Why are rental prices on houses so much higher than property values?

[helena101]

Originally Posted by JPD

There's another option, which should be obvious since this topic is about rent prices being high: Turn your house into a rental property and make profit off of it.

Renting a property isn't automatically lucrative. Are you able to rent it out for more than the combined cost of mortgage, taxes, HOA fees, and maintenance costs? Even if you do get a couple hundred more a month than those costs you are either managing the property yourself or you hire a management company (so either you are doing the work or paying someone else to do the work), and then deal with all the issues that come with renters. There are gaps between renters when you're carrying the mortgage, renters who lose their jobs and stop paying rent (and keep in mind it's very difficult to evict people-- you may end up going to court), renters who don't take care of the place and you have to chase them down in small claims court, and then just the hassle of finding a good renter each time one leaves and renters come and go frequently. I rented my property out for two years and it was a different renter each year, both had a slew of issues and there were gaps before the first one moved in and before the second one moved in. It's very difficult to time it so that you have someone move in right after the previous renter leaves, assuming you want to be somewhat selective with who you rent to.

[brown_dog_us]

The cost of borrowing is at historic lows, so mortgage payments are low. Rents on the other hand are driven by supply and demand. If/when mortgage rates go up this gap will shrink.

As long as you plan on staying for 10 years, now is a great time to buy.

[JPD]

Originally Posted by helena101

Renting a property isn't automatically lucrative. Are you able to rent it out for more than the combined cost of mortgage, taxes, HOA fees, and maintenance costs? Even if you do get a couple hundred more a month than those costs you are either managing the property yourself or you hire a management company (so either you are doing the work or paying someone else to do the work), and then deal with all the issues that come with renters. There are gaps between renters when you're carrying the mortgage, renters who lose their jobs and stop paying rent (and keep in mind it's very difficult to evict people-- you may end up going to court), renters who don't take care of the place and you have to chase them down in small claims court, and then just the hassle of finding a good renter each time one leaves and renters come and go frequently. I rented my property out for two years and it was a different renter each year, both had a slew of issues and there were gaps before the first one moved in and before the second one moved in. It's very difficult to time it so that you have someone move in right after the previous renter leaves, assuming you want to be somewhat selective with who you rent to.

No business is automatically lucrative. Everybody knows that, but thanks for the reminder.

[helena101]

Originally Posted by JPD

No business is automatically lucrative. Everybody knows that, but thanks for the reminder.

Yes, the advice to rent a property and "profit" is just as silly as saying "You could start a business and make a profit." A profit that's worth the effort you have to put in, or any profit at all is unlikely, especially for people who have zero experience in this area.

[AnsleyPark]

Originally Posted by travbo

I personally see both sides of the argument and each person should understand their own living/spending habits and use their best judgement. Under 30 should probably lean toward renting and over 30 should lean toward buying. My 2 cents.

Good post. Consider, too, that the savings from ownership can be invested and generate even more value for the owner. And, if you start off your young adult years saving, as opposed to waiting until later, it can make a huge impact on your future nest egg.

[Serious Conversation]

Originally Posted by ElleKaye

Where? Where does that happen?

Granted, it's easier to move and pay out your lease. However, that flexibility is not giving you more for your money under normal circumstances, The only one get more for their money is the owner. I'm not throwing stones, but I'd imagine that's why they rent in the first place is to make the healthiest profit they can off their property.

It doesn't normally, but there are benefits to renting. I was only making a little over $10/hr back home in Tennessee and got a job offer for $50k in Indiana a few years ago and would love to move back South. Renting allows me to keep the commitment relatively small if something comes up.

[ElleKaye]

Originally Posted by red92s

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.

You know there's going to be wear and tear. There is wear and tear everywhere, but it's not your tenant's responsibility to make your place spanking brand new. If you want it in a spanking brand new state then don't let anybody in it; seal it up.

Originally Posted by Serious Conversation

It doesn't normally, but there are benefits to renting. I was only making a little over $10/hr back home in Tennessee and got a job offer for $50k in Indiana a few years ago and would love to move back South. Renting allows me to keep the commitment relatively small if something comes up.

Well, that's one way to look at things. If you think such an ease to move about, then why not buy and rent your place out when you move.

[helena101]

Well, that's one way to look at things. If you think such an ease to move about, then why not buy and rent your place out when you move.

So just keep buying properties every time you want to move to a different neighborhood or a different city or decide to move in together with your significant other? That's not realistic. All your money is tied up in the first property and when you're a landlord from far away, you have no way of checking on your property and making sure it's ok. Have to just trust a property management company when they say there's a $3K plumbing issue.