> This is not always true. Often, the price of real estate outpaces rent. I.e. renting is cheaper than buying.
> As a renter, you're not paying property tax, insurance, repairs, maintenance, and maybe utilities.
You are though, are you not? Ie the only thing that changes between renting and owning is who is maybe economies of scale. For sake of discussion, lets say you rent from someone who owns a spare house. You are paying everything you just mentioned, on average, as the renter. If you don't, then the owner is losing money - and that's not likely.
Now with a larger business owning your home/apartment/etc, i imagine there is room for economies of scale. They don't have to pay to have a plumber come out, they might already have one on staff or retainer. etc. Perhaps they get better deals on land taxes and whatnot too?
But lets not forget - you're paying for everything your landlord is, plus profit. Always. The only way it works out cheaper for you is if they are more efficient at it.
> But let's not forget - you're paying for everything your landlord is, plus profit. Always.
Definitely not always. Loss is common in business.
Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped.
In reality, you're paying the least amount you can that still beats the alternatives. That doesn't guarantee profitability for the landlord. The landlord recognizing lack of profits and selling the property is an alternative, but may not even be a tenable one in some circumstances (e.g. a market downturn that leaves potential buyers weary) without taking even greater losses.
> Doubly so here when asset values are appreciating. If the landlord thinks they're making bank simply holding property, any rental income on top that helps minimize costs is just gravy. There isn't tremendous pressure for costs to be fully recouped.
Maybe with certain small owner groups, but I can guarantee you that any community with a dedicated management company (separate from the ownership group) has a goal of making profit on top of however much their property value is appreciating. Not every owner plans to sell the property within a few years of buying it. This applies to all of your apartment communities regardless of age (well, minus lease-ups in their first year).
Also, most properties run on a bog-standard business checking account for their income and expenses; the owner isn't just dumping money in it every month to support operating losses because "the property is appreciating anyways!". If the manager and management group isn't making money to sustain operations, you'll have both an angry owner and angry corporate management that can't pay themselves for their management fees.
I have observed that many small landlords are speculating on a longer term payoff of the property greatly increasing in value, are not present but planning on moving back in at some point, or own outright and have out of date ideas about market rent. All of these lead to situations where they may take losses of varying sizes in the near to medium term. Combine one of these landlords with someone who is not planning on sticking around long term and you've got a match made in heaven.
> Definitely not always. Loss is common in business.
Maybe randomly here and there, but you will be homeless if your landlord continually loses money. I said it earlier in my comment, "on average".
If your landlord on average is losing money, you will be homeless soon enough, or someone else will buy it and increase your rent or find a way to be more efficient than the previous landlord.
> but you will be homeless if your landlord continually loses money.
Or you will find yourself continually cycling through landlords as each one eventually gives up and sells to the next sucker. Assuming the next sucker comes along. The landlord might be stuck with the property. Real estate has been an easy sell of late, but that hasn’t been true historically.
> and increase your rent
To which you can say, "no thanks". Sure, they can kick you out[1], but with no rental income their losses will be even higher. What landlord worried about profitability wants to reduce profitability even further? The landlord is beholden to what the renter is willing to pay. The renter couldn't care less about the expenses involved in running a rental property. That doesn't factor into how much they are willing to pay at all.
[1] If your jurisdiction has liberal enough laws. Where I live it is essentially impossible to evict tenants. Even in egregious cases, like the tenant who stopped paying rent, there is currently a year+ backlog in the government signing off on the eviction.
I dunno, these seem like exceptions that prove the rule to me. Seems a time consuming game to seek out landlords who are losing money so that i can save money in the long run. Especially if i don't want to live in a place that behaves like it is also losing money. Ie where repairs and basic needs aren't met because the landlord is upside down and is seeking to sell asap.
Anything is possible, but it seems quite improbable to a, what appears to be, very profitable venture for many corporations. A probable explanation to so many potentially owned homes being offered as rentals, too.
For the significant majority of tenants i cannot imagine they're "winning" over their landlord.
> what appears to be, very profitable venture for many corporations.
It no doubt can be quite profitable where the tenants are willing to pay more than your costs. There are unquestionably markets where that is the case. I'm not sure it holds universally, though. Not everyone is a landlord in San Francisco renting out to software developers with the capability to pay almost anything to be there and a competitiveness to be willing to do so.
Do you really think the landlord in a dwindling town is profitable? As the town dwindles costs rise, and at the same time what incentive is there for the renters to pay more? It is not like there is a lineup behind them champing at the bit to rent the place when they leave.
> Do you really think the landlord in a dwindling town is profitable? As the town dwindles costs rise, and at the same time what incentive is there for the renters to pay more? It is not like there is a lineup behind them champing at the bit to rent the place when they leave.
Yes, anywhere that renting continues to exist. If it wasn't profitable on average it would be sold asap. Again, there's always the chance you're buying from a chain of incompetent landlords who all can't do math and continually fail to turn a profit, i just don't seem that as the likely long term outcome. Let alone trying to rely on you making out better than your landlord.
On average a simple and easy rule of thumb is that your landlord is paying what you'd pay, plus profit. Economies of scale/politics (lower taxes/etc) are the only time i see where on average both parties can profit.
Oh and of course, as someone else pointed out, if you're in an amazingly rent controlled place for a variety of reasons you're probably making out like a bandit. My coworker's mother lived in a place in Seattle that, for some reason, was paying like $600/m (half my rent at the time!) in downtown Seattle. Comparable apartments were going for $1,800+ iirc. A bit of golden handcuffs, because she couldn't afford to move anywhere given how cheap the rent was, hah.
> If it wasn't profitable on average it would be sold asap.
To who? If it can't be profitable, why would anyone else want to buy it? Maybe you'll get lucky and find another sucker, but then you're just pushing the same problem onto the next guy.
Outside of that, about all you can do is disappear as if you never existed and let the fate of the property land where it may. But as humans tend to be strongly loss averse, more likely you'll keep plugging along in hopes that one day things will turn around.
> To who? If it can't be profitable, why would anyone else want to buy it? Maybe you'll get lucky and find another sucker, but then you're just pushing the same problem onto the next guy.
Someone will almost assuredly buy it at a low enough rate. It's either that or actively lose money each month.
Tbh i'm still confused by your argument. Are you saying that you believe people will, month after month, take a loss for years so that someone can live more cheaply in a house than it would take that same person to own the home themselves?
Economies of scale is the only way this plays out in the long term in any stable way. No?
> Someone will almost assuredly buy it at a low enough rate.
Let's examine that. If you were selling it to yourself you would charge yourself $0. We have established, for the sake of argument, that you can't turn a profit renting out the place. Which means that even $0 is too high. Are you suggesting that the rate is negative? i.e. You will pay someone to take it off your hands? I think at that point you may as well just disappear into the night and never come back.
I mean, maybe you're thinking that this hypothetical person is trying to heat the place with $100 bills and the next guy to come along can cut costs dramatically by switching to natural gas, but I think for the purposes of discussion we can assume that the costs are already reasonably minimized. Are there small gains to be made with economies of scale? Sure, but I don't know if they are significant enough here.
> Are you saying that you believe people will, month after month, take a loss for years so that someone can live more cheaply in a house
I'm saying losses in business are the norm. It's not done out of the goodness of one's heart, it's just the nature of business being largely unpredictable and hard. I expect if you are discerning in your choices you can also continually eat at restaurants that see the restauranteur pay out of their own pocket for you to eat there. Even most software never turns a profit.
> Do you really think the landlord in a dwindling town is profitable? As the town dwindles costs rise, and at the same time what incentive is there for the renters to pay more? It is not like there is a lineup behind them champing at the bit to rent the place when they leave.
Oh and one additional thought. To think of it differently, do you really think a landlord in a dwindling town would lose money month after month, year after year? Any sane landlord will be looking to cut the losses asap.
> Do you really think the landlord in a dwindling town is profitable?
Yes, and so do the landlords.
If they didn’t, instead of renting the property out, they'd sell it for the price of one month's rent—someone willing to rent at that price would be even more willing to buy, and the landlord would then be free of the future losses they expect to suffer.
Given the scenario, why would someone pay even a month's rent to take on a larger monthly expense going forward?
More concretely, let's say it costs $1,000 per month to the landlord and the tenant pays $500 per month. The landlord is losing $500 a month and wants to unload the place, so he offers the property to you, the tenant, for $500. But now you have to assume the $1,000 per month cost. What's in it for you to double your expenses?
That is unless the landlord continues to carry the $500 per month shortfall even after the sale. That would be a good deal for the tenant, but why would the landlord sell under that scenario? If you're paying $500 per month out of pocket either way, you may as well ride it out and hope things improve someday.
There is a small seeming exception in regions where housing prices are rising rapidly: if the owner is willing to forgo increasing rent at the rate of housing price increases (which is pretty common among smalltime landlords), then renting can appear to be cheaper than the present-day mortgage for an equivalent property. Of course, in that market as a renter you lose out on appreciation of the house, so renting is only better if you can get bottom-market rates near the top of the market.
Not always. Around here, there were several years where house prices rose faster than rents. The owners were renting them out for less than the mortgage.
That was pretty standard leading up to the Great Recession. It was the new economy, you see, and fundamentals like valuing property based on rental market values was the old economy because property values never go down.
My sister was renting out her house for less than the mortgage for a few years waiting for the price to rise enough to not lose money selling it and she bought well before the real estate boom.
The “experts” were literally telling people that on a regular basis. The “fundamentals changed” so it was ok to sell a person making 35k a half a million house because they could always sell it (at a profit) before the interest rates increased on the loan. Or it was ok to use your house as an atm machine by pulling all the equity out to buy whatever you wanted.
You are though, are you not? Ie the only thing that changes between renting and owning is who is maybe economies of scale. For sake of discussion, lets say you rent from someone who owns a spare house. You are paying everything you just mentioned, on average, as the renter. If you don't, then the owner is losing money - and that's not likely.
Now with a larger business owning your home/apartment/etc, i imagine there is room for economies of scale. They don't have to pay to have a plumber come out, they might already have one on staff or retainer. etc. Perhaps they get better deals on land taxes and whatnot too?
But lets not forget - you're paying for everything your landlord is, plus profit. Always. The only way it works out cheaper for you is if they are more efficient at it.