commodity that should be compensated appropriately. The fact that you require employees to be at your workplace is value in itself. Their time is arguably just as important as any skill they are requiring. Walmart greeters, information desk clerks, parking attendants are paid to be in position...not necessarily their skills for saying hello, or you can't park there.
Attempting to trivialize someone's labor efforts is simply wrong. And no, I'm not implying that low skilled workers should be highly compensated, but the concept of a fair wage for a fair days work should be the standard. And that standard should be to to live with some dignity. Otherwise we start exploiting labor. Spare me the kiosk and automated argument. Businesses will do anything they can to reduce costs and overhead. They aren't withholding those machines because the goodness of their hearts. If they can do it and have the means, they eventually will.
There comes a point where the cost of labor exceeds the value of labor and replacing it with automation makes sense. In some cases supplementing labor with automation can improve the customer experience. Some automation actually increases the hourly value (productivity) of an employee, while reducing the number of required employees. The McDonalds kiosk has never gotten my order wrong, but mumbling through a face diaper has resulted in several mistakes. Without the order takers, the food preppers become more productive because they aren't remaking a burger without ketchup.