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In most cities, rents are lower than mortgage payments, because rent is a multiple of when the house was purchased, usually not the price to purchase the house
by pwinnski 4y ago
In most cities, rents are lower than mortgage payments, because rent is a multiple of when the house was purchased, usually not the price to purchase the house this year.
If I buy a house in 2009 when the market is depressed, and by 2023 the value of that house has gone up immensely, but my mortgage is still based on my 2009 purchase, I can charge less to rent it out than it would cost someone to buy it. Or I can charge the going rate, and hope I find someone willing to pay it.
But if I'm on the other side of the table, it is usually cheaper and easier to rent a house from someone who bought it years ago than it is to buy a similar house myself.
- dahfizz 4y agoBut you see the same benefits if you buy. As a renter, your rent goes up every year, but a mortgage is locked in and safe from inflation, rate hikes, and market volatility for 30 years. Renting _this year_ may be cheaper than buying _this year_, but renting for a lifetime is always more expensive than buying unless you move constantly.
- pwinnski 4y agoYou only have to move once or twice in 30 years for home ownership to not make a ton of sense. "Constantly" seems like hyperbole. This also assumes that you aren't facing high maintenance costs. One popular rule of thumb suggests setting side 1% of the total value of the home for maintenance every year, and if the value of the home is rising, that set-aside is also rising. By more or less than rent? Depends on many factors.