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Comment by iguy | Hacker News Reader

It seems they literally define "exploitation rate" as rent over purchase price. Then later they add in some estimate of costs of repairs.

But it would be much more interesting to actually see the books. I'd bet a lot of money that the tenants in expensive neighbourhoods are much more likely to pay on time, every month, and to leave when the contract is up. And in addition, the labor in dealing with each tenant is paid for out of $2000 not $200 rent, so more is left for the owner.

In other news, payday loans in sketchy parts of town come with higher interest rates than 20%-down home loans in good neighbourhoods. Does anyone think this is because payday loansharks are uniquely greedy human beings? They are just operating a very different business with different costs.

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Yes, some people do think payday loan sharks are greedy.

You missed the "because", see my other answer.

I don't doubt, however, that being really thick-skinned is a necessary trait for surviving in that business. Soft-hearted types also don't last long as drug dealers, surprisingly.

If you think the payday loan industry is not -immensely- profitable, you're wrong. It's an exceptional thing to get into, either running or investing, if you have lower ethical boundaries.

Well, are you really claiming that the cause of high interest rates on payday loans is poor morals? Unusual greed? Which mysteriously descends on all who enter the trade, every time?

That's the whole reason I used the example of loansharks, as I thought everyone understood by now that even if the angels ran that trade, such loans would be very expensive. But see below for other arguments against this bad-morals argument.

I've never seen numbers, but given the abundance of competing outfits, I'd expect that it looks roughly like any other business, once you account for all the costs. It could be a little more profitable if distaste drives some potential competitors to stay out. It also seems like a great front business for laundering, but I wouldn't guess that's a large proportion.

I wonder why you still managed to use the term "loansharks" when trying to defend their quite obviously predatory business practices.

"Higher interest rates" doesn't even begin to define the exploitation of these people who are desperate for cash. The rates for these loans are on the order of 400%, which makes the comparison laughable.

It's almost like saying "the US national debt is $22 trillion, which is more than the average American makes in a year."

My point is that a theory that says their business practices follow from moral failings doesn't explain anything about the world. Some businesses just mysteriously seem to always be run by bad people.

Conversely, assuming that every businessman is about equally greedy forces you to look elsewhere. Their loans are almost by definition high-risk, that's why they are expensive. Low-risk borrowers are a different market.

The fact that we can learn something by thinking about their business does not mean anything like "defending". It's just that sometimes the lessons are clearest with extreme examples. We can learn interesting things from studying drug gangs, pirates, kidnapping schemes, too.

We can also ask questions about whether the world would be made better by prohibiting loansharking, and I actually don't know enough to have an opinion. But it's clear to many that prohibiting drug-dealing has had some nasty side-effects.

So why doesn’t one of these greedy lenders steal market share by writing payday loans at closer to normal rates?

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