4 ms·

Rent shouldn’t be anywhere near the cost of a mortgage If that were true then the landlord wouldnt be able to pay the mortgage. I think rent is mortgage + taxe

Rent shouldn’t be anywhere near the cost of a mortgage If that were true then the landlord wouldnt be able to pay the mortgage. I think rent is mortgage + taxes + insurance + potential repairs + profit

derekp7 8y ago
I feel it should include mortgage interest, excluding principal. The principal is going straight to the landlord's net assets, which should one day return a profit on it's own.
- cirgue 8y ago
  That's not how prices work. The landlord is absorbing a huge liability by owning the home in the first place. You're a renter, your risk exposure is 0. That's why rent will almost always be higher than a mortgage.
  - ianai 8y ago
    I’m not at all talking about renting a home vs owning a home. That’s going to be a significantly minor portion of a rental market. The nearest comparison is like sqft for like sqft apartment vs condo/townhome. That gets you closest to ceteris paribus without the actual total market data.
- ianai 8y ago
  I did some calculating on a local market at various points. Basically, it seems to me the sweet spot is around 50k/rental for a building in the 100s of units. So your marginal, per unit mortgage should be around 50k or 500/mo (10 year mortgage) plus overhead. I know it’s possible to run such a complex with around 5-10 staff of various functions (possibly less). Those same units wind up being rented for over 1k/month - as that’s the trade off point for a similarly equipped condo. That’s a market operating inefficiently.
- ars 8y ago
  > I feel it should include mortgage interest, excluding principal. It does. When you start a mortgage, interest is around 90% of the payment. So by definition mortgage is virtually all interest. True, later the amount of interest goes down, but that's just a detail - the amount of money tied up in the house is what matters, not the accounting in your bank.
  - perl4ever 8y ago
    If 90% of your rent is interest, why can't someone who's paid off their mortgage rent to you for 90% less?
    - jurassic 8y ago
      Maybe they could, but why would they? Landlords charge rent according to what the market will pay, not what their costs are.
      - ianai 8y ago
        They would if there was someone else in the market selling closer to cost. But real estate isn’t an efficient market.
      - perl4ever 8y ago
        That's my argument though - if someone is charging 90% less, why would anyone pay more just because someone else has more expenses.
        loco5niner 8y ago
        Because of opportunity cost. They've now invested their efforts and money into a house, and are now reaping the benefits of their investment. They could invest it elsewhere, and charging a renter less money "because charity", doesn't make a lot of sense.
        perl4ever 8y ago
perl4ever 8y ago
Why is it impossible for a landlord to own property outright? And if some landlords own property outright, how can other landlords avoid competing? People don't get to arbitrarily set their prices at cost plus profit etc.
- loco5niner 8y ago
  > Why is it impossible for a landlord to own property outright? Some do. It shouldn't affect the rent price. > People don't get to arbitrarily set their prices at cost plus profit etc. Sure they do. They offer rent at a whatever price they choose, and that price is either rejected or accepted.

derekp7 8y ago

I feel it should include mortgage interest, excluding principal. The principal is going straight to the landlord's net assets, which should one day return a profit on it's own.

cirgue 8y ago
That's not how prices work. The landlord is absorbing a huge liability by owning the home in the first place. You're a renter, your risk exposure is 0. That's why rent will almost always be higher than a mortgage.
- ianai 8y ago
  I’m not at all talking about renting a home vs owning a home. That’s going to be a significantly minor portion of a rental market. The nearest comparison is like sqft for like sqft apartment vs condo/townhome. That gets you closest to ceteris paribus without the actual total market data.
ianai 8y ago
I did some calculating on a local market at various points. Basically, it seems to me the sweet spot is around 50k/rental for a building in the 100s of units. So your marginal, per unit mortgage should be around 50k or 500/mo (10 year mortgage) plus overhead. I know it’s possible to run such a complex with around 5-10 staff of various functions (possibly less). Those same units wind up being rented for over 1k/month - as that’s the trade off point for a similarly equipped condo. That’s a market operating inefficiently.
ars 8y ago
> I feel it should include mortgage interest, excluding principal. It does. When you start a mortgage, interest is around 90% of the payment. So by definition mortgage is virtually all interest. True, later the amount of interest goes down, but that's just a detail - the amount of money tied up in the house is what matters, not the accounting in your bank.
- perl4ever 8y ago
  If 90% of your rent is interest, why can't someone who's paid off their mortgage rent to you for 90% less?
  - jurassic 8y ago
    Maybe they could, but why would they? Landlords charge rent according to what the market will pay, not what their costs are.
    - ianai 8y ago
      They would if there was someone else in the market selling closer to cost. But real estate isn’t an efficient market.
    - perl4ever 8y ago
      That's my argument though - if someone is charging 90% less, why would anyone pay more just because someone else has more expenses.
      - loco5niner 8y ago
        Because of opportunity cost. They've now invested their efforts and money into a house, and are now reaping the benefits of their investment. They could invest it elsewhere, and charging a renter less money "because charity", doesn't make a lot of sense.
        perl4ever 8y ago

perl4ever 8y ago

Why is it impossible for a landlord to own property outright? And if some landlords own property outright, how can other landlords avoid competing? People don't get to arbitrarily set their prices at cost plus profit etc.

loco5niner 8y ago
> Why is it impossible for a landlord to own property outright? Some do. It shouldn't affect the rent price. > People don't get to arbitrarily set their prices at cost plus profit etc. Sure they do. They offer rent at a whatever price they choose, and that price is either rejected or accepted.