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The only way an owner is going to put up with taking a loss on rent, is if the housing market is collapsing.
We can end it here because you’re grasping at straws.
It’s not grasping at straws but rather simply facts. An owner’s cost don’t set the rental market, your cost could be zero or 10 million but the market in your area will be the market and your cost won’t matter
I have a 2006 Hyundai Tucson, bought it used with 70K for around $6700.
Financed it thru my credit union who ive been with for over 10 yrs.
Payments are $210 a month for 5 years, and when I paid it off, I will have paid $12,600, so the credit union is basically doubling their money!?
I noticed the same thing years ago when I was married and bought a house, the house was listed for $120K, our monthly payment for 30 yrs was around $850. If we made all the payments, we would have paid $306,000! That means our real interest rate was over 100%...right?
I wouldn't knock what the poster did. He needed a car and went and got one. most people look at paying for a car as a necessary evil. They need decent transportation to go to work. Of course being debt free is best. I have two vehicles, both are older and paid off. This way I have a spare set of wheels. Plus the truck isn't used much, it is used for towing and as a truck.
Just wait and watch as all these vehicles people cant afford are repossessed. Like housing.
A renter can downsize or move if the rent gets jacked up. An owner has much more difficulty if their rent, I mean property taxes, goes up, or the roof needs replacement, or the plumbing springs a leak and floods the basement, or mold takes over, or...
Owning does not magically insulate you from being hit by unexpectedly high housing-related bills. This is the flaw with your argument, you are falsely assuming ( implicitly) that an owner’s cost is predictable while a renter’s is not. This is false.
As to an owner’s ability to sell, your argument boils down to the claim that an owner wouldn’t choose to continue to own if the market leads to a negative cash flow. But this is not true, as many landlords hold on for reasons of price speculation, hoping the property will appreciate. But we have no reason to think that RE speculators have a better ability to predict the future than stock market speculators.
Also, most Americans are very bad at math, landlords included, so they will hold on to a negative cash flow rental house in order to eventually have it paid off in retirement. However they do not properly calculate the volatility-adjusted opportunity cost of doing so. Most landlords have probably never even heard of the Black-Scholes equation, so why should we assume they are rational in valuing their options regarding the possible sale of a property with unknown future value, which would allow them to invest proceeds and monthly cash flow into the stock market?
Finally, even if landlords were rational and had the math background to properly value a financial asset based on future probabilistic cash flows, why should we assume that lenders aren’t also rational? In particular, if housing had an objectively better risk/return profile than a mix of stocks and MBS bonds, then it would be irrational for any financial institution to simultaneously hold stocks and also make mortgage loans, since they would do better by buying rental houses instead. You are essentially arguing that institutional investors may be irrational but landlords are always rational. I challenge you to justify that assumption ( or propose a reason for it to be unnecessary based on a viable alternative asset pricing equation, preferably one which accounts for tail risk).
For every business you see, there’s some money in it otherwise they wouldn’t be in business. It doesn’t matter if it’s apartments or donuts. I personally would rather invest in stocks than real estate, but I cannot live inside a stock portfolio, so I might as well build equity iin home ownership nstead. Sure I could lose money by owning, but I will be guaranteed to lose money by renting.
It’s not grasping at straws but rather simply facts. An owner’s cost don’t set the rental market, your cost could be zero or 10 million but the market in your area will be the market and your cost won’t matter
And rent prices are directly related to ownership cost, otherwise there would be no incentive to rent it out, rental inventory would shrink and rent prices would go back up. The renter on the other hand never builds equity so it’s a guaranteed loss on their part.
People don’t rent because it’s a smarter financial strategy. They do so either out of convenience or necessity.
I wouldn't knock what the poster did. He needed a car and went and got one. most people look at paying for a car as a necessary evil. They need decent transportation to go to work. Of course being debt free is best. I have two vehicles, both are older and paid off. This way I have a spare set of wheels. Plus the truck isn't used much, it is used for towing and as a truck.
Just wait and watch as all these vehicles people cant afford are repossessed. Like housing.
There is nothing wrong with financing a car, especially if it’s only $6700. Even at 5% and 72 months, the finance cost would only add $1000 to the loan over 6 years. That’s cheaper than most people’s cable bills. What the poster most likely did was roll an excessive amount of add ons (extended warranty, 3M film, etc) and sales tax raising the principle. The finance cost is most likely negligible.
I disagree with being debt free. Debt is too cheap right now and the stock market is doing too well to hand over all your cash to save a couple percent.
If you’re cash strapped, dropping your entire life savings to pay off a loan that otherwise is only $100 a month is a terrible move. Unexpected things happen to people without any cash and it’s far more expensive to borrow it in a pinch than it is to negotiate it into your loan. Not saying that it’s always better to finance, but it’s not always a bad idea either.
Most Americans finance stuff and that’s not a bad thing. It keeps the economy humming, and people get what they want without waiting 80 years to enjoy it. Think of how many people wouldn’t have a job if people had to pay cash for every major purchase.
And rent prices are directly related to ownership cost, otherwise there would be no incentive to rent it out, rental inventory would shrink and rent prices would go back up. The renter on the other hand never builds equity so it’s a guaranteed loss on their part.
You are simply wrong. An owner’s cost is irrelevant to the current rental market. Owner’s will often rent at a negative cash flow, meaning they are taking in less than their expenses with the anticipation of asset appreciation. You can ignore facts but you aren’t grasping reality
Quote:
People don’t rent because it’s a smarter financial strategy. They do so either out of convenience or necessity.
You are wrong once again. Renting can be a better financial strategy. When you get into blanket statements you back yourself into a corner. A corner of being wrong
An owners cost is an influence on the rent market, but not directly related. The rental market generally does not care how much an owner pays for mortgage, maintenance, etc for the home. If an owner owns the home not having to pay a mortgage, the rental market does not care, nor does it care if the owner is upside down by $100 thousand. It does not care if the owner had to pay $5000 for a new roof, or if the owner has not had to spend a dime for ten years on repairs.
The rental market is a demand factor, the more demand, the higher the price, no matter what it is. This is why we have closets going for $2000/mth in some NYC areas, yet a 2500/sqft house going for $750 in a small KS town.
FYI-I own two rentals, one has a mortgage, one I own out right.
For every business you see, there’s some money in it otherwise they wouldn’t be in business. It doesn’t matter if it’s apartments or donuts. I personally would rather invest in stocks than real estate, but I cannot live inside a stock portfolio, so I might as well build equity iin home ownership nstead. Sure I could lose money by owning, but I will be guaranteed to lose money by renting.
Actually you are almost guaranteed to lose by owning as well (after interest, opportunity cost, insurance, taxes, and maintenance) unless the appreciation is quite high (which can happen but usually isn't sustained over many decades).
You are simply wrong. An owner’s cost is irrelevant to the current rental market. Owner’s will often rent at a negative cash flow, meaning they are taking in less than their expenses with the anticipation of asset appreciation. You can ignore facts but you aren’t grasping reality
You are wrong once again. Renting can be a better financial strategy. When you get into blanket statements you back yourself into a corner. A corner of being wrong
I’m pretty much defining capitalism for you, but believe whatever you want. Rent away.
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