[airics]

Index funds are based on the market. It was low in 2005 and did well up to the present. Who is to say that it will continue to do well? Heck I bought sirius xm at 10 cents a share... If I would have kept it till now, I'd be very well off. I sold it at 78 cents. But I paid hefty taxes on the profit. Real estate is a gamble just like anything else. Rent is not. You Lose Every way. And Scoop is correct..The rent includes everything.

[ScoopLV]

Originally Posted by Raiderman

I was thinking about all of that the other day. I looked at the records for the house we're renting, and the landlord paid $250K for it back in April and is renting it at $1500 to us. I can't see that he's making much by doing so. Is my math off?

Assuming your landlord did a 30-year mortgage with 20% down, his or her mortgage is a little over $1,300 a month. Add in property taxes and put the rest away for maintenance basically you're making the payments for the landlord.

Or if the landlord paid cash, he is making a little more than 7% annual return on an investment where the principal is also currently rising. Landlord could have made more with the right funds. But a long-term 7% really isn't all that bad. And there is little chance of the house pulling an Enron/Lehman/Bear Stearns and becoming worthless.

[airics]

And after the term, the renters bought a house for the landlord. And then some...

[Raiderman]

Originally Posted by ScoopLV

Assuming your landlord did a 30-year mortgage with 20% down, his or her mortgage is a little over $1,300 a month. Add in property taxes and put the rest away for maintenance basically you're making the payments for the landlord.

Or if the landlord paid cash, he is making a little more than 7% annual return on an investment where the principal is also currently rising. Landlord could have made more with the right funds. But a long-term 7% really isn't all that bad. And there is little chance of the house pulling an Enron/Lehman/Bear Stearns and becoming worthless.

I had calculated about a $1300 mortgage. I guess I wouldn't want to take the risk of renting a house out for no return. I think he overpaid for the place, but that's just me.

[ScoopLV]

Originally Posted by Raiderman

I think he overpaid for the place, but that's just me.

The landlord isn't paying anything at all. You are. That's the whole point.

[ddrhazy]

Originally Posted by ScoopLV

Assuming your landlord did a 30-year mortgage with 20% down, his or her mortgage is a little over $1,300 a month. Add in property taxes and put the rest away for maintenance basically you're making the payments for the landlord.

Or if the landlord paid cash, he is making a little more than 7% annual return on an investment where the principal is also currently rising. Landlord could have made more with the right funds. But a long-term 7% really isn't all that bad. And there is little chance of the house pulling an Enron/Lehman/Bear Stearns and becoming worthless.

Anything above 5% ROI is good these days.

[BBMW]

He probably put at least a down payment. If he didn't, the additional interest and PMI are probably putting him cash flow negative. Also, in investment property, the LL is probably carrying a commercial mortgage. These require a larger down payment (25% usually) and higher interest rates (they can be sold off to the gov't sponsored mortgage banks.) If LL bought them on a personal mortgage, he's committing mortgage fraud. Still think he's coming out ahead?

Originally Posted by ScoopLV

The landlord isn't paying anything at all. You are. That's the whole point.

[Raiderman]

Originally Posted by ScoopLV

The landlord isn't paying anything at all. You are. That's the whole point.

I understand that. But he's not making anything, either. And isn't that the whole point?

[BBMW]

And the S&P 500 was up 26% last year.

Originally Posted by ddrhazy

Anything above 5% ROI is good these days.

[ScoopLV]

Originally Posted by Raiderman

I understand that. But he's not making anything, either. And isn't that the whole point?

He's getting a basically free house, paid for with other people's money. Sure, there are other investments that pay better. But you can't live in them. Who here, besides Mr. "New Screen Name Every Other Day," would turn down a free house?