Comment by tardedmeme
2 days ago
It's not just accounting, it means enough things that they're incentivized to manipulate it upwards. It impacts the loans they can get and the interest they pay, enough that it may be worth it to forego some actual income to keep the fake numbers up.
But at some point it has to collapse, it seems to me. You can't forever fake a high value on a property that is bringing in no rent. Unless the real value is just being a outwardly legitimate-looking place to park money.
And they’re often owned by funds that are measured in the billions. A parking lot in New York covers for a bunch of empty middle America storefronts, as long as the valuation works out on paper.
It seems that approach is a way to generate losses without actually losing the titles. These losses are needed to offset incomes elsewhere thus not paying taxes on profits.
Investment fund's commodity is value - the rest are just tools to optimize the value.
In aggregate, the owners of these properties are investing to earn a return. Losses only lead to "not paying taxes on profits" if there are no profits. The overall portfolio has to be earning a risk-appropriate return or investors will go elsewhere.
But if there are losses there are no profits. I am with SoftTalker on this one. I figure there are things I do not know that explains how this keeps happening even though my simplistic knowledge thinks it is not sustainable.