As you can imagine, we’ve heard just about everything people have to say about investing in real estate during our twentysomething-year tenure in this industry. One of the complaints we see frequently is regarding ethics. Is it ethical to invest in real estate? Are landlords evil? Some people are thoroughly convinced that this investment method should be abolished altogether.
The Three Primary Ethical Objections to Investing in Real Estate
Obviously, we would disagree! That said, the question of ethics in real estate investment is essential. We don’t need to ignore how the industry can—and has—harmed people. What we can do is take in these criticisms, examine ourselves, and modify our strategies to promote ethical investing that benefits local communities.
Objection 1: Speculative investing ruins local markets for everyone else.
Speculative investing is most commonly a short-term strategy that involves snapping up properties in markets as they heat up.
Now, there’s nothing wrong with getting your foot in the door of a hot market! However, we often see flippers who buy properties, renovate them, and hold them vacant until they see the perfect opportunity to maximize capital gains. This drives up home prices artificially and can disrupt housing supply when done en masse. It can also disrupt local buyers who want to own and live in the properties and would like to benefit from the discounted purchase and renovation costs.
Objection 2: Real estate investors contribute to gentrification and harm vulnerable populations.
An individual investor can’t cause gentrification. (For those who need a refresher, gentrification happens when a wealthier demographic moves into a lower-income area, ultimately displacing the original residents.) This can happen when large-scale investment conglomerates develop large areas. Home values, costs, and rent may increase to a level untenable for vulnerable residents.
However, investment dollars…