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?
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?