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"I'm just buying more of my own place with somebody else's money." At the cost of incurring risks including but not limited to: - Property damage by renters

"I'm just buying more of my own place with somebody else's money." At the cost of incurring risks including but not limited to: - Property damage by renters and others. - Property damage by acts of god (flooding/fire/subsidence). - Default on payments & long eviction periods. - Low occupancy/months without rent. - Downward price movements in the market as a whole. - Downward price movements in your location due to ghettoization, tax increases, service/school decline, structural unemployment or other factors. Could be worth it for the gain in equity, but it's something to think about - especially as some of these risks can't be insured against. You are also forgoing returns on your existing equity if you invested it elsewhere. Risk free interest rates for retail deposits here in the UK are currently above 3% for example. In addition to that you also have the costs (in time and money) of: - Management time/effort. - Time to deal with renters and searches. - Organizing maintenance. - Costs of credit scoring etc.

bane 15y ago
All good points. You have to figure in costs of use when renting. As it turns out in my locale, you can reduce your taxes when renting under the assumption that renters are beating your place up and thus reducing the property value. I'm fortunate enough to live in an area where finding renters will never be a problem should I end up that route, but you make an excellent point about that. Also, eviction periods are not too bad in most parts of the U.S., you can write terms into the lease that also help short fuse eviction on non-payment if many places. The biggest concern I have above all others is just managing the renters. There are services you can hire to handle all that and maintenance, but they consume some not insignificant part of the rent as payment.
nhangen 15y ago
I pay 10%/month to a rental company to handle most of that for me. As to the first - this is why you take a deposit, and why you have money in the bank just in case something goes wrong. The first list is full of what if's... As a renter: What if the landlord gets foreclosed on and you are forced out What if they don't pay to fix anything What if the building burns down and you lose everything etc

bane 15y ago

All good points. You have to figure in costs of use when renting. As it turns out in my locale, you can reduce your taxes when renting under the assumption that renters are beating your place up and thus reducing the property value. I'm fortunate enough to live in an area where finding renters will never be a problem should I end up that route, but you make an excellent point about that. Also, eviction periods are not too bad in most parts of the U.S., you can write terms into the lease that also help short fuse eviction on non-payment if many places. The biggest concern I have above all others is just managing the renters. There are services you can hire to handle all that and maintenance, but they consume some not insignificant part of the rent as payment.

nhangen 15y ago

I pay 10%/month to a rental company to handle most of that for me. As to the first - this is why you take a deposit, and why you have money in the bank just in case something goes wrong. The first list is full of what if's... As a renter: What if the landlord gets foreclosed on and you are forced out What if they don't pay to fix anything What if the building burns down and you lose everything etc