Episode 2: "Can We Build More and Pay Less?"
Curtis and Riley with the help of Riley's AI watch, Olive, meet with condo developer Sumir who tells them how development works.
Notes for Episode 2
Wow Sumir! You have developments going up all over the City. But what's with these crazy housing prices?
My smart watch has some questions for you too.
How do you set the prices for the condos you're building?
I forecast what people can pay once the building's finally done... five years from now.
How do you know what people can pay five years from now?
Tech is booming. Starting salaries are over a hundred thousand dollars a year. A professional couple with those salaries, can easily pay for my condos.
Sounds like a condo for the stars! Our well appointed lifestyle just steps away from the Bay!
Big companies will buy units for visiting executives. Foreign buyers will park their cash in San Francisco real estate. It's a good investment. Some units are even used for tourist rentals.
In San Francisco
Using bitcoin to buy real estate
Tax on foreign buyers, Toronto and Vancouver
Corporate rentals and Tourist rentals
Wow. We're competing with all that?
That's the way we sell these new condos. There are lots of ways I can get top dollar for them!
There are far more profitable strategies than renting units as a typical landlord:
Not basing rents or sales on lower prices
Even in tight markets, the strategies for developers and landlords isn’t to reduce prices
But if there were fewer regulations--- wouldn't the price come down?
That's just one of my costs.
What about the others?
I also have to pay for land, materials, labor, architects and engineers, fees and financing. Honestly, if ANY of those costs go down, I just make more profit.
If costs decrease, why not sell or rent the condos for less?
I can't charge less. I have investors and a bank to answer to. My financing is based on an assumed return, with sales and rentals at the higher price-- the prices that I forecasted. Plus, you want me to make a profit so I can keep building, right?
I keep hearing that if we build more, prices will come down. But even though you're building so much, we're still not finding a place we can afford.
Well, lowering prices is not in my control. You can't expect me to solve that.
So who's the one calling the shots?
You should talk with my banker, Ernesto.