RE: You know what the best thing about being a landlord is...

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philosophy -> RE: You know what the best thing about being a landlord is... (8/31/2006 6:03:23 AM)
surely the best thing about being a landlord is having spare capacity in the roof-over-your-head stakes........

Chaingang -> RE: You know what the best thing about being a landlord is... (8/31/2006 6:26:31 AM)
quote: ORIGINAL: MizSuz Someone else paying the mortgage while I get the equity (just like I paid someone else's mortgage while they got the equity for years). Then I guess where I live the real estate is overvalued by around 100% because you can't rent for the full price of a mortgage unless the down was quite substantial. If you are financing even 75%, you can't rent it for the price of the monthly mortgage payment - you can't probably get even half of that.

Lordandmaster -> RE: You know what the best thing about being a landlord is... (8/31/2006 7:22:55 AM)
Sounds like you live in a renter's rental market, Chaingang. You should be making a good 12% through rents, because after deducting your expenses, you need to clear at least 6-7% just to make the investment worthwhile. That has GOT to cover your mortgage. After all, you can get the same 6-7% in bonds (with about 1% of the hassle).

Chaingang -> RE: You know what the best thing about being a landlord is... (8/31/2006 7:51:12 AM)
http://patrick.net/housing/crash.html US Housing Crash Continues, San Francisco Bay Area Hit Hard Thu Aug 31, 2006 Why? 1. Prices disconnected from fundamentals. House prices are far beyond any historically known relationship to rents or salaries. Rents are less than half of mortgage payments. Salaries cannot cover mortgages except in the very short term, by using adjustable interest-only loans. ... 10. Lightbulbs going on in many brains in the Bay Area: "Hey, I can move to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the price difference. My neighbors just did it, so I'll have friends there too." ----- I can confirm those bits there - observations I have noted for some time. Let's say you buy a $400K home of about 2,000 sq. ft. with 3-4 beds, 2 baths, two car garage, and yard with jungle gym. Perfect for a family of 4. You put 25% down and cover $100K, financing the rest for 30 years. That's a ballpark $2K a month mortgage. Where I live it would be fairly average to rent that for $1200-1500 per month. and maybe it just shows my age or the degree to which I am out of touch, but that's a lot to pay in rent. I'd hope the family was making at least $5-6K per month to throw away that kind of bread in rent. The houses stay for sale for quite some time now. People still want that bubble money that will not be forthcoming...

Lordandmaster -> RE: You know what the best thing about being a landlord is... (8/31/2006 7:31:01 PM)
I don't think renting the big 4-BR houses is the best way to go. Go with condominiums, 2-BRs, things like that. I think you'll find a better return percentage for those kinds of properties, and it's also a lot easier to find tenants for them. Of course the real estate market is cooling everywhere; I'm not going to argue with that. But I don't think that means you can no longer make money renting properties.

LTRsubNW -> RE: You know what the best thing about being a landlord is... (9/4/2006 2:51:03 PM)
quote: ORIGINAL: MizSuz Someone else paying the mortgage while I get the equity (just like I paid someone else's mortgage while they got the equity for years). Perzakly.

LTRsubNW -> RE: You know what the best thing about being a landlord is... (9/6/2006 5:16:28 PM)
quote: ORIGINAL: Chaingang http://patrick.net/housing/crash.html US Housing Crash Continues, San Francisco Bay Area Hit Hard Thu Aug 31, 2006 Why? 1. Prices disconnected from fundamentals. House prices are far beyond any historically known relationship to rents or salaries. Rents are less than half of mortgage payments. Salaries cannot cover mortgages except in the very short term, by using adjustable interest-only loans. ... 10. Lightbulbs going on in many brains in the Bay Area: "Hey, I can move to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the price difference. My neighbors just did it, so I'll have friends there too." ----- I can confirm those bits there - observations I have noted for some time. Let's say you buy a $400K home of about 2,000 sq. ft. with 3-4 beds, 2 baths, two car garage, and yard with jungle gym. Perfect for a family of 4. You put 25% down and cover $100K, financing the rest for 30 years. That's a ballpark $2K a month mortgage. Where I live it would be fairly average to rent that for $1200-1500 per month. and maybe it just shows my age or the degree to which I am out of touch, but that's a lot to pay in rent. I'd hope the family was making at least $5-6K per month to throw away that kind of bread in rent. The houses stay for sale for quite some time now. People still want that bubble money that will not be forthcoming... No offense meant Chaingang, but the only difference between the article you link, your arguments (which are currently, extremely valid) and those made in 1932, 1943, 1957, 1968, 1979, and 1991 are/is...the date on the article. By that I simply mean, your (well made) argument has been made in every one of the above noted years. Granted, there are times when purchasing real estate is and has been, for a time disadvantageous, but at only one time in U.S. history has real estate been a bad investment over a 10 year span (during and shortly after the civil war, for those who want to do the research, and then only because we didn't have, at that time, consistent state to state laws pertaining to transfer of title, making a sale of a deed at best, suspect). Every time that we've had scenarios where real estate values have outstripped both incomes and rental value comparitives, the roar of unrequited renters has exclaimed "OMFG!!! How will the next generation/my kids/your kids/anyone ever get a place of their own????" And yet, every doggone time, they always do. Which should by the way (with some very minor temporary exceptions) suggest...there truly is no such thing as a bad time to buy real estate. The sooner, the better. One other historical tidbit...thousands of fortunes have been made outside of real estate. Very few have been maintained without it.

UtopianRanger -> RE: You know what the best thing about being a landlord is... (9/7/2006 10:35:18 PM)
quote: ORIGINAL: Chaingang http://patrick.net/housing/crash.html US Housing Crash Continues, San Francisco Bay Area Hit Hard Thu Aug 31, 2006 Why? 1. Prices disconnected from fundamentals. House prices are far beyond any historically known relationship to rents or salaries. Rents are less than half of mortgage payments. Salaries cannot cover mortgages except in the very short term, by using adjustable interest-only loans. ... 10. Lightbulbs going on in many brains in the Bay Area: "Hey, I can move to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the price difference. My neighbors just did it, so I'll have friends there too." ----- I can confirm those bits there - observations I have noted for some time. Let's say you buy a $400K home of about 2,000 sq. ft. with 3-4 beds, 2 baths, two car garage, and yard with jungle gym. Perfect for a family of 4. You put 25% down and cover $100K, financing the rest for 30 years. That's a ballpark $2K a month mortgage. Where I live it would be fairly average to rent that for $1200-1500 per month. and maybe it just shows my age or the degree to which I am out of touch, but that's a lot to pay in rent. I'd hope the family was making at least $5-6K per month to throw away that kind of bread in rent. The houses stay for sale for quite some time now. People still want that bubble money that will not be forthcoming... We are thinking alike these days. The link you've cited is an excellent blog that I've garnerd information from for well over the last year. It gives a classic example of how renting has a huge upside vs. purchasing; even with tax implications when comes to certain markets. My brother is mortgage broker in the Napa Valley and told me a couple of days ago in phone conversation that the numbers with regard to the default notices are beginning to get ugly. He's also noted that at least two local title companies that he's done a fair amount of business with in the past have recently closed up shop - And we're just in the beginning stages. - R

Lordandmaster -> RE: You know what the best thing about being a landlord is... (9/7/2006 10:41:34 PM)
Unless I've misunderstood what you're saying, I think the renting vs. purchasing decision depends on a lot of factors. For example, I can't imagine that it would ever be wiser to rent in the same location for 30 years than simply to buy and pay off a mortgage. If you take a mortgage that you know you can pay, especially if you live in the same location for long enough to offset the closing costs, that HAS to be a better long-term deal than renting. quote: ORIGINAL: UtopianRanger It gives a classic example of how renting has a huge upside vs. purchasing; even with tax implications when comes to certain markets.

UtopianRanger -> RE: You know what the best thing about being a landlord is... (9/7/2006 10:54:30 PM)
quote: ORIGINAL: Lordandmaster Unless I've misunderstood what you're saying, I think the renting vs. purchasing decision depends on a lot of factors. For example, I can't imagine that it would ever be wiser to rent in the same location for 30 years than simply to buy and pay off a mortgage. If you take a mortgage that you know you can pay, especially if you live in the same location for long enough to offset the closing costs, that HAS to be a better long-term deal than renting. quote: ORIGINAL: UtopianRanger It gives a classic example of how renting has a huge upside vs. purchasing; even with tax implications when comes to certain markets. If you read the blog..... you will see what I am talking about. If you deciced tomorrow that San Francisco was the new place you wanted to live, and moved there....you'd be far better off to rent than to purchase. Now if you're in another market like most of the Midwest, it's whole different reality. But in much of California and even some parts of Oregon... it's much more prudent to rent and then take the money you would have ordinarily used to purchase with and make a more lucrative investment elsewhere. I guess what I'm really saying is that it's better to rent in an over-inflated market. - R

UtopianRanger -> RE: You know what the best thing about being a landlord is... (9/7/2006 11:12:44 PM)
I've pasted a perfect example of what I'm talking about : What are their arguments? "There are great tax advantages to owning." FALSE. It is much cheaper to rent a house in the San Francisco Bay Area than it is to own that same house, even with the deductibility of mortgage interest figured in. It is possible to rent a good house for $1800/month. That same house would cost about $700,000. Assume 6% interest we can see that a buyer loses at least $4,936 per month by buying. Renting is a loss of course, but buying is a much bigger loss. Renting: Rent: $1,800 ---------------------- Monthly Loss: $1,800 Buying: Property Tax: $486 ($729 per month at 1.25% before deduction, $486 lost after deduction.) Interest: $2,333 ($3500 per month at 6% before deduction, $2333 lost after deduction.) Other Costs: $450 (Insurance, maintenance, long commute, etc.) Principal loss: $1,667 (Modest 3% yearly loss on $700,000. Reality will be much worse.) ---------------------- Monthly Loss: $4,936

TotalitarianFL -> RE: You know what the best thing about being a landlord is... (9/8/2006 1:57:34 AM)
I have been lucky with tenants in the past... of course there was an exception, a disgusting bitch who seemed reliable and turned out to be a parasite. Eh, you live and learn though...

Lordandmaster -> RE: You know what the best thing about being a landlord is... (9/8/2006 7:34:52 AM)
There are a lot of things wrong with those figures (aside from the questionable assumption that a $700K house will yield only $1,800 in monthly rent). "Long commute"? You can't penalize the homeowner for a long commute. The renter would have the same commute if we're talking about "the same house." And renters have to pay for insurance too, though of course they won't have as high a premium. Also, I'm puzzled by what's meant by "principal loss." Why are we ASSUMING that the homeowner is going to lose principal? In the long-term, I find the opposite more likely. In fact, that raises another point that the figures leave out: renters encounter continually escalating rents, whereas a mortgage payment never rises. (I can't tell you how many people in my ritzy neighborhood are living on mortgages they took out 15 years ago, when these houses were all built, and sold at prices representing about 30-40% of their current dollar value. These fat pigs are living on what we'd consider a low-income mortgage today!) Obviously, in the first year or two of owning, a homeowners find themselves paying much more to live than they did when they were renting. But over the long term, the balance shifts dramatically in their favor. I remember when I was renting at one point, and was confronted with what I considered an absurd enough increase to warrant the expense of moving out. Not long after I started searching, I discovered a substantially larger townhouse for sale twenty minutes closer to work with a mortgage payment that was going to be about 55% of my rent. I couldn't afford not to buy. All I know is that in not very many years of casual but informed investing, I've done ridiculously well in real estate, and I don't feel that I've ever earned a dime by renting. quote: ORIGINAL: UtopianRanger I've pasted a perfect example of what I'm talking about : What are their arguments? "There are great tax advantages to owning." FALSE. It is much cheaper to rent a house in the San Francisco Bay Area than it is to own that same house, even with the deductibility of mortgage interest figured in. It is possible to rent a good house for $1800/month. That same house would cost about $700,000. Assume 6% interest we can see that a buyer loses at least $4,936 per month by buying. Renting is a loss of course, but buying is a much bigger loss. Renting: Rent: $1,800 ---------------------- Monthly Loss: $1,800 Buying: Property Tax: $486 ($729 per month at 1.25% before deduction, $486 lost after deduction.) Interest: $2,333 ($3500 per month at 6% before deduction, $2333 lost after deduction.) Other Costs: $450 (Insurance, maintenance, long commute, etc.) Principal loss: $1,667 (Modest 3% yearly loss on $700,000. Reality will be much worse.) ---------------------- Monthly Loss: $4,936

LadyEllen -> RE: You know what the best thing about being a landlord is... (9/8/2006 8:39:06 AM)
Call me a communist, but I do not believe that the free market is any way in which to ensure that the basic needs of life are available to all - housing, water, power, food. I realise that the free market gives us all choices, but we do not choose to have or not have those things which are essential - by definition, we have to have them. In the UK right now, (outside of London where the situation is worse), we have the ridiculous situation that the cost of one bedroom apartment is around five times the average salary, and around eight times the minimum salary one might derive from a full time job at minimum wage. In short, far more than one could reasonably acquire, as a first time buyer, mortgage approval for, unless a couple came together to buy. If one wanted to buy a dwelling with two or more bedrooms, one would be at a loss to do so as a first time buyer even as a couple. We might say, that this is the market and thats the way it goes. However, this is to ignore the social effects of the situation. We have people in their 30s in long term relationships, who must live with their parents because they cannot afford a house. We have a birth rate which is falling ever more quickly, because adequate housing for couples who would like to start a family is unavailable to them and if they do have housing then a family is unattainable because both partners must work full time to support the mortgage payments. We have people in their 20s who spend their weekends drunk and behaving anti-socially, because they might as well spend their excess income as its not enough to save a deposit since house prices are rising faster all the time. Meanwhile, what is left of social housing after Mrs Thatcher decided to sell it all off, is taken up by the genuinely poor and is in such short supply that one might as well not bother applying for it - the lists are years long. And renting is not an option either since it attracts such social and financial stigma in the UK (try getting a loan if you are not a homeowner) that very few will take it up, especially when the rent is as much as the mortgage for which they could not get approval! The way to rectify the situation would of course to be to reverse the short supply which is driving house prices ever higher. However, this is not possible to do because so much of the UK economy relies on the finance/credit industry and so much of that relies on the value of housing. If an adequate supply of housing was built, then the value of housing would fall, leaving millions of homeowners in negative equity and unable to match assets against debts. So the situation continues. And then we are told that because of the lowering birth rate resulting from lack of housing, we must have millions of immigrants to provide wealth to the country. Quite where they will live has not yet been announced to us, but whilst I welcome them, I just hope that housing will not be made available to them in a way that satisfies the essentials of their being here rather than on the basis of the same free market which prevents the rest of us from acquiring it. And before I'm flamed into the abyss, I will point out that I own two houses here in the UK and have rented one out in the past. I have enjoyed the benefits of seeing their combined values rise from GBP 60k to GBP 200k in under ten years, but at the same time as I fully expected them to be assets, I do not feel that it is socially acceptable or advantageous for them to have appreciated to such an extent that if I were in my twenties today, I could not afford even the smaller of them. E

Chaingang -> RE: You know what the best thing about being a landlord is... (9/8/2006 10:27:16 AM)
quote: ORIGINAL: Lordandmaster Also, I'm puzzled by what's meant by "principal loss." Why are we ASSUMING that the homeowner is going to lose principal? In the long-term, I find the opposite more likely. In fact, that raises another point that the figures leave out: renters encounter continually escalating rents, whereas a mortgage payment never rises. The first issue is true of a bubble market circumstance - and bubbles do happen, all the time over the longer scheme of things. If you buy in bubble and the bubble bursts on you, you just got fucked hard. The second issue depends on the type of mortgage. Plus you are thinking of buying when it's low and reaping the benefits of increased value. Again, not always the case in a bubble market and you lose something more adjusting for inflation over 30 years too. If you can buy when the market is reasonable and your mortgage is fixed - I agree with you. Utopian said as much also.

MmakeMme -> RE: You know what the best thing about being a landlord is... (9/8/2006 5:46:27 PM)
The best thing about being a landlord is hiring a property manager worth his or her salt. That way YOU get to keep you money (minus the 10% +/- the manager keeps) you don't have to hassle with tenant issues, you keep the tax write-off, you have someone paying your mortgage (basically, although maybe not totally) AND you keep the property. There is risk in being a landlord, sure, as there is in any investment. And, as with any investment, it's best to know what you're getting into before you get into it. (If it were easy and no-mess, everybody would do it and we'd all get rich doing it.)

LTRsubNW -> RE: You know what the best thing about being a landlord is... (9/8/2006 8:44:32 PM)
quote: ORIGINAL: Chaingang "...bubbles do happen, all the time over the longer scheme of things. If you buy in bubble and the bubble bursts on you, you just got fucked hard." Yeah, but the great thing about real estate is, even on a bad real estate deal...it's quite a bit like that first girl that really fucked you over bad...after enough years go by, all you can remember is her incredible smile.

Lordandmaster -> RE: You know what the best thing about being a landlord is... (9/8/2006 8:50:23 PM)
This is true of any kind of investment whatsoever. If people are trying to make the argument that investment in real estate is somehow inherently less lucrative than investment in anything else, I'm going to have to disagree. quote: ORIGINAL: Chaingang The first issue is true of a bubble market circumstance - and bubbles do happen, all the time over the longer scheme of things. If you buy in bubble and the bubble bursts on you, you just got fucked hard.

Chaingang -> RE: You know what the best thing about being a landlord is... (9/8/2006 10:13:19 PM)
It's not complicated, we are just identifying a bubble market and saying that such a market is quite risky. There are other real estate markets worth investing in even at this time, just not where one identifies a bubble. I don't see the big deal. There's no mumbo jumbo here.

Kedicat -> RE: You know what the best thing about being a landlord is... (9/8/2006 11:25:46 PM)
The secret camera system?

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