3 ms·

I think OP meant how much people were paying in rent. "We're working for our landlords"- bulk of people's salary is spent on rent, so it's more profitable to be

I think OP meant how much people were paying in rent. "We're working for our landlords"- bulk of people's salary is spent on rent, so it's more profitable to become a landlord rather than grinding and paying rent.

SoftTalker 2y ago
Rent (or mortgage) is typically the single highest expense for most people, always has been. If your are paying more than a third of your income in rent, you need to downsize or get a better job.
- fouc 2y ago
  IMO if you're paying more than 1/4th of your income in rent, you need to downsize or get a better job. The 1/3 rule is crazy high IMO.
  - esalman 2y ago
    Agreed, 1/3 rule definitely does not work in VHCOL areas. I pay 28% in rent, that cuts down the commute and allows us to live at a stone's throw from good schools, grocery stores and small airports.
  - rco8786 2y ago
    Obviously the lower the better, with 0 being the ideal for anyone. But most people cannot afford a reasonable home on 1/4 of their income.
- 38 2y ago
  > downsize or get a better job wow great idea, why didn't I think of that
refurb 2y ago
Being a landlord isn’t that profitable. In high COL cities like SF, rent doesn’t even cover the carrying costs of a mortgage. And if they paid the place off, say a $1.2M home, they might $5,000/month in rent. That’s a screaming 4.2% return on their money (ignoring property taxes, insurance, maintenance). Including those it 2-3%.
- BirdieNZ 2y ago
  If you think of it in share market terms, it's a 4.2% dividend from a stock with a long-term price growth rate of ~7%. Not only that but you can use leverage (e.g. like a margin trader) in the form of a mortgage. In the USA, you can even lock your interest rate for 30 years, and only re-fix the rate when it drops! It's very profitable!
  - jjav 2y ago
    > It's very profitable! Have you tried being a landlord, if it is very profitable? If not why not? The best way to be profitable as a landlord is to inherit a paid-off property and rent that out. But if you aren't that lucky and have to actually pay for the property you rent out, it is very difficult to make a profit, let alone one that beats just putting the money into an index fund.
    - esalman 2y ago
      I think that's where the "Nvidia money" comes into play. I live in a VHCOL area and according to redfin/Zillow data, almost every house recently sold near me were paid for with between 40-60% down payment. If that's the case, mortgage starts to become manageable if you rent the property out. Edit: for context, it is the orange county area where average home price is $1.4m afaik.
      - jjav 2y ago
        > If that's the case, mortgage starts to become manageable if you rent the property out. Sure, with a large enough down payment you can make the mortgage low enough to be cash flow positive if you rent it out. This does not make it profitable though! You'd have to consider the opportunity cost of putting that huge amount of money into a down payment instead of into some ETF.
        refurb 2y ago
        It's incredible how many people miss this point. Locking up $2M in an asset has a cost. It's not "free".
rco8786 2y ago
Still kind of doesn't make sense unless they knew the landlord's expenses though. I dunno, just seems a little "jump to conclusions"-y.

SoftTalker 2y ago

Rent (or mortgage) is typically the single highest expense for most people, always has been. If your are paying more than a third of your income in rent, you need to downsize or get a better job.

fouc 2y ago
IMO if you're paying more than 1/4th of your income in rent, you need to downsize or get a better job. The 1/3 rule is crazy high IMO.
- esalman 2y ago
  Agreed, 1/3 rule definitely does not work in VHCOL areas. I pay 28% in rent, that cuts down the commute and allows us to live at a stone's throw from good schools, grocery stores and small airports.
- rco8786 2y ago
  Obviously the lower the better, with 0 being the ideal for anyone. But most people cannot afford a reasonable home on 1/4 of their income.
38 2y ago
> downsize or get a better job wow great idea, why didn't I think of that

refurb 2y ago

Being a landlord isn’t that profitable. In high COL cities like SF, rent doesn’t even cover the carrying costs of a mortgage. And if they paid the place off, say a $1.2M home, they might $5,000/month in rent. That’s a screaming 4.2% return on their money (ignoring property taxes, insurance, maintenance). Including those it 2-3%.

BirdieNZ 2y ago
If you think of it in share market terms, it's a 4.2% dividend from a stock with a long-term price growth rate of ~7%. Not only that but you can use leverage (e.g. like a margin trader) in the form of a mortgage. In the USA, you can even lock your interest rate for 30 years, and only re-fix the rate when it drops! It's very profitable!
- jjav 2y ago
  > It's very profitable! Have you tried being a landlord, if it is very profitable? If not why not? The best way to be profitable as a landlord is to inherit a paid-off property and rent that out. But if you aren't that lucky and have to actually pay for the property you rent out, it is very difficult to make a profit, let alone one that beats just putting the money into an index fund.
  - esalman 2y ago
    I think that's where the "Nvidia money" comes into play. I live in a VHCOL area and according to redfin/Zillow data, almost every house recently sold near me were paid for with between 40-60% down payment. If that's the case, mortgage starts to become manageable if you rent the property out. Edit: for context, it is the orange county area where average home price is $1.4m afaik.
    - jjav 2y ago
      > If that's the case, mortgage starts to become manageable if you rent the property out. Sure, with a large enough down payment you can make the mortgage low enough to be cash flow positive if you rent it out. This does not make it profitable though! You'd have to consider the opportunity cost of putting that huge amount of money into a down payment instead of into some ETF.
      - refurb 2y ago
        It's incredible how many people miss this point. Locking up $2M in an asset has a cost. It's not "free".

rco8786 2y ago

Still kind of doesn't make sense unless they knew the landlord's expenses though. I dunno, just seems a little "jump to conclusions"-y.