Being a Landlord is Cool Now

Chances are you thought about about buying an investment property at some point during the last 5-10 years. We all did.

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Last week, indie actress darling actress Zooey Deschanel and Property Brother Jonathan Scott announced they were are getting engaged. Some longtime fans of Zooey found it humorous because The Property Brothers are known for being a little cheesy. Looking back on it. They were ahead of their time.

In 2011, they wore tight dress clothes, focused on rehabbing homes, had a smug attitude. They weren’t construction guys or blue collar types that you would normally see remodel homes. They just seemed like regular middle-to-upper middle class strivers who wanted to make money quickly. Their show premiered in 2011, right after the Great Recession ended. It was the beginning of the great Landlord Wave that engulfed society. Obsession with property and cash flow.

Soon everyone wanted to become a Property Brother. Real estate speculation went mainstream. Becoming a landlord suddenly was cool. Cash flow. Assets. Real estate became a part of culture.

Every Era Has a Guy

I’ve seen many types of guys come and go. Remember the 2000s and the poker fad? Regular people got obsessed with playing online poker and took it seriously. ESPN would show poker tournaments on television. We all had a family member or friend who got too deep with it.

A few years after that the poker guy faded The Chef became inexplicably prominent in American culture. Both Anthony Bourdain and Guy Fieri had hit TV shows. The Food Network became popular, and Millenials were obsessed with cooking.

Today, it’s the Landlord.

The AirBnB Revolution

Before Airbnb, Landlording was not cool. It was seen as a huge pain in the ass. Traditional landlording was often seen as a significant commitment, fraught with challenges ranging from tenant disputes to maintenance issues. Additionally, being a landlord was perceived negatively, especially if they were seen as prioritizing profits over tenant welfare. Many literature and film depictions of landlords exist and they are not positive.

Buying a small handful of apartments was not thought of as a sexy way to get rich or build financial security.

You can even see Arnold Schwarzenegger in this video discussing his goal of immigrating to America to own an apartment building. Live in one unit and collect rent on the rest of the units. That was the dream.

However, Airbnb's model was launched in 2008 and became popular during the last 10 years. It introduced a more casual, flexible, and socially-acceptable form of landlording. It reframed the notion from one of strictly business transactions to one of shared economy, community, and cultural exchange. By allowing individuals to rent out a spare room, a guest house. It changed the culture of what it meant to be a landlord. Anyone could be a landlord.

Airbnb just totally nuked the concept of residential zoning. By challenging and often operating outside of established zoning and housing laws, Airbnb was able to expand swiftly and capture significant market share, betting that regulations would eventually adapt to new realities introduced by the sharing economy.

Low Interest Rate Environment

More than AirBnB, it was the unique financial environment we all found ourselves in for the past 15 years. A long stretch of time of low interest rates and low mortgage rates. This even accelerated during the pandemic when the government gave away a lot of free money.

While the Fed doesn’t directly set fixed mortgage rates, it does influence mortgage rates. Recently, the central bank has boosted its policy rate from near zero because of inflation. It’s the most aggressive raising of interest rates in 40 years. Today mortgage rates are over 7.4%. A few years ago they were 3%. In a low rate environment, middle class and upper middle class people could could put a down payment on a second piece of property and accumulate multiple streams of income. Look at how low rates were in the years 2010-2022.

A higher rate environment will probably cool off some of the Landlord culture we’ve been seeing.

These new landlords will have to make the decision in this new high interest rate environment:

Do we keep the old house (~3% rate) and buy a new, bigger, more expensive house (~7%) rate and rent out the old one?

Or do we sell the old house and put that money towards the new house, dramatically lowering the mortgage payout?

Especially, in states with high property taxes people may strongly consider the 2nd one.

In This Newsletter

1) The Side Hustle and the Passive Income Industrial Complex. Property is one small component of a larger ideology during the last 15 years. Hobbies are now only for the upper middle class and above. Culture has been telling everyone else that your hobby has to double as a side hustle.

2) Masculinity and Landlordism: Why was Landlordism coded as the most masculine of any of the side hustles of the past 15 years? The case of Grant Cardone.

Passive Income Industrial Complex

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