4 ms·

So true. And the notion that you must own a home is stupid anyway and oversold. I currently pay $4500/mo to rent a home in California. Because of it's location

So true. And the notion that you must own a home is stupid anyway and oversold. I currently pay $4500/mo to rent a home in California. Because of it's location, the home would cost $2M+ for me to buy. So the debt service / maintenance / taxes is way more than the rental income. You're either renting the house or renting the money (mortgage). The idea that you're throwing money away on rent never considers the gap between rental income and expenses, vaporized down payments and going underwater from falling prices, tax hikes, etc. I'll probably move into a smaller house soon because I don't need as much space and I've been buying investment homes instead of worrying about my primary residence. My first investment property pays the mortgage and makes money. It's increased in value too but I don't bank on that. Why buy a home you cannot rent out for more than the debt service? Also - why buy a starter home in California for $1M+. That's fundamentally messed up to spend that much on a home that you know for a fact is not your forever home. The only way to know if it's a good deal is if you can rent it out for more than it costs, or about the same and you're going to be there for ~7 yrs+.

dikdik 10y ago
So your landlord is losing money by renting it to you? This doesn't make any sense to me...
- ThrustVectoring 10y ago
  They expect to make money on the appreciation of the house's value.
- sagarm 10y ago
  They probably have a massive prop 13 subsidy.
  - exclusiv 10y ago
    Yeah it's in a family trust and they haven't done any major renovations. Taxes are lower than they should be. But even if taxes were zero, it still wouldn't make sense to buy this place for 2M+ when rent is only 4500. For 4500 rent you need to be around 900k max purchase price. If it's an investment it should be way less, like 450k. I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.
- exclusiv 10y ago
  I don't think mine is losing money since it's been in a family trust forever. But most landlords aren't making any money. Everyone has owned properties forever and taxes are really low for them. If you're in that position it doesn't matter but it doesn't apply to a rent or own debate for current renters or potential homebuyers. But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.

dikdik 10y ago

So your landlord is losing money by renting it to you? This doesn't make any sense to me...

ThrustVectoring 10y ago
They expect to make money on the appreciation of the house's value.
sagarm 10y ago
They probably have a massive prop 13 subsidy.
- exclusiv 10y ago
  Yeah it's in a family trust and they haven't done any major renovations. Taxes are lower than they should be. But even if taxes were zero, it still wouldn't make sense to buy this place for 2M+ when rent is only 4500. For 4500 rent you need to be around 900k max purchase price. If it's an investment it should be way less, like 450k. I've rented 4 different homes in Cali and 3 were owned by family trusts. The one that wasn't made nothing and she ended up selling to get out. I rented that house for $3600/mo and she got 925k for it.
exclusiv 10y ago
I don't think mine is losing money since it's been in a family trust forever. But most landlords aren't making any money. Everyone has owned properties forever and taxes are really low for them. If you're in that position it doesn't matter but it doesn't apply to a rent or own debate for current renters or potential homebuyers. But yes most landlords out here are lucky if they break even. They take tax write-offs and hope for appreciation. Cap rates in Cali are super low and prices are really high.