Real estate investing has gotten somewhat of a bad rap lately. With hundreds of thousands of Americans at risk for eviction, some media outlets and tenant advocacy groups have brought into question the ethics of investing in real estate. In challenging economic times, it may seem easy to label "good guys" and "bad guys" in a real estate transaction, but the reality is that real estate continues to be one of the most ethical forms of investing, providing much-needed property for people to live, work, eat, and play across the globe. Here's why.
Real estate is essential
Real estate is an essential part of our economy. Everyone needs a place to live. We need commercial real estate like shops to purchase goods, offices to conduct business, and hospitals and schools to help care for and educate our society. Real estate investors help meet demand for these properties while bridging the gap for those who cannot afford to buy on their own.
Even those who can afford to buy still rely on real estate investors. Real estate developers help build homes, communities, strip malls, and beyond. Fix-and-flip investors add tremendous value to the marketplace by improving outdated, unsafe, or undesirable properties into liveable, move-in-ready homes.
Some argue real estate investors shouldn't be able to access or deny essential services, such as housing. I personally believe investors aren't denying access; rather, providing easier access than the alternative of purchasing land and developing on your own. Everyone has the right to buy property and build their own store, house, or other building -- but that's not always practical or accessible. Real estate investors provide housing for those who need an alternative.
It's all about supply and demand
It's easy to look at high-priced rental and real estate markets and put a large portion of blame on the landlords and investors. But it's not investors that drive prices up or down -- it's supply and demand in the marketplace as a whole. If rental rates or real estate values are expensive in your area, it's because there's enough demand from tenants or buyers to consistently drive prices up. There are many markets where rent and real estate prices are far more affordable because prices reflect demand in the market.
Real estate investing is a business. Just like your favorite coffee shop, clothing boutique, or local grocery store, landlords need to earn a profit. That includes adjusting for increased costs of property taxes, insurance, and building maintenance over time by raising rents. If and when demand diminishes, values and rental rates will decline with it.
Outliers exist, but real estate investing is ethical at its core
Eviction without cause, not maintaining a property (i.e., being a slumlord), charging far too high of rent for the quality of the property, or violating fair housing laws by denying access to housing based on race, gender, identity, or beliefs is unethical. There is no denying that some investors operate in an unethical manner, but the few do not represent the whole.
Most investors run their investment business in an ethical way, maintaining and improving the property, upholding the terms of the lease, following the rules and regulations of landlord tenant laws, and providing much-needed solutions in the marketplace. The question of ethics surrounding real estate investing are often derived from the few outliers or are a result of outside factors.
People need to be able to look past the market swings and cycles that favor landlords or tenants at any given time and look at the intrinsic value real estate holds and accept the fact that investors help provide it.