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this post was submitted on 03 Oct 2023
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Now tell me, where do you think the owners got those 20k from to pay for the repairs? The goodness of their hearts? Or your rent? People seriously thinking renting is cheaper need some help, it's less of a hassle sure and if that's why you rent go ahead but if you rent because it's cheaper I suggest you retake first grade math classes because
property upkeep + mortgage + rent overhead since owner wants to make money != property upkeep + mortgage. If you are renting you are paying extra, no two ways about it. Unless your credit score is crap you are likely also paying more than if you bought the place entirely on credit (this depends heavily on how the owner financed the place, if they paid out of pocket it might be a bit cheaper to rent whilst the hypothetical mortgage is being paid off).Only reasons I can think of renting for is A) ease of living: if something breaks it's not your time spent fixing it. B) flexibility: you can move places faster than if you had to sell the place you're currently living in first
But cheaper? Yeah no, the math just doesn't work out on that one.
If you live in a place for 2 years and have to spend $18,000 on a mortgage and $20,000 on repairs, that's definitely more expensive than just paying $24,000 in rent. Not everyone has $20,000 just laying around to fix stuff. They'd rather spend $20,000 over 2 years going on vacation, eating out, or having fun.
You mean, earning money from their job (managing the property). It's not free money, it's their income. Just like other people get a paycheck from a regular job, landlords are just self employed. Running your own business might mean not taking a lot of pay (or no pay) some years.
So the 18k for the mortgage just disappear when someone else owns the place? Do you even listen? Unless you're renting from a corporation (in which case the rent is not going to be cheaper anyway, they'll just make more profit) the landlord is paying that same mortgage (maybe only 17k since they have a longer history with the bank). You're not getting out of this cheaper. Any cost you might have with a house the landlord has as well, at best they get a better credit from the bank but overall the difference is so miniscule it doesn't balance out the cut they add for themselves onto the rent.
Regarding your second paragraph see my list of reasons why you might legitimately rent. If the saved time is worth it for you then that is absolutely valid but don't delude yourself into thinking it's cheaper.
If it's at the beginning of the mortgage, most of that is interest because interest is front loaded.
What's your point here?
At the beginning of a mortgage you're really not gaining much equity if that's that your prior comment was about.
The point is that it doesn't matter if the landlord pays the mortgage or you pay it it is still there. And if the landlord pays it you can be damn certain it's gonna end up in your rent calculation.
Well obviously, they aren't going to work for free.
Here's your error: you're assuming the mortgage will never be paid off. Which just isn't true.
You know what corporations do with a property that doesn't make money? Either they find a way to kick out the current residents to raise rent. If that is not possible they sell. A corporation doesn't give a shit about you still living in the building before selling.
you very apparently have no idea how property development works. Those companies have at any point in time almost no cash on hand and while they might pay a good chunk of a building out of pocket credit is usually still the way they go. There are very few companies that don't need credit for daily operations, in property development that number is even smaller because their daily operations include paying for construction basically all the time. Even if they were paying out of pocket the difference would be interest, not some magical 33% as you suggest.
Not sure what you are smoking but with a 25 year mortgage my calculator says that's ~2k a month (without interest). Now interest will add some to that but not 100%. Unless you are getting a loan from a meth dealer in a back alley. Without any upfront payment some random mortgage calculator spits out 2.4k per month on that property for me. We can talk about the math when you come back with numbers that add up. Going with the numbers of your closing sentence anyway here's some math for you: Rent: 2.8k / month House: 3k + 1k + 1k (1k repairs, 1k upkeep. Repair from earlier mentioned 20k/2years, upkeep from home owner annectodes around here estimated upwards)
25 years: Rent: 840k House: 1500
40 years (25 + 15): Rent: 1344k House: 1860k
50 years (25 + 25): Rent: 1680k House: 2100k
in which case yes, you are absolutely right. But that would also be the point at which I question how you arrive at a 4k or even just 3k 25 year mortgage for a ~600k property. To me that means either your bank is ripping you off or your credit history is so low the bank doesn't even think you can afford your next breakfast. That level of difference isn't even at a point where I can chalk it up to difference in interest rates. The number you gave me initially (4k) would be a 100% total interest rate. Again, I don't see how that works out.
If your mortgage numbers are correct then you are probably also correct in that the owner would be running a loss on the property (a steep one at that) assuming they are still paying a mortgage on it.