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> Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes. These costs aren’t that high though, com

> Landlords have to allocate capital to fixing and improving the house, as well as taking care of insurance and taxes. These costs aren’t that high though, compared to rent. 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. Then they raise your rent every year, demonize rent increase caps, and then vote for reduced housing builds. I find it very difficult to accept them. If I had the money and the capital I absolutely would own a dozen homes and rent it all out, you would make insane money. Not to mention the mortgage costs being so low during ZIRP days. At the rate of AI coming for SWE jobs, landlords seem untouchable.

jjav 9mo ago
> 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. You missed insurance and mortgage.
- pixelatedindex 9mo ago
  Fair. Mortgage during the ZIRP days and prior was really low though. A 3K mortgage then is like a 6-7K mortgage now. And home insurance is also relatively low, I pay like 1.5K for the whole year. Point is, it’s a great way to make money and that is why people become landlords.
  - jjav 9mo ago
    > Point is, it’s a great way to make money and that is why people become landlords. If it is, why not do it and become rich too? It's not really a particularly good way to make money. I've run the numbers on hundreds of properties over the last two decades and I've yet to find a scenario where I could buy something and rent it out with enough profit to be worth the hassle. You'll be much better off investing in some index fund instead.
    - pixelatedindex 9mo ago
      > If it is, why not do it and become rich too? If I had the capital I absolutely would have. It’s a bit worse now but any property you bought pre-covid (at least in big cities) can be rented out for more than what mortgage costs. I remember looking at houses in the Bay Area and the monthly mortgage would be 3K while you can rent it out for 4-5K. Anyone who owned property in the 90s and early aughts are absolutely rolling in it. You can invest the profits in an index fund on top of it.
      - jjav 9mo ago
        There's quite a bit of optimism in those numbers. I bought a house in the Bay Area in the 90s and the mortgage was well over $3K (remember interest was over 7%) and an equal house back then was renting for $1300 (my rent at the time for a 3br house in south San Jose). Try to run the numbers for any property you like. Remember to include taxes and insurance and maintenance. Just to break even is not easy and then you'll have to work for free on the maintenance. Or pay a rental management company, which is another 8-10% taken from the rent.
        pixelatedindex 9mo ago
        Your house now can be rented for 4-5K a month if not more, you have no mortgage. Your property taxes are capped at purchase price due to Prop 13. All said and done can’t you net like 35-40K or so per year on a single home? I agree that buying a home and immediately putting it up for rent would put you underwater these days but during ZIRP times rent and mortgage weren’t too far from each other.
        jjav 9mo ago
        > Your property taxes are capped at purchase price due to Prop 13. BTW this is a common myth but not true. Property taxes are set by purchase price in year zero when you buy it. Every year after that, they go up 2% compounding. That's not the full story because the city/county can also add any extra fees they like, and raise them, prop13 does not apply. My taxes go up by well over 2% every year. > All said and done can’t you net like 35-40K or so per year on a single home? If you can find yourself a free house somehow, that feels about right. But how do you get yourself a free house? If you have to buy it, now you have a mortgage, and the math no longer works. The only people I know who profitably rent out homes are those who inherited a home with no debt. In that case, yes it works. > during ZIRP times rent and mortgage weren’t too far from each other Low interest helps, for sure, but the numbers still didn't work out. Here's a graph of interest rates: https://fred.stlouisfed.org/graph/?g=1KZYI https://fred.stlouisfed.org/graph/?g=1KZYI The rates only briefly dipped below 3% during the pandemic. Let's say you got the timing right and got a 3% mortgage for 1.2M. The payment is still a bit over $5K/mo. That's just the mortgage, add insurance + taxes + maintenance. On a home you can rent out for maybe 4K-4.5K/mo. Losing money every month. I've been running these numbers every few months for the last two decades hoping to follow the common advice to buy rental property and become rich. But it has always been cash flow negative no matter what the rents and interest rates have been. Only advice I have is go inherit a free house, that can be profitable.
- PaulDavisThe1st 9mo ago
  You're assuming a mortgage.

jjav 9mo ago

> 3 months of rent covers a year of property taxes where I live. Major repairs are about a couple months rent. There is still another half year of rent that’s pure profit. You missed insurance and mortgage.

pixelatedindex 9mo ago
Fair. Mortgage during the ZIRP days and prior was really low though. A 3K mortgage then is like a 6-7K mortgage now. And home insurance is also relatively low, I pay like 1.5K for the whole year. Point is, it’s a great way to make money and that is why people become landlords.
- jjav 9mo ago
  > Point is, it’s a great way to make money and that is why people become landlords. If it is, why not do it and become rich too? It's not really a particularly good way to make money. I've run the numbers on hundreds of properties over the last two decades and I've yet to find a scenario where I could buy something and rent it out with enough profit to be worth the hassle. You'll be much better off investing in some index fund instead.
  - pixelatedindex 9mo ago
    > If it is, why not do it and become rich too? If I had the capital I absolutely would have. It’s a bit worse now but any property you bought pre-covid (at least in big cities) can be rented out for more than what mortgage costs. I remember looking at houses in the Bay Area and the monthly mortgage would be 3K while you can rent it out for 4-5K. Anyone who owned property in the 90s and early aughts are absolutely rolling in it. You can invest the profits in an index fund on top of it.
    - jjav 9mo ago
      There's quite a bit of optimism in those numbers. I bought a house in the Bay Area in the 90s and the mortgage was well over $3K (remember interest was over 7%) and an equal house back then was renting for $1300 (my rent at the time for a 3br house in south San Jose). Try to run the numbers for any property you like. Remember to include taxes and insurance and maintenance. Just to break even is not easy and then you'll have to work for free on the maintenance. Or pay a rental management company, which is another 8-10% taken from the rent.
      - pixelatedindex 9mo ago
        Your house now can be rented for 4-5K a month if not more, you have no mortgage. Your property taxes are capped at purchase price due to Prop 13. All said and done can’t you net like 35-40K or so per year on a single home? I agree that buying a home and immediately putting it up for rent would put you underwater these days but during ZIRP times rent and mortgage weren’t too far from each other.
        jjav 9mo ago
        > Your property taxes are capped at purchase price due to Prop 13. BTW this is a common myth but not true. Property taxes are set by purchase price in year zero when you buy it. Every year after that, they go up 2% compounding. That's not the full story because the city/county can also add any extra fees they like, and raise them, prop13 does not apply. My taxes go up by well over 2% every year. > All said and done can’t you net like 35-40K or so per year on a single home? If you can find yourself a free house somehow, that feels about right. But how do you get yourself a free house? If you have to buy it, now you have a mortgage, and the math no longer works. The only people I know who profitably rent out homes are those who inherited a home with no debt. In that case, yes it works. > during ZIRP times rent and mortgage weren’t too far from each other Low interest helps, for sure, but the numbers still didn't work out. Here's a graph of interest rates: https://fred.stlouisfed.org/graph/?g=1KZYI https://fred.stlouisfed.org/graph/?g=1KZYI The rates only briefly dipped below 3% during the pandemic. Let's say you got the timing right and got a 3% mortgage for 1.2M. The payment is still a bit over $5K/mo. That's just the mortgage, add insurance + taxes + maintenance. On a home you can rent out for maybe 4K-4.5K/mo. Losing money every month. I've been running these numbers every few months for the last two decades hoping to follow the common advice to buy rental property and become rich. But it has always been cash flow negative no matter what the rents and interest rates have been. Only advice I have is go inherit a free house, that can be profitable.
PaulDavisThe1st 9mo ago
You're assuming a mortgage.