Author Topic: Do renters typically get the better end of the deal?  (Read 1497 times)

Dibbels81

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Do renters typically get the better end of the deal?
« on: January 07, 2018, 08:46:56 AM »
I currently live in Las Vegas, with an anticipated move back to the Midwest in a few months. The home that I bought during the downmarket in 2012 for 93k would now sell for probably ~230k.  The homes in my neighborhood are renting for about 1.2k a month. Homes nearby that sell for 400k+ are renting for about 2.3k monthly. Back of the napkin math indicates this is a terrible deal for landlords, nowhere near the 1% value that I've seen recommended. Homes where I'll be moving to in the Chicagoland area sell for about 300k and rent for 2.1k monthly, once again falling way short of 1%.  Home maintenance in Las Vegas has been low, as my house is only about 10 years old, but Chicago homes are typically 50 years+, with the added bonus of ever increasing property taxes.  This makes me wonder if renters typically are getting the better deal in most areas?

Also, is this a no brainer sell for me?  Mortgage is $540 month, plus $85 HOA. I would use a property manager. A/C unit and furnace are now 11 years old. And if I sell now I would benefit from the home owner tax benefit.

FINate

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Re: Do renters typically get the better end of the deal?
« Reply #1 on: January 07, 2018, 09:34:51 AM »
Location, location, location. And timing. Homeowners that purchased in HCOL area of California more than a few years ago are way ahead on the rent vs. buy equation. Largely due to increasing demand and chronic lack of new supply for various reasons I won't go into here. Interestingly, at any given point in time the numbers show that renting is usually better here, yet over the long haul (5-10 years) buying becomes more efficient as rents keep rising whereas the cost of ownership is relatively fixed. But of course this all presupposes increasing rent, which may or may not happen...making the rent vs. buy decision in this context is understandably anxiety inducing. No idea what the situation is elsewhere in the country.

dummy

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Re: Do renters typically get the better end of the deal?
« Reply #2 on: January 08, 2018, 12:02:50 AM »
Im a landlord in Chicago and see some rentals that are priced below the market.  I have even half thought of moving into a couple and renting out the unit my wife and I live in. lol

I guess the answer is, it depends.  But I think renting is a good financial move in many areas of Chicago.

Edit- And I think I would sell if I had a rental as far away as you will.  But you would need to run the numbers.
« Last Edit: January 08, 2018, 12:05:20 AM by dummy »

HawkeyeNFO

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Re: Do renters typically get the better end of the deal?
« Reply #3 on: January 08, 2018, 03:17:50 PM »
Location, location, location. And timing.

Yep.  It ain't rocket surgery.  Simple math equations provide the answers you seek.  Just need to be aware of the variables, which are determined my location and timing.

Cwadda

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Re: Do renters typically get the better end of the deal?
« Reply #4 on: January 11, 2018, 11:11:26 PM »
I currently live in Las Vegas, with an anticipated move back to the Midwest in a few months. The home that I bought during the downmarket in 2012 for 93k would now sell for probably ~230k.  The homes in my neighborhood are renting for about 1.2k a month. Homes nearby that sell for 400k+ are renting for about 2.3k monthly. Back of the napkin math indicates this is a terrible deal for landlords, nowhere near the 1% value that I've seen recommended. Homes where I'll be moving to in the Chicagoland area sell for about 300k and rent for 2.1k monthly, once again falling way short of 1%.  Home maintenance in Las Vegas has been low, as my house is only about 10 years old, but Chicago homes are typically 50 years+, with the added bonus of ever increasing property taxes.  This makes me wonder if renters typically are getting the better deal in most areas?

Also, is this a no brainer sell for me?  Mortgage is $540 month, plus $85 HOA. I would use a property manager. A/C unit and furnace are now 11 years old. And if I sell now I would benefit from the home owner tax benefit.

Yes, it is a terrible deal for landlords. Negative cashflow. Like putting your money into a bank account that pays NEGATIVE interest. All banking on appreciation? Just like Bitcoin. Doesn’t make sense to me. But hey, those guys have a lot more money than I ever will so they must be doing something right, huh? Lol

Michael in ABQ

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Re: Do renters typically get the better end of the deal?
« Reply #5 on: January 12, 2018, 04:01:49 PM »
Our rent is $1,240 a month and the house we're renting would probably sell around $200-225k. At 4% on a 30-year mortgage that's a mortgage payment of $955 per month, leaving $285 a month ($3,422 a year) for our landlord to cover property taxes, maintenance, and the water/sewer/garbage bill. Property taxes are about $2,000, W/S/G average maybe $75/month and in the two years we've lived here the washer, dryer, dishwasher, an evaporative cooler, and (just this week) a furnace have been replaced. In addition they had to re-plumb part of the house and fix multiple leaks in the main waterline from the meter to the house as it was made of polybutylene. That whole ordeal alone probably cost at least a few thousand dollars as it was probably 10+ man-days of labor between the multiple leaks and then biting the bullet and redoing the piping into the house and partially inside the house.

It's no wonder our landlords have told us they'll be selling the house as soon as we move out, or in a year or two, whichever comes first.

It's been nice for us as we're getting a very responsive local landlord who is charging us below-market rent because we're good tenants who aren't going to be late on rent or trash the house. Had we bought this same house two years ago, any minimal equity built-up would have been more than erased by the maintenance costs.