[jefflombardjr]

I am completely against a 'landed class' collecting malthusian rents. But, if these companies are adding value that shouldn't be overlooked. Not all people want to maintain a property, and not all people want to "rent for decades" in the same place.

I rented in a larger city last year. Had I bought instead of renting I would have had transaction costs that would be 3x the amount I paid in rent. Not only that, if something broke in the apartment I had someone I could call to take care of it. I didn't even have to think through the logistics of getting contractors to my apt and getting bids on jobs.

Not all landlords are slumlords.

[asdff]

I think a lot of landlords are slumlords without even realizing it then. Landlords whine and scream and sound the alarm that shit will hit the fan when cities try to limit rent increases to a generous 5% to keep pace with actual wage growth. Yet to the landlord, did their costs even increase at all the year they jacked the rent? In CA, their taxes remained the same as when they bought the place. Hiring laborers to upkeep the property has always been about hiring from the very bottom of the handiman market, a market that also has not seen wage growth.

So if all the landlords costs do not rise all that much, why do they feel justified to raise rents sometimes well over 10% a year? The only reason is to fatten the wallet by milking the tenants, and we've hit a point where in some cases the working class has to commute 4 hours a day in desperate effort to find a job that pays the exorbitant rent.

[charlesdm]

I rent for the exact same reason, and can agree. The second reason is that there is minimal opportunity for capital appreciation where I am, and I do not feel like locking up a significant deposit in such an illiquid asset. I get much better returns on my money elsewhere.

[C1sc0cat]

Where in the world are transaction costs that high for buying a property

[jaclaz]

I will give you an example for Italy.

The real estate agent wants between 2% and 3% of the actual value of the building from both the seller and the buyer.

Taxes (unless it is a "first house" designed and actually used as your "primary residence" AND provided that you are not going to resell it within 5 years, in which case will be around 2% of nominal value) will be around 9% of nominal value (usually much lower than market value). Then there is the notary fees.

So, example, you buy an apartment paying it 200,000 Euro, something that would be rented between 600 and 800 Euro/month (if you are lucky):

Estate agent (buying) 6,000 (0.03x200,000)

Taxes (buying) 10,800 (0.09x120,000)

Notary 2,000

Estate agent (re-selling) 6,000 (0.03x200,000)

That is 24,800 Euro to which you add the equivalent of 1 year land tax probably some 800 Euro, and some repairs/refurbishing making it more than 26,000 Euro (and without considering what the 226,000 Euro could have produced if invested).

Compare this with 12x800=9600

Maybe it is not exactly 3x, but it is at least 2.5x.

If you prefer, unless there is a huge increase in house value in the (short) period of ownership, the breaking even point is past more than three years.

[C1sc0cat]

Ah like France with its corrupt lawyer cartel then.

[jaclaz]

>Ah like France with its corrupt lawyer cartel then.

I am not following you, in the example I posted there is no "lawyer" (corrupt or belonging to a cartel or not) involved (as normally there are no lawyers involved in "normal" real estate transactions).

What I posted ar only usual fees and taxes.

[C1sc0cat]

Usual for Italy buying a house is a lot cheaper in the UK - France is even worse lawyers can charge 12% or so.

[bardam]

In NYC the cost of buying/selling an coop/condo can be more than 10% of the total purchase/sale price. See for reference:

https://www.brickunderground.com/blog/2015/03/closing_costs

So the cost to buy/sell a $1mm apartment could be in the range of $110,000 after broker fees and all taxes are accounted for. An apartment at that price would rent for maybe $4k for month, though that will rise at a faster price over 30 years than a fixed mortgage + common charges. Unless the value rises at a pace much faster than the rate of inflation, you're going to lose money if you don't hold on to the place for a few years. See this fun calculator to find the inflection point:

https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal...