Just when you thought college debt alone would ruin you....

Today's Wall Street Journal offered an interesting report on real estate broker A. J. Steigman who represents institutional investors rather than families or individuals in buying homes -- not to live in, but to use as a rental property investment. He's Atlanta's top broker, and he doesn't even live or work in Atlanta.

Hers is the full article.

Atlanta’s No. 1 Broker Bought Homes for Big Investors From 600 Miles Away - WSJ.pdf

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This key passage pretty much explains what he's doing:

While his competitors in Atlanta shuttle between home showings and plant “For Sale” signs in front lawns, Mr. Steigman’s client base consists entirely of institutional investors, he said. He has no employees but relies on a $20,000 laptop and proprietary software system to buy single-family homes on behalf of his clients, which lease them out to capitalize on soaring rents.

This is another example of the unintended but direct negative consequences of student college debt. Young college graduates can't afford to buy a home without a significant down payment (no VA loans here), leading to live in rental properties that prevent the single most common and effective way of building wealth in America, and that is by incensing home equity with mortgage payments and rising home prices which are increasing even faster today, making them both less attainable and more valuable as a potential wealth builder, just as interest rates "spike," making mortgage payments even less affordable. Absent owning a (mortgaged) home, home equity can then be leveraged to pay for college (or to pay off current loans), especially with a 15-year fixed mortgage, which is another thing these under 30's can't afford, i.e, higher payments that produce a faster payoff of debt. Home equity interest rates have been lower than student loan rates, so it could even be a "good investment" to borrow off one's home to pay off college loans, ending up paying a lower interest rate.

In all these cases, the college debt-ridden graduate is in a terrible state. And while institutional investors buy and rent the homes, increasing the investors wealth and decreasing the renter's wealth/net worth, claims of wealth inequality will increase, along with a short-sighted by seemingly appealing strategy of these 'stuck' people to vote for progressive politicians who will provide more freebies to ameliorate Millennial pain. Sorry, in this case, the cure is worse than the disease.

Most of the social unrest and demands for new rights to be funded stem from the economic mess created by easily accessible college loans to pay grossly inflated college tuition, room and board. If you think gas and food price increases look bad, just look at college tuition, room and board increases for the last twenty years. By comparison, oil and gas price increases look modest. And at least with high oil prices you get something of immediate value that costs very little compared to a $300,000 tuition bill that leads to an unmarketable major and degree.

If we want to stem inflation, we'd be better off going after colleges, their revenues and their endowments. Here's an outrageous idea, how about a 'luxury tax' on colleges for excess tuition, e.g., any amount over the true cost of educating the student gets taken by the government in taxes. Or how about taxing aid to students as income, since students without aid must pay tuition from their income. Such 'taxes' would incentivize colleges to keep their tuition low and they can do manage by better managing their costs, which also shedding overhead, bureaucracy, administrators, and other non-value-added costs imposed by woke and progressive college presidents who claim corporate salaries yet manage like a government agency with unlimited resources to pursue their social engineering follies and brand recognition for their athletic programs. It would not be surprising to find on inspection of a college budget, that less than 20% of tuition actually goes into instruction, the supposed reason that colleges exist. Mission drift (not just 'creep') has eroded the educational core of many universities, especially those with little or no serious funded research, meaning that teaching is not just their primary mission, it's the overwhelming majority of what they do.

The pandemic policies of remote learning has also exposed the fact that colleges used residential education as a method to leverage lucrative student housing and board revenues, in some cases, earning a 'profit' from these ancillary activities to fund expensive, unprofitable and otherwise unwise and unaffordable ventures elsewhere on campus. This reminds me of Loyola's practice when I arrived on campus in 1995, where selling college room telephone services -- land lines, no cell phones here -- generated $500,000 in net profit for Loyola, a non-trivial amount in those days of $15,000 tuition for 3100 students (vis-a-vis $55,000 for 4,000 students today).

So where did Steigman develop this strategy? At Wharton. In 2017. And with the pandemic, his opportunities only increased, including the opportunity to work remotely and to pay cash to sellers eager to "get out of town." Here's the conclusion to the article:

He started building the system in 2017, as part of an accelerator program at the University of Pennsylvania’s Wharton School. He pitched the concept as a “Bloomberg Terminal for residential real estate” that could analyze large data sets and identify the best homes for investors.

Mr. Steigman said his goal is to identify eligible homes, underwrite deals and close transactions faster than other real-estate brokers. He compared it to a chess supercomputer that plays through thousands of matches, gaming out all possible scenarios to make the right moves.

Some of the investors in Mr. Steigman’s firm said they didn’t completely understand how the process works. “There’s always a gray box element to this,” said Rama Subramaniam, a partner at Wall Street trading firm Global Trading Systems LLC who independently invested in Steignet. “We look at the result.”

Other investors in his firm include Bruce Chizen, the former chief executive of Adobe Inc. and professional chess player Hikaru Nakamura, currently world No. 11. Working remotely from Florida wasn’t Mr. Steigman’s original plan. He owns a home and keeps an office in Atlanta, where he attended college. But when the Covid-19 pandemic broke out, he relocated to his home state of Florida for health reasons, he said.

When he traveled to Atlanta to receive the top agent award at the Atlanta Realtors Association annual gala, there were many there who knew nothing about him. “People were like, ‘Who is that? What does he do?,’” said Karen Hatcher, the trade group’s president.