this post was submitted on 03 Oct 2023
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You've just killed any ability to rent with that. Renting is very important as a lot of people do not want to overhead costs of fixing everything that breaks.
Good. Housing should never been an investment. HUD or The New Communist HUD that we are writing into the Constitution will own all non-private primary housing stock and will ensure that at least 10% more capacity then is needed exists in every metro area.
That's not what was originally written though. Also, 10% more capacity than is needed sounds very wasteful.
It's not because we have yearly growth, and housing needs elasticity for people to move in and move out over the years. Plus it's no where near as wasteful when you consider the AirBNBs that plague metro areas that are vacant greater then 50% of the time. Of course those will also be reclaimed by the New Communist HUD as well.
I think what OP was getting at was not housing being sold to make money down the line but housing being bought, then sat on until prices rise, then sold for more money. All while the property lays vacant.
Not sure though since I can't read minds.
In any case:
ah yes the act of renting suddenly makes those costs disappear, you know you'd have even less cost if you bought wherever you are living instead since now you don't have the overhead cost of paying the landlord? Renting being cheaper is a myth because most people rent apartments, not houses (At least where I live). If 10 people owned the apartments in the house they live in and shared the repair costs they would be significantly cheaper off than if those 10 people rented their apartments from a landlord.
That makes sense. A lot of places fix that with a vacancy tax.
It's not a myth. I've literally done the calculations. I live in a 580,000-dollar house. I have an active standing offer to buy this house at 580k. I pay 2.8k for rent. The mortgage for me would be 3.1k to 4.3k a month. Plus repairs. Plus down payment if you pick the number closer to 3k. The reason the large corporation landlord can afford this house with repairs and rent it for that rate is because they don't pay a mortgage, they bought it outright.
So yes, renting can be cheaper than owning.
Unfortunately, some people think their way is the only way and won't open their minds to people wanting different ways to live (own, rent, etc).
There's nothing wrong with renting but some people demonize it for no reason.
Because renting adds an extra overhead to the equation in the form of the landlords cut, you'd be cheaper of owning the property and sharing the repair costs (assuming you live in an apartment complex)
I rent a house with the option to buy it. I've watched the owners spend at least 20,000 USD in 2 years on repairs. No thank you!
Now tell me, where do you think the owners got those 20k from to pay for the repairs? The goodness of their hearts? Or your rent? People seriously thinking renting is cheaper need some help, it's less of a hassle sure and if that's why you rent go ahead but if you rent because it's cheaper I suggest you retake first grade math classes because
property upkeep + mortgage + rent overhead since owner wants to make money != property upkeep + mortgage. If you are renting you are paying extra, no two ways about it. Unless your credit score is crap you are likely also paying more than if you bought the place entirely on credit (this depends heavily on how the owner financed the place, if they paid out of pocket it might be a bit cheaper to rent whilst the hypothetical mortgage is being paid off).Only reasons I can think of renting for is A) ease of living: if something breaks it's not your time spent fixing it. B) flexibility: you can move places faster than if you had to sell the place you're currently living in first
But cheaper? Yeah no, the math just doesn't work out on that one.
My credit isn't crap and it's still far cheaper to rent than what my mortgage payment would be. I rent at 2.8k a month and my mortgage would be 4k a month. So I'd need a large downpayment to deal with it.
Honestly, I suggest you assume people you are talking to know their own situation better than you. I've done the math and the reason the large corporation can afford it is because they buy the house outright and don't pay a mortgage on it. They own tons of properties and not every single one makes money. The one I am in probably doesn't make money and they are likely waiting for me to move out so they can cut their losses and recoup some of their portfolio.
So here is a third one for you, it actually is cheaper if you do the math in a lot of situations, including average to low credit but even with perfect credit and a small 5% APR (which you realistically aren't getting a 5% APR currently, it's far more likely to get 7% but lets build in a huge benefit for the sake of argument) on a loan of 580,000 (the price for the house I rent), it's still 300 dollars a month more to own it. Plus repairs and upkeep. So tell me again how you've done all this math and are perfect about knowing every situation.
Recommendation: Do the math with any mortgage calculator. The rent is 2800. Reasonable Mortgage is 3000 + repairs and maintenance.
Here's your error: you're assuming the mortgage will never be paid off. Which just isn't true.
You know what corporations do with a property that doesn't make money? Either they find a way to kick out the current residents to raise rent. If that is not possible they sell. A corporation doesn't give a shit about you still living in the building before selling.
you very apparently have no idea how property development works. Those companies have at any point in time almost no cash on hand and while they might pay a good chunk of a building out of pocket credit is usually still the way they go. There are very few companies that don't need credit for daily operations, in property development that number is even smaller because their daily operations include paying for construction basically all the time. Even if they were paying out of pocket the difference would be interest, not some magical 33% as you suggest.
Not sure what you are smoking but with a 25 year mortgage my calculator says that's ~2k a month (without interest). Now interest will add some to that but not 100%. Unless you are getting a loan from a meth dealer in a back alley. Without any upfront payment some random mortgage calculator spits out 2.4k per month on that property for me. We can talk about the math when you come back with numbers that add up. Going with the numbers of your closing sentence anyway here's some math for you: Rent: 2.8k / month House: 3k + 1k + 1k (1k repairs, 1k upkeep. Repair from earlier mentioned 20k/2years, upkeep from home owner annectodes around here estimated upwards)
25 years: Rent: 840k House: 1500
40 years (25 + 15): Rent: 1344k House: 1860k
50 years (25 + 25): Rent: 1680k House: 2100k
in which case yes, you are absolutely right. But that would also be the point at which I question how you arrive at a 4k or even just 3k 25 year mortgage for a ~600k property. To me that means either your bank is ripping you off or your credit history is so low the bank doesn't even think you can afford your next breakfast. That level of difference isn't even at a point where I can chalk it up to difference in interest rates. The number you gave me initially (4k) would be a 100% total interest rate. Again, I don't see how that works out.
If your mortgage numbers are correct then you are probably also correct in that the owner would be running a loss on the property (a steep one at that) assuming they are still paying a mortgage on it.
That's not at all what this conversation was about. It's about upfront costs.
Making money off the renter isn't needed when they can make money off of selling the property.
I never suggested anything of the sort. Please read my words better.
You are insane. You've dropped interest from your calculations entirely. It's like saying "I put in a 580,000 dollar down payment and now the monthly payment is 0 so checkmate!" Try to put a decent interest rate on that like 5%-10% Which the average for my area is 7%.
You literally ignored the interest which I gave the numbers for. You need to read better if we are to have a conversation otherwise this is pointless if you are going to drop one of the major components that make up the final monthly payment.
They aren't paying a typical mortgage on it though. Because they get a large business loan with a smaller interest rate overall to cover it then they build a portfolio from that and use the cash flow to buy properties outright for cheaper overheads than renting. So they then charge the renters a cheaper rate than the mortgage they could get. This is why renting entirely is important.
If you live in a place for 2 years and have to spend $18,000 on a mortgage and $20,000 on repairs, that's definitely more expensive than just paying $24,000 in rent. Not everyone has $20,000 just laying around to fix stuff. They'd rather spend $20,000 over 2 years going on vacation, eating out, or having fun.
You mean, earning money from their job (managing the property). It's not free money, it's their income. Just like other people get a paycheck from a regular job, landlords are just self employed. Running your own business might mean not taking a lot of pay (or no pay) some years.
So the 18k for the mortgage just disappear when someone else owns the place? Do you even listen? Unless you're renting from a corporation (in which case the rent is not going to be cheaper anyway, they'll just make more profit) the landlord is paying that same mortgage (maybe only 17k since they have a longer history with the bank). You're not getting out of this cheaper. Any cost you might have with a house the landlord has as well, at best they get a better credit from the bank but overall the difference is so miniscule it doesn't balance out the cut they add for themselves onto the rent.
Regarding your second paragraph see my list of reasons why you might legitimately rent. If the saved time is worth it for you then that is absolutely valid but don't delude yourself into thinking it's cheaper.
If it's at the beginning of the mortgage, most of that is interest because interest is front loaded.
What's your point here?
At the beginning of a mortgage you're really not gaining much equity if that's that your prior comment was about.
The point is that it doesn't matter if the landlord pays the mortgage or you pay it it is still there. And if the landlord pays it you can be damn certain it's gonna end up in your rent calculation.
Well obviously, they aren't going to work for free.