6 ms·

> This is not always true. Often, the price of real estate outpaces rent. I.e. renting is cheaper than buying. > As a renter, you're not paying property tax, in

> This is not always true. Often, the price of real estate outpaces rent. I.e. renting is cheaper than buying. > As a renter, you're not paying property tax, insurance, repairs, maintenance, and maybe utilities. You are though, are you not? Ie the only thing that changes between renting and owning is who is maybe economies of scale. For sake of discussion, lets say you rent from someone who owns a spare house. You are paying everything you just mentioned, on average, as the renter. If you don't, then the owner is losing money - and that's not likely. Now with a larger business owning your home/apartment/etc, i imagine there is room for economies of scale. They don't have to pay to have a plumber come out, they might already have one on staff or retainer. etc. Perhaps they get better deals on land taxes and whatnot too? But lets not forget - you're paying for everything your landlord is, plus profit. Always. The only way it works out cheaper for you is if they are more efficient at it.

rileymat2 4y ago
> The only way it works out cheaper for you is if they are more efficient at it. One easy way would be the difference in credit scores leading to lower payments for the landlord.
- willis936 4y ago
  There is a widening gap between "perfect credit score" and "able to afford a down payment on a mortgage".
ravel-bar-foo 4y ago
There is a small seeming exception in regions where housing prices are rising rapidly: if the owner is willing to forgo increasing rent at the rate of housing price increases (which is pretty common among smalltime landlords), then renting can appear to be cheaper than the present-day mortgage for an equivalent property. Of course, in that market as a renter you lose out on appreciation of the house, so renting is only better if you can get bottom-market rates near the top of the market.
- dnissley 4y ago
  Or if you're not sticking around long term.
randomdata 4y ago
> But let's not forget - you're paying for everything your landlord is, plus profit. Always. Definitely not always. Loss is common in business. Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped. In reality, you're paying the least amount you can that still beats the alternatives. That doesn't guarantee profitability for the landlord. The landlord recognizing lack of profits and selling the property is an alternative, but may not even be a tenable one in some circumstances (e.g. a market downturn that leaves potential buyers weary) without taking even greater losses.
- dnissley 4y ago
  I have observed that many small landlords are speculating on a longer term payoff of the property greatly increasing in value, are not present but planning on moving back in at some point, or own outright and have out of date ideas about market rent. All of these lead to situations where they may take losses of varying sizes in the near to medium term. Combine one of these landlords with someone who is not planning on sticking around long term and you've got a match made in heaven.
- judge2020 4y ago
  > Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped. Maybe with certain small owner groups, but I can guarantee you that any community with a dedicated management company (separate from the ownership group) has a goal of making profit on top of however much their property value is appreciating. Not every owner plans to sell the property within a few years of buying it. This applies to all of your apartment communities regardless of age (well, minus lease-ups in their first year). Also, most properties run on a bog-standard business checking account for their income and expenses; the owner isn't just dumping money in it every month to support operating losses because "the property is appreciating anyways!". If the manager and management group isn't making money to sustain operations, you'll have both an angry owner and angry corporate management that can't pay themselves for their management fees.
WalterBright 4y ago
> Always. Not always. Around here, there were several years where house prices rose faster than rents. The owners were renting them out for less than the mortgage.
- UncleEntity 4y ago
  That was pretty standard leading up to the Great Recession. It was the new economy, you see, and fundamentals like valuing property based on rental market values was the old economy because property values never go down. My sister was renting out her house for less than the mortgage for a few years waiting for the price to rise enough to not lose money selling it and she bought well before the real estate boom.
  - WalterBright 4y ago
    > the old economy because property values never go down that conventional wisdom never existed
    - UncleEntity 4y ago
      The “experts” were literally telling people that on a regular basis. The “fundamentals changed” so it was ok to sell a person making 35k a half a million house because they could always sell it (at a profit) before the interest rates increased on the loan. Or it was ok to use your house as an atm machine by pulling all the equity out to buy whatever you wanted. Can’t make this stuff up…

rileymat2 4y ago

> The only way it works out cheaper for you is if they are more efficient at it. One easy way would be the difference in credit scores leading to lower payments for the landlord.

willis936 4y ago
There is a widening gap between "perfect credit score" and "able to afford a down payment on a mortgage".

ravel-bar-foo 4y ago

There is a small seeming exception in regions where housing prices are rising rapidly: if the owner is willing to forgo increasing rent at the rate of housing price increases (which is pretty common among smalltime landlords), then renting can appear to be cheaper than the present-day mortgage for an equivalent property. Of course, in that market as a renter you lose out on appreciation of the house, so renting is only better if you can get bottom-market rates near the top of the market.

dnissley 4y ago
Or if you're not sticking around long term.

randomdata 4y ago

> But let's not forget - you're paying for everything your landlord is, plus profit. Always. Definitely not always. Loss is common in business. Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped. In reality, you're paying the least amount you can that still beats the alternatives. That doesn't guarantee profitability for the landlord. The landlord recognizing lack of profits and selling the property is an alternative, but may not even be a tenable one in some circumstances (e.g. a market downturn that leaves potential buyers weary) without taking even greater losses.

dnissley 4y ago
I have observed that many small landlords are speculating on a longer term payoff of the property greatly increasing in value, are not present but planning on moving back in at some point, or own outright and have out of date ideas about market rent. All of these lead to situations where they may take losses of varying sizes in the near to medium term. Combine one of these landlords with someone who is not planning on sticking around long term and you've got a match made in heaven.
judge2020 4y ago
> Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped. Maybe with certain small owner groups, but I can guarantee you that any community with a dedicated management company (separate from the ownership group) has a goal of making profit on top of however much their property value is appreciating. Not every owner plans to sell the property within a few years of buying it. This applies to all of your apartment communities regardless of age (well, minus lease-ups in their first year). Also, most properties run on a bog-standard business checking account for their income and expenses; the owner isn't just dumping money in it every month to support operating losses because "the property is appreciating anyways!". If the manager and management group isn't making money to sustain operations, you'll have both an angry owner and angry corporate management that can't pay themselves for their management fees.

WalterBright 4y ago

> Always. Not always. Around here, there were several years where house prices rose faster than rents. The owners were renting them out for less than the mortgage.

UncleEntity 4y ago
That was pretty standard leading up to the Great Recession. It was the new economy, you see, and fundamentals like valuing property based on rental market values was the old economy because property values never go down. My sister was renting out her house for less than the mortgage for a few years waiting for the price to rise enough to not lose money selling it and she bought well before the real estate boom.
- WalterBright 4y ago
  > the old economy because property values never go down that conventional wisdom never existed
  - UncleEntity 4y ago
    The “experts” were literally telling people that on a regular basis. The “fundamentals changed” so it was ok to sell a person making 35k a half a million house because they could always sell it (at a profit) before the interest rates increased on the loan. Or it was ok to use your house as an atm machine by pulling all the equity out to buy whatever you wanted. Can’t make this stuff up…