[bombcar]

That shows exactly the point, 10% for maintenance isn't enough, doesn't cover taxes, insurance, and other costs, and netting $200/month on a (assumed) $450k+ house isn't great, that's less than the interest earned on a deposit of the same amount.

Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation.

To actually make a profit on the rental portion, you need to discount the appreciation. You can do this if you're paying into a mortgage from 20 years ago and renting at todays prices, but that's just ignoring the fact that you could sell the property.

The biggest risk that most small landlords don't account for is a bad tenant - they exist and they will quickly eat through your $200/net a month.

The final proof is no company anywhere is building single-family rentals. If there was money to be made there, they would; but you need to get to apartments and the cost-savings inherent in them before it makes sense.

[mdorazio]

You realize that a mortgage is a loan, right? You’re paying both interest and equity on it over time, which you need to take into account. The longer you pay it, the more of your payments are really going right back into your own pocket. Renters get zero equity in exchange for their rent.

And yes, I’ll agree that some portion of the ROI on a house is the expected appreciation, but we’ve setup a system where that’s effectively guaranteed in many locations and simultaneously unavailable to renters. There’s a reason “be a landlord” is now the go-to “get rich” strategy for a large number of people.

[PaulDavisThe1st]

You seem to be assuming that a rental property is subject to a mortgage. I don't know how what fraction of the US rental property is covered by mortgages, but it is definitely not 100%. For those that are not, your math is totally wrong.

I've been a landlord of a non-mortgaged property and am about to become one again (reluctantly). We charge a below market rental rate, and typically make around 4-6% (pretax) of the nominal property value a year (we typically divert 1-2% of the rent into a maintainance fund).

[long_time_gone]

> Even if you only count the downpayment, $2400 a year on $90k is a 2.6% return; you therefore are getting the majority of your return from appreciation.

I would also getting the increased equity in the house as each mortgage payment lowers the total loan amount.