I’m in this situation and I’m renting out my house while working overseas, where I am living in a rental property. Just because the market has been perverted by capital doesn’t mean there aren’t legit purposes for a rental market.
The person in the tweet doesn’t claim to be making a profit at all. She’s basically saying she isn’t going to sell the apartment, so if she didn’t rent it out, then it would just sit empty.
In her case, so she has a place to move back to if she comes back. Although I have a friend who has a few properties that he rents out basically at cost (mortgage, taxes, insurance, maintenance) and has them as an investment properties.
The way the real estate market is currently set up, a property sitting empty still generates profit as a financial asset. This is the major issue with rentier capitalism, not your average middle class homeowner with an extra property for rent.
Taxes, maintenance, a management company but probably most of all to interest on the insanely large loan you took out to get it. We “bought” a house with a 30 year loan and if we were to rent it out right now at market rate, there would be no profit. We would probably take a small loss other than the opportunity to hold the property hoping that the price of housing continues to rise. It hasn’t risen since we bought the house a couple of years ago. If you’re old enough to remember 2008, then you also know that it doesn’t always go up. Sometimes it goes down pretty dramatically and you’re left holding the bag.
If the house sits empty between tenants, those costs don’t go away. So for me, in my one bathroom house, that would be $2,400 a month (not including maintenance.) Where is that money gonna come from? I don’t have it because I’m paying rent somewhere else to try and make more money to dig my way out of this hole in this hypothetical situation.
So why not sell? To sell it, we have to pay 6% to real estate agents. If we actually owned the house, not just a massive soul-crushing loan, fine. But we don’t. So that 6% is a SHITLOAD of money when you borrowed all of it besides the 15% down payment that was two people’s life savings plus begging for more from relatives. So selling means half your combined life savings and the money you begged from relatives, poof gone.
Most people have a mortgage like this and amortized interest rates mean that in the beginning, 90% of the money you give the mortgage company goes straight to interest because you pay off 30 year’s worth of interest up front so that they’re sure they get their profit (and because paying the full 5% interest on a note that big every year would be impossible for most people.)
People who bought recently, have a mortgage and a single home that they rent out are not making any profit in areas with expensive housing. It’s not like houses are cheap to “buy” in the first place. They get you good.
Why buy at all then? Because I don’t like landlords telling me what I can and can’t do. So much so that I gambled it all on “buying” a place.
Loan interest payments are absolutely not something that should be converted by rent - you just take someones labour to pay for something in order for you to eventually own it.
Regarding the intentionally low liquidity market - that bullshit is by design. The government to allow (much less mandate) real estate agents to not get payed in fixed amounts is just grotesque. They dont provide any service and are not really responsible for anything.
I think we have a cap at 2% (but EU is slowly working towards banning any financial advice where the adviser gets payed in % of something because then it’s in their interest for the price to go up). But most importantly, I can draft the contract myself (or ask a lawyer to do it for a minimal fixed fee if Im too lazy to look online for examples) & pay nothing to real estate agents. I can’t imagine paying an extra 6%, that shit is formed basically as taxes, but go directly to private entities instead.
What in saying is that actual landlords and real estate agents have an interest in hiking prices for something they have extra but its a necessity for everyone.
Wait, why would people buy houses with 30y loans just to rent them?
Loan interest payments are absolutely not something that should be converted by rent - you just take someones labour to pay for something in order for you to eventually own it.
Same with taxes - both on rent profit and real estate itself.
Maintenance, insurance, electricity, water, etc tenants cover, bcs that is the thing they are using & costing landlords. And those things are absolutely not 6%~12% (as average re yield) of the real estate price. Its just profit from labor transferred to non-productive factors.
So people should just pay a tiny fraction of the cost of home ownership to rent somewhere? If that were the case, only the absolutely most wealthy people could afford to own and rent places out. It wouldn’t make sense for anyone else to buy it, and those ultra wealthy would be the only ones profiting.
I agree, however, a good landlord who maintains their property and promptly resolves issues will have to invest an element of time and money into the process.
a good landlord [is one] who maintains their property
That job exists - they are called maintenance workers: plumbers, electricians, roofers, handymen…
What makes a landlord a landlord - and not a handyman - is the ownership of property and extraction of rent for its use. It is definitionally not the labor involved in maintaining it.
If landlords want to be paid for maintaining properties they can get jobs as maintenance workers.
Landlord is the role of owner, not maintainer/manager of the property. Sure, they can be the same sometimes (even then most of the actual work gets outsourced to professionals), but anyone can enlist the help of a real estate manager. We usually tend to call them janitors.
Also there are huge open funds specialising in real estate (for rent revenue, for dev/resell potential, or both) that have like a 100 property managers that just need to keep their tenants happy. What that actually means is that investors pool their moneys into a fund with fund managers that buys real estate, finds tenants that wound pay a higher rent under certain conditions (eg I want a huge concert hall in the center of our office complex), fund has the capital to make it happen & evicts the current tenants (unless they can match the rent of the place with a concert hall but without actually having it).
Exactly. Profit actually middies/lowers intrinsic value added since the main driver is purely financial, not actual irl. And you can make a (steady) profit on/with things that don’t add value.
Ofc, stuff that you can’t really live without (or be considered poor without) cannot be market priced/for profit because the only thing stopping soaring prices would be a revolution/revolt … and we were pretty pacified throughout our upbringing. Even silly/obvious things - like people automatically condemning (financially poor) looters of megacorps with unimaginable private profits.
The issue is (the normal and accepted practice of) charging people “market” rates for something that is a necessity.
Like healthcare, housing market isn’t free because the demand part of the market isn’t free.
People tend to mistake choice (the amount of available products that do the same - eg 100 colors of the same 100× overpriced cornflakes) with free market.
You are not going to go live in another country to work there and be homeless. And, if you could buy the place instead of renting, ofc you would want to do that. Even if you dont have the full nominal amount of moneys, as long as your credit payments (eg bank financing) would be lower than rent (well, actually just if the interests payments are lower than rent), you are just losing money paying rent. Even in case of like a really long loan, if you decide to sell the real estate after a year, every penny that you paid to you borrowed nominal is now “yours again” since the loan diminished by that amount and the selling price is within that margin/about the same-ish.
The profit incentive of current owners (ie the ones that just happened to have the opportunity to buy that real estate before you did, or were even born) is the main driver for hiking prices/rents.
And all of the free actors on the market, which are owners that control the supply part of the market, have exactly aligned interest of charging higher rents (that consequently/additionally result in higher real estate prices bought as investments) … guess where the market is headed. Not only at higher market prices, but also supporting other hurdles to buying real estate.
I worked in another country for a few years, renting was defiantly the better choice at the time. I wasn’t going to be there long enough to break even when I sold, and the headache of buying a property in a country that you don’t have citizenship, trying to get financing, ect. just wasn’t worth it.
Oh, that’s true, especially if countries dont have any bilateral agreements. But these are unnecessary complications that should be resolved (like, I can buy stock on basically any open market in seconds with very clear and registered ownership).
I’m in this situation and I’m renting out my house while working overseas, where I am living in a rental property. Just because the market has been perverted by capital doesn’t mean there aren’t legit purposes for a rental market.
Not for profit, there isn’t. Profit as a concept in contemporary economics already doesn’t pass the sniff test, but housing especially doesn’t.
The person in the tweet doesn’t claim to be making a profit at all. She’s basically saying she isn’t going to sell the apartment, so if she didn’t rent it out, then it would just sit empty.
Why rent it out if you’re not making a profit?
In her case, so she has a place to move back to if she comes back. Although I have a friend who has a few properties that he rents out basically at cost (mortgage, taxes, insurance, maintenance) and has them as an investment properties.
The way the real estate market is currently set up, a property sitting empty still generates profit as a financial asset. This is the major issue with rentier capitalism, not your average middle class homeowner with an extra property for rent.
Please expand.
Home value goes up over time.
Yeah but you’re paying taxes and maintenance. It’s actually not a great investment vehicle if it’s sitting empty, it’s just generally very safe.
So rent goes where if not in profit? Maintenance??
Taxes, maintenance, a management company but probably most of all to interest on the insanely large loan you took out to get it. We “bought” a house with a 30 year loan and if we were to rent it out right now at market rate, there would be no profit. We would probably take a small loss other than the opportunity to hold the property hoping that the price of housing continues to rise. It hasn’t risen since we bought the house a couple of years ago. If you’re old enough to remember 2008, then you also know that it doesn’t always go up. Sometimes it goes down pretty dramatically and you’re left holding the bag.
If the house sits empty between tenants, those costs don’t go away. So for me, in my one bathroom house, that would be $2,400 a month (not including maintenance.) Where is that money gonna come from? I don’t have it because I’m paying rent somewhere else to try and make more money to dig my way out of this hole in this hypothetical situation.
So why not sell? To sell it, we have to pay 6% to real estate agents. If we actually owned the house, not just a massive soul-crushing loan, fine. But we don’t. So that 6% is a SHITLOAD of money when you borrowed all of it besides the 15% down payment that was two people’s life savings plus begging for more from relatives. So selling means half your combined life savings and the money you begged from relatives, poof gone.
Most people have a mortgage like this and amortized interest rates mean that in the beginning, 90% of the money you give the mortgage company goes straight to interest because you pay off 30 year’s worth of interest up front so that they’re sure they get their profit (and because paying the full 5% interest on a note that big every year would be impossible for most people.)
People who bought recently, have a mortgage and a single home that they rent out are not making any profit in areas with expensive housing. It’s not like houses are cheap to “buy” in the first place. They get you good.
Why buy at all then? Because I don’t like landlords telling me what I can and can’t do. So much so that I gambled it all on “buying” a place.
Loan interest payments are absolutely not something that should be converted by rent - you just take someones labour to pay for something in order for you to eventually own it.
Regarding the intentionally low liquidity market - that bullshit is by design. The government to allow (much less mandate) real estate agents to not get payed in fixed amounts is just grotesque. They dont provide any service and are not really responsible for anything.
I think we have a cap at 2% (but EU is slowly working towards banning any financial advice where the adviser gets payed in % of something because then it’s in their interest for the price to go up). But most importantly, I can draft the contract myself (or ask a lawyer to do it for a minimal fixed fee if Im too lazy to look online for examples) & pay nothing to real estate agents. I can’t imagine paying an extra 6%, that shit is formed basically as taxes, but go directly to private entities instead.
What in saying is that actual landlords and real estate agents have an interest in hiking prices for something they have extra but its a necessity for everyone.
Wait, why would people buy houses with 30y loans just to rent them?
Mortgage, maintenance, insurance, taxes
Loan interest payments are absolutely not something that should be converted by rent - you just take someones labour to pay for something in order for you to eventually own it.
Same with taxes - both on rent profit and real estate itself.
Maintenance, insurance, electricity, water, etc tenants cover, bcs that is the thing they are using & costing landlords. And those things are absolutely not 6%~12% (as average re yield) of the real estate price. Its just profit from labor transferred to non-productive factors.
So people should just pay a tiny fraction of the cost of home ownership to rent somewhere? If that were the case, only the absolutely most wealthy people could afford to own and rent places out. It wouldn’t make sense for anyone else to buy it, and those ultra wealthy would be the only ones profiting.
Profit is a byproduct of free exchange of labor. Most people wouldn’t labor if it was net negative for them.
FTFY
Value is added regardless of whether the labor was freely exchanged.
That said: rent isn’t a result of any labor at all
I agree, however, a good landlord who maintains their property and promptly resolves issues will have to invest an element of time and money into the process.
That being said, fuck landlords in general.
That job exists - they are called maintenance workers: plumbers, electricians, roofers, handymen…
What makes a landlord a landlord - and not a handyman - is the ownership of property and extraction of rent for its use. It is definitionally not the labor involved in maintaining it.
If landlords want to be paid for maintaining properties they can get jobs as maintenance workers.
Landlord is the role of owner, not maintainer/manager of the property. Sure, they can be the same sometimes (even then most of the actual work gets outsourced to professionals), but anyone can enlist the help of a real estate manager. We usually tend to call them janitors.
Also there are huge open funds specialising in real estate (for rent revenue, for dev/resell potential, or both) that have like a 100 property managers that just need to keep their tenants happy. What that actually means is that investors pool their moneys into a fund with fund managers that buys real estate, finds tenants that wound pay a higher rent under certain conditions (eg I want a huge concert hall in the center of our office complex), fund has the capital to make it happen & evicts the current tenants (unless they can match the rent of the place with a concert hall but without actually having it).
Exactly. Profit actually middies/lowers intrinsic value added since the main driver is purely financial, not actual irl. And you can make a (steady) profit on/with things that don’t add value.
Labor theory of value. Read theory people. It makes you better informed.
Ofc, stuff that you can’t really live without (or be considered poor without) cannot be market priced/for profit because the only thing stopping soaring prices would be a revolution/revolt … and we were pretty pacified throughout our upbringing. Even silly/obvious things - like people automatically condemning (financially poor) looters of megacorps with unimaginable private profits.
You are so brave to post this on lemmy
The issue is (the normal and accepted practice of) charging people “market” rates for something that is a necessity.
Like healthcare, housing market isn’t free because the demand part of the market isn’t free.
People tend to mistake choice (the amount of available products that do the same - eg 100 colors of the same 100× overpriced cornflakes) with free market.
You are not going to go live in another country to work there and be homeless. And, if you could buy the place instead of renting, ofc you would want to do that. Even if you dont have the full nominal amount of moneys, as long as your credit payments (eg bank financing) would be lower than rent (well, actually just if the interests payments are lower than rent), you are just losing money paying rent. Even in case of like a really long loan, if you decide to sell the real estate after a year, every penny that you paid to you borrowed nominal is now “yours again” since the loan diminished by that amount and the selling price is within that margin/about the same-ish.
The profit incentive of current owners (ie the ones that just happened to have the opportunity to buy that real estate before you did, or were even born) is the main driver for hiking prices/rents.
And all of the free actors on the market, which are owners that control the supply part of the market, have exactly aligned interest of charging higher rents (that consequently/additionally result in higher real estate prices bought as investments) … guess where the market is headed. Not only at higher market prices, but also supporting other hurdles to buying real estate.
I worked in another country for a few years, renting was defiantly the better choice at the time. I wasn’t going to be there long enough to break even when I sold, and the headache of buying a property in a country that you don’t have citizenship, trying to get financing, ect. just wasn’t worth it.
Oh, that’s true, especially if countries dont have any bilateral agreements. But these are unnecessary complications that should be resolved (like, I can buy stock on basically any open market in seconds with very clear and registered ownership).