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this post was submitted on 11 Jul 2024
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Housing Bubble 2: Return of the Ugly
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I've heard that argument as well. But what that implies, is that it's cheaper to rent. More expensive to own.
How is the person renting out their property not losing money then? Because they have all the costs such as repairs, depreciation, future remodels, all worked into the price of rent, plus extra for profit.
These people aren't running charities.
It is cheaper to rent and more expensive to own for around the first ten years. It's far, far more expensive to buy than to rent when you consider the down payment, and closing costs. Over a long period of time it becomes much cheaper to own, even considering repairs, unless you have something catastrophic happen, and then hopefully you have insurance.
You are correct. That's why the rent is more expensive, if you buy a house and rent it for exactly your mortgage payment you will lose money due to all those things.
If x is mortgage and y is the average cost of all that stuff then x + y = z where z is the break even point. Now most places make a profit which we will call a. Z + A = rent payment. A lot of people compare rent to X and not Z. Now is A excessive sometimes/usually yes... But rent should always be higher than mortgage to take into account Y.
I hate when people say they are 'losing' money if the rent doesn't cover the mortgage / taxes.
No bitch, you're getting $2k a month outta me thats going into your equity. If you gotta chip in $500 to get my $2k you aren't losing $500 a month.
Edit: just to clarify, I'm not saying they shouldn't charge more, but fuck the losing money narrative if rent control or something else changes the situation.
You usually make money when you sell it or when your mortgage is paid, otherwise you're likely breaking even in the meantime if you account for everything you had to spend for your property from the date of purchase.
What you can do though is use your equity to buy more and more of them so on paper you might be worth millions but truth is you're likely still working a regular job until you reach a certain point where you've got units that are paid for.
That's my experience from dating a girl who owned four 3 units buildings with her mother, they had to live in one and both had to keep working to pay for their own stuff... But I agree that when it's an investment company it's another level where you make a shit ton of profit.
A friend of mine made the calculation the other day and over 25 years buying a duplex would make him be 1m dollars poorer than continuing to rent and putting the surplus he would have paid for the mortgage in an index fund, even even taking into consideration that one unit would be rented...