SPEAKER_00 0:04

Derek is my college roommate. Same degree, same city, same first job. He posted on social media today. We just closed on our new house. We bought our first one in 2017 for $240, just sold it for $480. Net gain $240,000. To everyone still renting, keep saving. He made $240,000 by existing. I went to an open house last week. 17 people for a two-bedroom with vintage wiring and a foundation the inspector called concerning. I came in seventh to an LLC with better credit than God. So tonight, one question, and I'm not letting it go. When you pay rent, where does the money actually go? Because it's not where you think. It leaves before you even get the key. Let's start with a simpler question. If the people who bought cheap aren't selling, and everybody else can't afford to buy, then who's buying the houses? Investors. In one recent redfin quarter, they bought about one in six homes overall. But at the cheap end, the starter home end, it gets close to one in four. Not families, it's LLCs with spreadsheets and cash. They even have a name for what they want, the buy box. Built after 1990, three to four bedrooms, median price. That's not the description of a mansion, that's a description of your first house. The spreadsheet does not want the big place, it wants the starter. Because once it buys the starter, you do not buy a house. You rent the yield. Here is where the money goes. It goes through a waterfall, and you are at the bottom. Your rent hits the top and immediately gets mugged on the way down. Every level takes a cut before the next one sees a drop. First level, property management. 7% for the luxury service of emailing you when the rent is due. Second level, operating expenses. 35%. Maintenance, taxes, insurance. That's the only money that actually keeps the building standing and it's under constant pressure to shrink. Third level, debt service. 40%. And this is the one that really matters. Your landlord did not buy the building with cash. They took out loans, packaged thousands of future rent checks together, and then sold that package to investors as a bond. Pension funds, insurance money, some guy in Luxembourg with a spreadsheet, no plumbing problems. That tier gets paid first, always. They call it senior debt. Your lease became a bond coupon with appliances. And the structure on top, the real estate investment trust, is required by tax code to pay out at least 90% of its taxable income to shareholders every year. The code does not say fix the sink. It just makes sure the dividend gets a chair at the table before the sink does. Last level, what is left? 18% goes to the actual owner. You paid 100%, you got housing, the triple A investors got paid before your sink did. The waterfall is a drain. You are not the tenant, you are the water. And in case you think this is an accident, Blackstone said the quiet part in an investor call plain English. Constrained housing supply is quite positive for real estate over time. They said it and wrote it down. Once they own it, the second engine starts. Fees. Maya found a one bedroom listed at $1,400. Then the lease arrived. Valet trash, $25 a month. A smart thermostat sheet NAS for $50. Pest control, $10. Package handling, $20. A billing fee for the privilege of paying rent online, which is the only way you can pay, $15. Water, sewer, trash bundle, $80. $200 a month and mandatory fees, $2,400 a year. Her $1,400 apartment now costs $1,600. The lease had the balls to call it market rate. The industry even has a word for the rent they have not squeezed out of you yet. Loss to lease. You are the loss. They are trying to capture you. That is a verb they use on quarterly earning calls about your apartment. Capture. And when Maya can afford first class insecurity somewhere else, she stays. The software logs that is price elasticity confirmed. Push higher next year. And before you go looking for the villain, there isn't one in a room somewhere. Nobody said let's screw a generation. They said let's maximize shareholder value. Same result, just a much better PowerPoint. It is not red versus blue either. Doing nothing as a lobbyist. In 2024, it had an $86 million one, the National Association of Realtors, number one lobbying organization in America. The party changes, the appraisal keeps going up. Housing is the only market where the government says prices are too high and we must protect home values. In the same breath, well pick one. So here's the one thing you can do this week. Look up your landlord. County assessor records are public. Type in your address, see who owns the building. See what else they own. If it's an LLC sitting on 200 units, you're not in a neighborhood, you're in a portfolio. And if your rent jumped 15% or more, document it. Screenshot the renewal, save the date. The DOJ just settled with RealPage. RealPage denied everything and promised to stop. The state cases and class actions are still going. Add your data to the pile. The system is working exactly as designed. It's just not designed for you. But they wrote the entire design down in bond prospectuses and lease addendums and software licenses. Well, at least you know, and now you've read it.