5 ms·

Wow, now that's the major difference from NYC. A mortgage payment for anything decent anywhere in Manhattan is far beyond my current means, yet I afford the ren

by maxaf 10y ago

Wow, now that's the major difference from NYC. A mortgage payment for anything decent anywhere in Manhattan is far beyond my current means, yet I afford the rent easily enough. I wonder why the UK is so different? Are landlords simply profiteering off a bad situation?

deleted 10y ago
[deleted]
UVB-76 10y ago
I find the inverse to be strange, i.e. the notion that the rental value of a property should be less than the cost of a mortgage. Not least because landlords incur overheads over and above those an owner-occupier does. There is a large 'buy-to-let' industry in the UK, whereby millions have taken out mortgages to buy properties for the sole purpose of renting them out. The rental income pays the mortgage, and usually provides some profit on top, all while the value of the property itself continues to appreciate.
- awinder 10y ago
  In the US anyways you have favorable tax treatments for interest and property taxes, but rent (of private properties like houses) tends to exceed principle + interest + taxes in many areas. I find that to be fairly weird, because you've essentially got a very low out of pocket expense at that point (or even nearly net positive) in raw money exchanged, yet principle is recoverable on sale and tax deductions offset a portion of property taxes. Basically if buying a house and renting it out immediately turns a profit, that's a renter-saturated market, and it seems best to be on the non-saturated side of the market
- dagw 10y ago
  Not least because landlords incur overheads over and above those an owner-occupier does. But isn't there also an economy of scales argument to be made. If you own dozens of buildings and hundreds of flats, you should be able to keep your pr. flat cost lower than someone who just bought one flat.
  - UVB-76 10y ago
    None of the overheads I'm thinking about lend themselves to economies of scale. I'm talking about things like: * Admin costs (contracting, etc.) * New tenant costs (marketing, agency fees, reference checks, credit checks, inventory, etc.) * Landlords' insurance * Extra safety checks (e.g. annual gas safety checks) * Cost of downtime between tenants * Cost of rectifying wear and tear (cannot recover from tenants) There's also a difference in terms of maintenance. If I'm an owner-occupier and something breaks, I can live with it for a while, shop around, get a few quotes, and get it fixed at my leisure. As a landlord, if something goes wrong with one of my properties I have an obligation to repair it as soon as reasonably possible. Then every now and then you get a tenant who completely trashes a property, causing damage far in excess of any deposit, and which you're unlikely to ever recover.
k-mcgrady 10y ago
>> "I wonder why the UK is so different? Are landlords simply profiteering off a bad situation?" In my experience landlords tend to buy property and then use renters to pay for their mortgage. And then they add more on top of that so not only is their mortgage being paid but they're earning money too. I know some people for example who are buying a 2 bedroom apartment (they only need a 1 bed) and are renting the second room at a price high enough to cover their mortgage. So basically they're not paying a penny for their accommodation.
gizmo 10y ago
I think in NYC many real estate buyers are really speculators. They don't buy to live there, but because the prices are expected to go up. With this increased demand the price for houses keeps going up, but the price to rent is based on how many people want to live in NYC. In most areas of the country there is a balance between renters and buyers. People may prefer one or the other, but they will switch to renting or buying to save money. This keeps the market from going out of whack. NYC is different because for investors renting isn't an alternative to buying, hence the mismatch.
- lhopki01 10y ago
  London is an even more extreme example of speculation in the property market. There are no restrictions on foreign ownership. In South Kensington an area of London 1 in 50 homes are designated as long term unoccupied. Buy-to-leave is a well known term in London and it's even a sensible decision. London property appreciates at a rate greater than 10% a year.
lhopki01 10y ago
As said in other comments buy-to-let is a massive thing in the UK and in London buy-to-leave is big too. But yes profiteering is a major part too.

by maxaf 10y ago

deleted 10y ago

[deleted]

UVB-76 10y ago

I find the inverse to be strange, i.e. the notion that the rental value of a property should be less than the cost of a mortgage. Not least because landlords incur overheads over and above those an owner-occupier does. There is a large 'buy-to-let' industry in the UK, whereby millions have taken out mortgages to buy properties for the sole purpose of renting them out. The rental income pays the mortgage, and usually provides some profit on top, all while the value of the property itself continues to appreciate.

awinder 10y ago
In the US anyways you have favorable tax treatments for interest and property taxes, but rent (of private properties like houses) tends to exceed principle + interest + taxes in many areas. I find that to be fairly weird, because you've essentially got a very low out of pocket expense at that point (or even nearly net positive) in raw money exchanged, yet principle is recoverable on sale and tax deductions offset a portion of property taxes. Basically if buying a house and renting it out immediately turns a profit, that's a renter-saturated market, and it seems best to be on the non-saturated side of the market
dagw 10y ago
Not least because landlords incur overheads over and above those an owner-occupier does. But isn't there also an economy of scales argument to be made. If you own dozens of buildings and hundreds of flats, you should be able to keep your pr. flat cost lower than someone who just bought one flat.
- UVB-76 10y ago
  None of the overheads I'm thinking about lend themselves to economies of scale. I'm talking about things like: * Admin costs (contracting, etc.) * New tenant costs (marketing, agency fees, reference checks, credit checks, inventory, etc.) * Landlords' insurance * Extra safety checks (e.g. annual gas safety checks) * Cost of downtime between tenants * Cost of rectifying wear and tear (cannot recover from tenants) There's also a difference in terms of maintenance. If I'm an owner-occupier and something breaks, I can live with it for a while, shop around, get a few quotes, and get it fixed at my leisure. As a landlord, if something goes wrong with one of my properties I have an obligation to repair it as soon as reasonably possible. Then every now and then you get a tenant who completely trashes a property, causing damage far in excess of any deposit, and which you're unlikely to ever recover.

k-mcgrady 10y ago

>> "I wonder why the UK is so different? Are landlords simply profiteering off a bad situation?" In my experience landlords tend to buy property and then use renters to pay for their mortgage. And then they add more on top of that so not only is their mortgage being paid but they're earning money too. I know some people for example who are buying a 2 bedroom apartment (they only need a 1 bed) and are renting the second room at a price high enough to cover their mortgage. So basically they're not paying a penny for their accommodation.

gizmo 10y ago

I think in NYC many real estate buyers are really speculators. They don't buy to live there, but because the prices are expected to go up. With this increased demand the price for houses keeps going up, but the price to rent is based on how many people want to live in NYC. In most areas of the country there is a balance between renters and buyers. People may prefer one or the other, but they will switch to renting or buying to save money. This keeps the market from going out of whack. NYC is different because for investors renting isn't an alternative to buying, hence the mismatch.

lhopki01 10y ago
London is an even more extreme example of speculation in the property market. There are no restrictions on foreign ownership. In South Kensington an area of London 1 in 50 homes are designated as long term unoccupied. Buy-to-leave is a well known term in London and it's even a sensible decision. London property appreciates at a rate greater than 10% a year.

lhopki01 10y ago

As said in other comments buy-to-let is a massive thing in the UK and in London buy-to-leave is big too. But yes profiteering is a major part too.