35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This logic assumes that 35% of Americans WANT to rent their home. Which seems odd to me, if only for financial reasons - why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it?
> why would you pay 1400$ for a 1 bedroom apartment when you could pay 700$ in a mortgage for that same apartment if you could have bought it
Because the down payment you put into your purchased home could've been put into the stock market and grown faster than property values (this is historically true).
Because you don't want the headache of home maintenance.
Because in the 21st century, job stability doesn't exist so it's a big risk to buy a home fifteen minutes from your current job that might be an hour from your new job after you get fired so a CEO can get more golden parachutes.
Because you might have to change cities a year from now.
My wife and I rented for a long time because it was better than owning for us.
Agreed. It’s a classic fallacy to compare rent vs mortgage on a numbers to numbers basis. It’s classic example of not accounting for the total cost of ownership.
Maybe not half, but it’s pretty common around here (generic midwestern city) for renting to be more expensive than a comparable mortgage.
Many landlords seem to expect to pay their mortgage and property taxes and maintenance with the rental income, and still net a profit, if r/landlord is to be believed.
The profit is compensation for the risk. The mortgage and property taxes and maintenance are due no matter what - can't find a tenant, tenant doesn't pay, tenant flushes paper towels down the toilets every day etc etc.
If there was no profit there would be no landlords. Some might say that's great. But it would be a world with less flexibility, with fewer choices. Don't like your job and want to move? Split up with your partner and need someplace to live? Moved to a new city and don't know where you want to put down roots yet? At college for 4 years? Don't want to deal with house maintenance? "F** you, buy a house anyway". That's what we'd have if there was no rental housing.
The actual numbers might be more like rent $1400 vs mortgage $1000. After property taxes, insurance, and maintenance there might be $50 left. A handsome 3.5% profit, rising to maybe 6-7% if you include principal paydown. This is hardly a money-printing machine. It's a steady return for taking on some risk.
> renting to be more expensive than a comparable mortgage.
that doesn't sound plausible. May be for a select few properties that are in some unique circumstance (e.g., the seller of the property would sell underpriced because they needed quick sale).
And often, in arguments like these, the rent is the rent, but the mortgage is purely the interest on the loan, and doesn't count the maintenance cost, and doesn't count the deposit required (which has a cost, ala the cost of capital). If you added up all these costs, it exceeds rent.
I fundamentally agree on statement that rents are more expensive than mortgages. As capital is involved and landlords want premium on capital.
Still, things can go either way. And well renting is lot more flexible and less risky. So there is really nothing wrong with that option existing. And many times it is the better pick of the two.
> And well renting is lot more flexible and less risky
Sure if you don't count the cost of risk for the tenant (of needing to move due to job loss, unexpected maintenance bills) then renting is more expensive.
You do know that the posters on r/landlord are often selling services to landlords and thus have a financial incentive to make being a landlord seem attractive. Its a pretty safe assumption that reality isn't that rosy.
> 35% of Americans rent their homes. And they almost invariably rent from investors. Therefore if more than 35% of homes are owned by investors this drives down rent. If less than 35% are owned by investors rent goes up.
This only holds until the percentage owned by the investors becomes a monopolistic chunk. At that point the investors would rather leave some apartments empty rather than see rents go down.