When you mortgage a home as an investment property, you are leveraging your money 5-1 (on a 20% down payment)
If rent covers 90% of the mortgage, you still make an absolutely huge profit amortized over the loan.
If you consider the tax incentives (interest write off, depreciation, capital gains deferment, pass through deduction) the gap in the rent can be covered.
Consider paying 50k down on a 250k house, the. Paying an additional 15 percent over the life of the loan (around 40k) to cover for gaps in rent.
Over the life of the loan you turned 90 grand into 250 grand (and a house is an appreciating asset, so it will likely be worth more than 250 by the end of it all)
Deduct depreciation (value of the home minus land value over 27.5 years) and carry over losses can even make up for the gap of rent you pay entirely over time.
I agree, and came in here to say the same thing. I think the data is being skewed by the fact that many (not all, of course) rental properties are subdivided into multiple units (or built that way in the first place). People commenting about how it’s considering modern costs, well, they must not have read the first two sentences of the article:
On paper, owning a home is almost always more expensive than renting — about 14% more, on average, after factoring in expenses like insurance, taxes, and upkeep.
But the difference has grown much more extreme in recent years as just about all homeownership costs have ballooned.
The only way you can arrive at that 14% number is if you’re averaging in multi-unit apartment buildings. Very few, if any, landlords are out there subsidizing their non-family tenants by charging less than the normal costs of ownership. If most landlords are losing money year over year, well… at that point just sell the property.
Most landlords bought the place earlier when home prices and mortgage rates were lower, or they just own the place outright and don’t make any mortgage payments.
This article is about choosing whether to buy at current rates or rent at current rates. If you bought a place 10 years ago for half the price it’s worth now and a 2% interest rate then you’re probably going to be paying less then renting
I am confused, my thought process went like this:
So it’s more expensive to own then rent?
Unless you own it and rent it out to others?
Nobody would be a landlord if a dwelling cost more to maintain then to rent out.
So something doesn’t add up.
When you mortgage a home as an investment property, you are leveraging your money 5-1 (on a 20% down payment)
If rent covers 90% of the mortgage, you still make an absolutely huge profit amortized over the loan.
If you consider the tax incentives (interest write off, depreciation, capital gains deferment, pass through deduction) the gap in the rent can be covered.
Consider paying 50k down on a 250k house, the. Paying an additional 15 percent over the life of the loan (around 40k) to cover for gaps in rent.
Over the life of the loan you turned 90 grand into 250 grand (and a house is an appreciating asset, so it will likely be worth more than 250 by the end of it all)
Deduct depreciation (value of the home minus land value over 27.5 years) and carry over losses can even make up for the gap of rent you pay entirely over time.
I believe they are taking into account the cost to purchase these days since interest rates are higher, ergo high mortgage payments.
As someone else mentioned most landlords have locked in rates at this point. Not many new landlords.
I agree, and came in here to say the same thing. I think the data is being skewed by the fact that many (not all, of course) rental properties are subdivided into multiple units (or built that way in the first place). People commenting about how it’s considering modern costs, well, they must not have read the first two sentences of the article:
The only way you can arrive at that 14% number is if you’re averaging in multi-unit apartment buildings. Very few, if any, landlords are out there subsidizing their non-family tenants by charging less than the normal costs of ownership. If most landlords are losing money year over year, well… at that point just sell the property.
Most landlords bought the place earlier when home prices and mortgage rates were lower, or they just own the place outright and don’t make any mortgage payments.
This article is about choosing whether to buy at current rates or rent at current rates. If you bought a place 10 years ago for half the price it’s worth now and a 2% interest rate then you’re probably going to be paying less then renting
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