"Why i am never going to own a home again" (investments, sales)

[mortimer]

Originally Posted by rfr69

I live in a SFH my mortgage is $860 ...,
rents in my neighorhood go for around $1100-$1250. ...

These numbers are irrelevant. They are absolutely, completely irrelevant:

Housing is and has been overvalued in this country for years. Everywhere.

The test is in what is the asset worth? Not the mortgage -- which varies.

Yeah, I could have a mortgage on my house that is only 1/3rd the
value of the house and have rental costs under my carrying costs.
Who cares? If I called that good, I'd be an incompetent investor.
I'd be ignoring the 'paid-for' 2/3rds of my house -- just languishing.

If you cannot rent out an asset for 1% of the value each month
then the rental business compares unfavorably to just buying a
risk-free high-grade or US government bond.

Maybe, just maybe in your neighborhood you can do that.
There certainly are some neighborhoods in Detroit where you can buy
a single family dwelling and rent it out for more than 1% of its value.
Unfortunately, a higher yielding asset is usually associated with
a higher risk. It works that way for bonds, just like houses.

[rfr69]

Originally Posted by mortimer

These numbers are irrelevant. They are absolutely, completely irrelevant:

Housing is and has been overvalued in this country for years. Everywhere.

The test is in what is the asset worth? Not the mortgage -- which varies.

Yeah, I could have a mortgage on my house that is only 1/3rd the
value of the house and have rental costs under my carrying costs.
Who cares? If I called that good, I'd be an incompetent investor.
I'd be ignoring the 'paid-for' 2/3rds of my house -- just languishing.

If you cannot rent out an asset for 1% of the value each month
then the rental business compares unfavorably to just buying a
risk-free high-grade or US government bond.

Maybe, just maybe in your neighborhood you can do that.
There certainly are some neighborhoods in Detroit where you can buy
a single family dwelling and rent it out for more than 1% of its value.
Unfortunately, a higher yielding asset is usually associated with
a higher risk. It works that way for bonds, just like houses.

I bought FHA so I don't have all that money tied up, I have 3.5% in and that was actually all grants that paid that. I had 8k to bring to the table but was surprisd when I wound up walking away with $1700 and not spending a penny.

Every cent of equity in the house is not my money tied up its the renters money and they are paying PMI taxes and all that other jazz.

I'm pretty happy with money I can't touch as its not my money anyway.

[Dressy]

What he misses is the issue of convenience and comfort of your own house. If he cannot afford it and opt for much more modest rental place instead - is one thing. Nobody is going to rent you the house for less then mortgage and other expenses . So the "cheap" alternative in this case is not just renting but renting a cheap place.

[timfountain]

Originally Posted by Dressy

What he misses is the issue of convenience and comfort of your own house. If he cannot afford it and opt for much more modest rental place instead - is one thing. Nobody is going to rent you the house for less then mortgage and other expenses . So the "cheap" alternative in this case is not just renting but renting a cheap place.

Agreed, and in addition when everyone is renting, according to his prophecy, the rental market will be totally inundated with would-be renters and predatory landlords will be naming their price with a line of people out the door willing to pay it. Anyone see anything wrong with this picture?

[JohnVosilla]

Originally Posted by timfountain

Agreed, and in addition when everyone is renting, according to his prophecy, the rental market will be totally inundated with would-be renters and predatory landlords will be naming their price with a line of people out the door willing to pay it. Anyone see anything wrong with this picture?

Rents in hard hit Florida have been going up quite dramatically in a number of areas of late. It is all about timing and seeing value something prior generations took for granted in a slow steady appreciating world they lived in post WWII. The 2003-05 period, trading up and using your home as a piggy bank then the subsequent bust that was in essence a casino is not the norm. Some parts of this country are still way over priced but many more are now a bargain well below replacment cost with PITI on a 20% down payment well below equivalent rents. In the end there is no where to hide. The majority of people who are wealthy acquired it through RE and I am talking income producing properties not your homestead per se. You should actually live a step or two below your means in your own home.

[dragontales]

Nothing beats a quiet detached home. Try getting that in a 30 unit apartment. My point is, besides the money part of the equation there is the quality of life part of the equation.

[mortimer]

Originally Posted by rfr69

Every cent of equity in the house is not my money tied up its the renters money ...

If you are the mortgagor, then every cent of equity in the house is your money.
It was just put there by the renter.

If your rent is $1150 and your mortgage payment is $860 then your gross rental profit is $290.
Assuming that 25% of that payment is tax + insurance, then your mortgage must be about $120k.
The $290, $3500/year is not profit or even cash flow since you can expect to have to pay for
stuff over time. If you spend 100 hours dealing with your rental property driving, paperwork,
dealing with repairs, etc then you make about $35/hour gross.

I'm sure you turn a profit, but lots of people take on a small part time job for far
less risk and take home the same kind of money. If it works for you, then fine.

However, most people live in houses that are worth closer to $200k.
Trying to make the rental numbers work for that and above isn't so easy.
Such dwellings have a negative cash flow and the postulates of the
article in the OP are quite true.

To really make your situation work, would require owning 5 or so houses
just like the one you rent out on or around the same block.

Lots of landlords who own old, inexpensive properties - especially near universities
make out quite nicely. Landlords owing newer houses in the burbs, not so much.

Originally Posted by timfountain

... according to his prophecy, the rental market will be
totally inundated with would-be renters and predatory
landlords will be naming their price

The rental market - if gobs of people "inundate" it - would be just
like the rental market today, but bigger. Today, there is overbuilding
where landlords offer 1st month's rent free and stuff like that and there
will be times when there is a shortage and landlords can be predators.

Originally Posted by dragontales

Nothing beats a quiet detached home. ...
there is the quality of life part of the equation.

No one is contesting that.

The question is whether it's a good investment.

It can still be a bad investment and a desirable thing.

Many people absolutely positively refuse to buy a used car.
There are qualitative aspects to buying a new car.
Only an idiot would claim it's a good investment.

[rfr69]

Originally Posted by dragontales

Nothing beats a quiet detached home. Try getting that in a 30 unit apartment. My point is, besides the money part of the equation there is the quality of life part of the equation.

Yeah you couldn't pay me to rent. Screw having people come and go from my house at the landlords will when repairs are needed, screw quarterly or yearly checks to see how I'm living in their place, etc.

My house, no connecting walls, nobody can come in without my permission. That's priceless

[KCfromNC]

Originally Posted by arctichomesteader

If the renters were the ones making out financially, no one would be in the rental business.

Similar logic leads to the conclusion "if the buyers were the ones making out financially, no one would be in the mortgage business."

Back in reality, it wouldn't be a business if both the buyer and seller (owner and renter, whatever) each didn't gain some benefit from the transaction. Sustainable businesses are built on more than just screwing over the customer as hard as you can until they go away.

[KCfromNC]

Originally Posted by dragontales

Nothing beats a quiet detached home. Try getting that in a 30 unit apartment. My point is, besides the money part of the equation there is the quality of life part of the equation.

Sure. If that's important to you the next step is to figure out whether it makes more sense to rent or buy the detached house.