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Isn't that how it's usually done? My mortgage payment is somewhere around $2,700/month, but I'm pretty sure that covers insurance and taxes.
by freshyill 11y ago
Isn't that how it's usually done? My mortgage payment is somewhere around $2,700/month, but I'm pretty sure that covers insurance and taxes.
- sokoloff 11y agoYes, but I'm talking about something else. If landlord A puts down 50% of the purchase price and landlord B puts down 20%, their mortgage amounts (and montly cashflows) will be different, but the inherent value proposition to the landlord will be about the same. Likewise, if someone bought 10 years ago and their value doubled (but their mortgage stayed the same), that property will "appear" more profitable to that landlord than if they sold that rental to another landlord. That's why I think the "property holding costs" should be based on the full, mark-to-market, cost of the property today, and be based on a 100% financing mortgage rate. There's also a strong argument that we shouldn't include the principal paydown part of the mortgage payment when doing this analysis, as that's a forced-savings (and cashflow) item, not an inherent profitability impact.
- e12e 11y agoAh, but "forced-savings" doesn't work if that means you can't afford to eat. So it's very much relevant to the "young people can't afford to buy a house". True, it's slightly different problem - but it's also (probably) why people are forced to rent, driving up prices for rent vs buying a house/apartment. This also include the saving you need to do before you get a mortgage (which is harder to do if rent prices are inflated...). It's of course true, that even with a catastrophic collapse in the housing market, the money sunk into the principal are rarely truly lost. At some point the market is likely to recover to the point that it is worth something. If you can afford to wait.