Why would you assume that it is cheaper to rent? Mortgages on investment properties carry higher interest rates than mortgages on primary residences. It seems to me that there is no incentive for a landlord to rent at a price less than his PITI.Originally Posted by Madison320
From the same page
10 homes you can buy for $5000.
In some areas the market is at less than half of the PITI. The incentive for the slumlord is a future increase in property value. IOW, pure speculation.
But the landlord is also accumulating an asset. So if his PITI is $1000 and his rent is $800 he's losing $200 but he may be gaining $300 in assets. I'm not really sure how this works, my guess is you'd also have to consider landlords that don't have to finance at all.
I did accounting for a living. I have never seen a landlord lose money month to month on a property that is leased. (Assuming the tenant actually pays...)
Most professional property owners keep mortgages because it allows them to free up cash to invest in more properties.
There certainly are different reasons to buy property. Long term investing is different than buying property to produce income. But if you're investing in property for long term, then you're probably better off not renting the property out. Renters are hard on property.
You're probably right but I wonder if that would still be true if we had a free market in housing. I wonder if the equation would change if interest rates were 10% instead of 4%. There must be some historical rent vs mortgage charts out there.
A general rule for renting property is to charge enough to cover your expenses (including taxes, any mortgage and maintenance) with about nine ten months rent payments. That allow for a couple months empty between renters or if renters don't change, a profit of two or three months payments (three months would mean a 25% profit margin).
There is no reason interest rates should be 10% right now with price inflation so low but higher rates would either mean somebody buying a property would either face higher payments for the same purchase price or for the same monthly costs they buy a lower price unit. Those costs would be passed along to renters. How much that would impact rents would depend on when the property was purchased.
As for the chart you requested: (I believe that this assumes you are facing the option of buying or renting at the time of the survey- it does not reflect mortgage prices of units purchased in previous years)
http://www.businessinsider.com/month...payment-2013-1Census Bureau, J.P. Morgan Asset Management. Monthly mortgage payment assumes a 20% down payment at prevailing 30-year fixed-rate mortgage rates; analysis based on median asking rent and median mortgage payment based on asking price.
Last edited by Zippyjuan; 07-28-2017 at 01:40 PM.
but again, this ends at the peak of the housing crash.A general rule for renting property is to charge enough to cover your expenses (including taxes, any mortgage and maintenance) with about nine ten months rent payments. That allow for a couple months empty between renters or if renters don't change, a profit of two or three months payments (three months would mean a 25% profit margin).
There is no reason interest rates should be 10% right now with price inflation so low but higher rates would either mean somebody buying a property would either face higher payments for the same purchase price or for the same monthly costs they buy a lower price unit. Those costs would be passed along to renters. How much that would impact rents would depend on when the property was purchased.
As for the chart you requested: (I believe that this assumes you are facing the option of buying or renting at the time of the survey- it does not reflect mortgage prices of units purchased in previous years)
http://www.businessinsider.com/month...payment-2013-1
Apples to apples: If you have to pay to live somewhere you might as well pay it to yourself.
Strange how this thread turned into a rent vs mortgage debate instead of how mortgages are a pure scam of the highest order, where people pay half their life span for something the bank created in a split second and never own what they're paying for.
"Let it not be said that we did nothing."-Ron Paul
"We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book
The only scam I see is that Federal Reserve/Govt bails banks out (with taxpayer money).
Do you think mortgages would be a scam in a free market?
pffft...we're all just renters.
Squatters on the King's land only as long we pay our yearly tribute.
Nobody truly owns $#@!.
“Civilizations die from suicide, not by murder.” - Arnold Toynbee
No $#@!, Sherlock.
Yea but we have to live somewhere.
How is borrowing money a scam? If I personally float a loan, is that also a scam?
Aside from the fact that I'm wary of anything that has the word "death" in the root language, no it would not be a scam. In a free market, there would be an exchange of value for value. The property would be paid for and the buyer would actually own it after the property is paid for. The current debt-as-money system deems that the human can not own the property because the means ("money") used to obtain residence in/on the property is not the human's property and does not actually exist. It is literally a case of the slave working to pay the rent for the slave's own quarters! The slave masters don't even have to provide the slave's quarters anymore. The slave does it for them!
If you float a loan, it is from "money" that already exists and is not a scam.
Do you even know how the debt-as-money system works? You've been here as long as I have and are still this ignorant about money?? Ron would shake his head at you.
Last edited by devil21; 07-29-2017 at 11:37 AM.
"Let it not be said that we did nothing."-Ron Paul
"We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book
Ok, stop with the hyperbole, drama boy. How does the fact that the state taxes the property have any bearing what-so-ever on the loan?
.
Hyperbole? Wha? Are you going to address my statement or continue with ad hominem and deflection? You sound like a zippy sock puppet. Hmmm......
Repeat: Do you even know how the debt-as-money system works? You've been here as long as I have and are still this ignorant about money?? Ron would shake his head at you.
Last edited by devil21; 07-29-2017 at 11:49 AM.
"Let it not be said that we did nothing."-Ron Paul
"We have set them on the hobby-horse of an idea about the absorption of individuality by the symbolic unit of COLLECTIVISM. They have never yet and they never will have the sense to reflect that this hobby-horse is a manifest violation of the most important law of nature, which has established from the very creation of the world one unit unlike another and precisely for the purpose of instituting individuality."- A Quote From Some Old Book
Why is a contract agreed to by two parties a scam? Renting is a worse deal. You are definitely getting nothing for your money with that arrangement. Rent you pay property taxes. Renting you are paying a mortgage (the home owner's). Renting you have nothing. Buying a home you can eventually get rid of the mortgage portion. And you have an asset you can resell for probably all of your money back while renting you have nothing to sell and get money back from. So you don't like a mortgage. Fine. Does that make it a scam? It can be a useful investment tool. Paying off the mortgage significantly reduces your out of pocket living expenses- an effective large raise in your income. Can't get that with paying rent.
Mortgages are legitimate. That much is true.
Everything else you said is incorrect. There are legitimate reasons to own a home. If you are married with kids, having more space is a good reason. If you have lots of disposable money and want to show off wealth, that makes sense. However, investment is not really one of those reasons. A lot of people do make homes their biggest asset because they are financially illiterate and undisciplined. For them, maybe having an illiquid, low return place to park their money that grows more or less tax free might a good place. Paying a mortgage is a good forced savings. If you are trying to get rich, buying a house is slightly better than buying a watch or luxury car. It is not a good place to put money.
I have worked out the math on this and it is not really close over the long haul. And then there are intangible things like peace of mind and not having an illiquid, high maintenance leg weight. If you are taking speculative risk to grow wealth tying up capital and having high fixed costs is a psychological burden. An actual Nobel Prize winning economist, who made his name in part for the work he did in residential real estate asset pricing, clearly shows what a terrible investment home ownership is. Putting money that you save renting in index fund is a better idea. And if you can find a small business like a laundromat or a dry cleaner where the math works out on, you are better off doing that than tying up money in a house.
Last edited by Krugminator2; 07-29-2017 at 12:17 PM.
I asked a question. You went off on a tangent. I'm done here, because this is just silly.
Renting would be as good of an investment as buying a fancy watch or a car- those depreciate rapidly. Buying a home is a much better one. They usually appreciate.
The opportunity cost is what else you are going to do with that money. This is money you need to spend on housing. It can go for rent or for buying a home. You can't take you rent money and invest it into a laundromat or other business. You do that if you have extra money after you pay for housing. That is true if you rent or own. Rent offers a guaranteed zero rate of return (actually a 100% loss financially). You get a roof over your head and that is all. Buy and you get a tax deduction for some of the money you get for interest. And when you get the mortgage paid off, you disposable income gets a large boost (just like a huge pay raise) and you have an asset you can resell. My disposable income rose about 25%. Can renting do that for me with the same monthly expense?
Last edited by Zippyjuan; 07-29-2017 at 12:30 PM.
Lets just take my situation. I spend $575 a month on rent. I just moved into a new apartment. I was spending $441 on rent. My electricity and utility probably averages to $115 through over the summer and winter. The national average mortgage payment for a $220,000 loan is $1061 (which is in line with where I live). When you include insurance and utilities you are looking at $1400 a month plus you have to have a fund for a new roof, you have furnish the place, you buy a lawn mower, snowblower (or you pay people to do that. If I got into an average house, mortgage payments would be $100000+ more over the course of a decade. Each year I conservatively have an additional 10k to put into the market which has a real rate of return of 6% over the last 100 years vs -1% to 1% in owning a home.
In just a pure dollar perspective, a 50k down payment would be 108k in 10 years and the 10k in yearly savings would be 178k over 10 years at historical 8% in an index fund. So you would have 186k increase on invested dollars. A 280k house growing at a historical 3% would give you 376k. That's 100k less in buying a house.
http://realtormag.realtor.org/daily-...r-pay-mortgage
Last edited by Krugminator2; 07-29-2017 at 01:02 PM.
The "average mortgage payment" you are using for comparison to renting a one room apartment is probably a multi-room house. Not apples to apples comparison. A bigger place is almost always going to cost more whether you buy or rent.
In my case, I have a one bedroom condo. I can rent one in the same building same size (apples to apples) for about $1500 a month. (It was about $1000 a month when I moved in so rents rose about 50%). I bought for just over $100k. Mortgage about $500 a month, property taxes $100 a month and condo fees about $300. Even at that I was saving about $200 a month. Now mortgage is zero, still have HOA fees and taxes but with rents up to $1500 I am saving over $1000 a month and an identical unit to mine (right next door) just sold for $300k. So I have gained $200k on the investment itself and have an extra $1000 a month in disposable income compared to renting the last 15 years (yes, I paid off my mortgage early).
If somebody is going to spend the money for rent anyways, might as well get something for it.
http://www.investopedia.com/ask/answ...ate-sector.aspEach year I conservatively have an additional 10k to put into the market which has a real rate of return of 6% over the last 100 years vs -1% to 1% in owning a home.
Average annual returns in long-term real estate investing vary by the area of concentration in the sector. Average 20-year returns in the commercial real estate slightly outperform the S&P 500 Index, running at around 9.5%. Residential and diversified real estate investments do a bit better, averaging 10.6%. Real estate investment trusts (REITS) perform best, with an average annual return of 11.8%.
The S&P 500 Index's average annual return over the past 20 years is approximately 8.6%. By any measurement, the real estate sector has outperformed the overall market, even factoring in the drastic collapse in housing prices during the 2008 financial crisis.
Last edited by Zippyjuan; 07-29-2017 at 01:10 PM.
As I said, you got lucky. That wasn't an astute buy on your part. A 100k house at 3% over 15 years should be 155k not 300k.
There is nothing wrong with it. My point is only, it kind of absurd how much home ownership is promoted.
That is just wrong for historical individual home ownership. It isn't close. Here is another from their site. saying it is half that up to the top of the housing market http://www.investopedia.com/articles...ate-market.asp
Shiller came up with 3.2% since 1890.
Last edited by Krugminator2; 07-29-2017 at 01:25 PM.
My reasons for buying it worked out great- that was the part about having a place paid for so I can have lower expenses when I eventually retire. It was an astute buy. I don't count the higher price it could sell for today since I do not intend to sell it- unless I either can no longer live here or have a financial crisis. I knew if I continued to just pay rent, my cost of living would continue to rise- not decline. That means you need to have even more money saved up to be able to retire at the same standard of living.
Again- might as well get something for money you have to spend anyways. Otherwise you are just throwing it away. I see that as smart- not absurd. To me, throwing away rent money is absurd.
Last edited by Zippyjuan; 07-29-2017 at 01:28 PM.
I think there are times to rent and times to buy. Depends on your situation. I would say buying, overall, is probably better most of the time, but not in every situation. At least for me and many others who would like to buy.
Disrupt, Deny, Deflate. Read the RPF trolls' playbook here (post #3): http://www.ronpaulforums.com/showthr...eptive-members
I think I understand the Federal Reserve pretty well, it's basically a counterfeiting operation. But I'm not making the connection why that makes bank lending a scam. If anything inflation actually makes it easier to pay back the loan. In fact I think if we get really high inflation the banks will get wiped out because they'll be getting paid back with monopoly money.
Yup. Plus I looked up some charts to see if mortgages were more or less than rents and it was different everywhere. Depends on location and time in history.
Sure. If you aren't planning on staying very long, or if you don't want to be bothered with maintaining it are the two most common reasons. But that is not what this thread is about.
If your income rises with the price inflation you will have more money to pay off the loan. If your income does not rise, you will be spending more money on other things and paying it back will be more difficult. Banks won't get wiped out with high inflation. They just charge higher rates on new loans.
Posting Permissions
Reply With Quote
Connect With Us