Why are rental prices on houses so much higher than property values? (real estate, rental market)

[atltechdude]

Originally Posted by ATLTJL

Just make sure that you allot for this kind of thing. Because if you own the place and it develops a problem like this, you definitely don't want to refuse to fix it. Depending on how bad it is, it could cost more than $6k to fix.

Not saying you shouldn't buy, but doing so to save money isn't always the best decision.

Well you also have to consider the future.

I don't think I will be leaving anytime in the near term. If I'm still here in 3-5 years and still renting, with the way prices are rising I will likely be paying even higher costs in rent, whereas my payment will stay the same if I buy.

[red92s]

Originally Posted by atltechdude

If I'm still here in 3-5 years and still renting, with the way prices are rising I will likely be paying even higher costs in rent, whereas my payment will stay the same if I buy.

You know this isn't actually true, right? If values continue to rise, and you live somewhere the appraisers are doing a halfway decent job, It could be several hundred dollars more per month in taxes alone.

[atltechdude]

Originally Posted by AnsleyPark

Landlords look to make a profit by renting. So, your rent payment covers the basics, a bit for a maintenance reserve, and profit.

Well consider that even if the rent is the same as their mortgage payment, they are still making a profit because they are transferring money from the tenant into equity in their asset.

I don't think landlords suddenly have a need for more profit then before. It's probably just that they are charging more because they can since there is more demand.

Seems like a lot more people are wanting to move in town and there is still not a lot of new construction happening so the existing housing stock commands higher prices.

[ElleKaye]

Originally Posted by AnsleyPark

Landlords look to make a profit by renting. So, your rent payment covers the basics, a bit for a maintenance reserve, and profit.

I agree with this.

In the years I have rented, I rarely needed maintenance for anything. Certainly nothing that could justify a price hike.

I think the difference in payments is like a penalty. It separates who has credit good enough to buy from those who don't or choose not to do so. I am renting now but have bought before and definitely got more but paid less when I had a mortgage.

[red92s]

Originally Posted by ElleKaye

I agree with this.

In the years I have rented, I rarely needed maintenance for anything. Certainly nothing that could justify a price hike.

Just because the water heater or roof didn't need to be replaced while you were renting a particular property does not mean those maintenance costs are $0. The wear/tear/depreciation you put on those systems directly contribute to their needing to be replaced. Large expenses can and do come up unexpectedly in home ownership. A landlord obviously isn't going to charge the tenant $5k when the HVAC needs to be replaced during their lease, they are going to charge everyone slightly more to save money for when it eventually needs replacement.

[travbo]

Originally Posted by red92s

You know this isn't actually true, right? If values continue to rise, and you live somewhere the appraisers are doing a halfway decent job, It could be several hundred dollars more per month in taxes alone.

As someone who is currently refinancing my home, home appraisers are doing a lousy job on appraisals for refinances. However, home appraisals on new home sales are sky rocketing. Appraiser business is full of dishonest people and the difference between what my home "appraised" for and the actual comparables in the area is significant.

[red92s]

Originally Posted by travbo

As someone who is currently refinancing my home, home appraisers are doing a lousy job on appraisals for refinances. However, home appraisals on new home sales are sky rocketing. Appraiser business is full of dishonest people and the difference between what my home "appraised" for and the actual comparables in the area is significant.

I was talking about the appraisers who are doing property tax assessments, but I wouldn't disagree with your sentiments.

[AnsleyPark]

Originally Posted by atltechdude

Well consider that even if the rent is the same as their mortgage payment, they are still making a profit because they are transferring money from the tenant into equity in their asset.

They are increasing the asset value, yes, but that does not equate to current income. To your point, there is a long-term gain based on asset value, and a short-term profit component. Hence, the term "income property."

[Serious Conversation]

Originally Posted by ElleKaye

I agree with this.

In the years I have rented, I rarely needed maintenance for anything. Certainly nothing that could justify a price hike.

I think the difference in payments is like a penalty. It separates who has credit good enough to buy from those who don't or choose not to do so. I am renting now but have bought before and definitely got more but paid less when I had a mortgage.

With that penalty comes a lot of flexibility you don't have while owning. While renting, it's much easier to just pack up and go if you want to leave the area.

[helena101]

Originally Posted by atltechdude

Ideally yes but the funny thing is that's kind of the reason I'm moving. The property I am in has major water issues (leaking/flooding, etc) that they are refusing to fix, lol.

I'm not worried about maintenance since I will still have plenty of additional monthly income with saving more on the mortgage vs rent, plus I have credit cards if I needed even more in a pinch.

If I sign a new lease somewhere else now I'm going to have to spend at least $500 more than what I'm paying now. That's a guaranteed $6k/year vs if I buy I MIGHT spend that much per year in maintenance, plus you have the additional tax savings with a mortgage.

You also might spend far more. It's a gamble. And people overestimate the tax savings. The standard deduction is already $6K for a single person and $12K for a married couple. You'd have to be paying quite a bit in mortgage interest to itemize.