If you are renting you are paying extra, no two ways about it. Unless your credit score is crap you are likely also paying more than if you bought the place entirely on credit (this depends heavily on how the owner financed the place, if they paid out of pocket it might be a bit cheaper to rent whilst the hypothetical mortgage is being paid off).
My credit isn’t crap and it’s still far cheaper to rent than what my mortgage payment would be. I rent at 2.8k a month and my mortgage would be 4k a month. So I’d need a large downpayment to deal with it.
I suggest you retake first grade math classes because property upkeep + mortgage + rent overhead since owner wants to make money != property upkeep + mortgage.
Honestly, I suggest you assume people you are talking to know their own situation better than you. I’ve done the math and the reason the large corporation can afford it is because they buy the house outright and don’t pay a mortgage on it. They own tons of properties and not every single one makes money. The one I am in probably doesn’t make money and they are likely waiting for me to move out so they can cut their losses and recoup some of their portfolio.
Only reasons I can think of renting for is A) ease of living: if something breaks it’s not your time spent fixing it. B) flexibility: you can move places faster than if you had to sell the place you’re currently living in first
So here is a third one for you, it actually is cheaper if you do the math in a lot of situations, including average to low credit but even with perfect credit and a small 5% APR (which you realistically aren’t getting a 5% APR currently, it’s far more likely to get 7% but lets build in a huge benefit for the sake of argument) on a loan of 580,000 (the price for the house I rent), it’s still 300 dollars a month more to own it. Plus repairs and upkeep. So tell me again how you’ve done all this math and are perfect about knowing every situation.
But cheaper? Yeah no, the math just doesn’t work out on that one.
Recommendation: Do the math with any mortgage calculator. The rent is 2800. Reasonable Mortgage is 3000 + repairs and maintenance.
Here’s your error: you’re assuming the mortgage will never be paid off. Which just isn’t true.
not every single one makes money.
You know what corporations do with a property that doesn’t make money? Either they find a way to kick out the current residents to raise rent. If that is not possible they sell. A corporation doesn’t give a shit about you still living in the building before selling.
they buy the house outright and don’t pay a mortgage on it.
you very apparently have no idea how property development works. Those companies have at any point in time almost no cash on hand and while they might pay a good chunk of a building out of pocket credit is usually still the way they go. There are very few companies that don’t need credit for daily operations, in property development that number is even smaller because their daily operations include paying for construction basically all the time. Even if they were paying out of pocket the difference would be interest, not some magical 33% as you suggest.
580,000
4k a month
Not sure what you are smoking but with a 25 year mortgage my calculator says that’s ~2k a month (without interest). Now interest will add some to that but not 100%. Unless you are getting a loan from a meth dealer in a back alley. Without any upfront payment some random mortgage calculator spits out 2.4k per month on that property for me. We can talk about the math when you come back with numbers that add up. Going with the numbers of your closing sentence anyway here’s some math for you:
Rent: 2.8k / month
House: 3k + 1k + 1k (1k repairs, 1k upkeep. Repair from earlier mentioned 20k/2years, upkeep from home owner annectodes around here estimated upwards)
25 years:
Rent: 840k
House: 1500
40 years (25 + 15):
Rent: 1344k
House: 1860k
50 years (25 + 25):
Rent: 1680k
House: 2100k
in which case yes, you are absolutely right. But that would also be the point at which I question how you arrive at a 4k or even just 3k 25 year mortgage for a ~600k property. To me that means either your bank is ripping you off or your credit history is so low the bank doesn’t even think you can afford your next breakfast. That level of difference isn’t even at a point where I can chalk it up to difference in interest rates. The number you gave me initially (4k) would be a 100% total interest rate. Again, I don’t see how that works out.
If your mortgage numbers are correct then you are probably also correct in that the owner would be running a loss on the property (a steep one at that) assuming they are still paying a mortgage on it.
Here’s your error: you’re assuming the mortgage will never be paid off. Which just isn’t true.
That’s not at all what this conversation was about. It’s about upfront costs.
You know what corporations do with a property that doesn’t make money? Either they find a way to kick out the current residents to raise rent. If that is not possible they sell. A corporation doesn’t give a shit about you still living in the building before selling.
Making money off the renter isn’t needed when they can make money off of selling the property.
Even if they were paying out of pocket the difference would be interest, not some magical 33% as you suggest.
I never suggested anything of the sort. Please read my words better.
Not sure what you are smoking but with a 25 year mortgage my calculator says that’s ~2k a month (without interest).
You are insane. You’ve dropped interest from your calculations entirely. It’s like saying “I put in a 580,000 dollar down payment and now the monthly payment is 0 so checkmate!” Try to put a decent interest rate on that like 5%-10% Which the average for my area is 7%.
We can talk about the math when you come back with numbers that add up.
You literally ignored the interest which I gave the numbers for. You need to read better if we are to have a conversation otherwise this is pointless if you are going to drop one of the major components that make up the final monthly payment.
If your mortgage numbers are correct then you are probably also correct in that the owner would be running a loss on the property (a steep one at that) assuming they are still paying a mortgage on it.
They aren’t paying a typical mortgage on it though. Because they get a large business loan with a smaller interest rate overall to cover it then they build a portfolio from that and use the cash flow to buy properties outright for cheaper overheads than renting. So they then charge the renters a cheaper rate than the mortgage they could get. This is why renting entirely is important.
My credit isn’t crap and it’s still far cheaper to rent than what my mortgage payment would be. I rent at 2.8k a month and my mortgage would be 4k a month. So I’d need a large downpayment to deal with it.
Honestly, I suggest you assume people you are talking to know their own situation better than you. I’ve done the math and the reason the large corporation can afford it is because they buy the house outright and don’t pay a mortgage on it. They own tons of properties and not every single one makes money. The one I am in probably doesn’t make money and they are likely waiting for me to move out so they can cut their losses and recoup some of their portfolio.
So here is a third one for you, it actually is cheaper if you do the math in a lot of situations, including average to low credit but even with perfect credit and a small 5% APR (which you realistically aren’t getting a 5% APR currently, it’s far more likely to get 7% but lets build in a huge benefit for the sake of argument) on a loan of 580,000 (the price for the house I rent), it’s still 300 dollars a month more to own it. Plus repairs and upkeep. So tell me again how you’ve done all this math and are perfect about knowing every situation.
Recommendation: Do the math with any mortgage calculator. The rent is 2800. Reasonable Mortgage is 3000 + repairs and maintenance.
Here’s your error: you’re assuming the mortgage will never be paid off. Which just isn’t true.
You know what corporations do with a property that doesn’t make money? Either they find a way to kick out the current residents to raise rent. If that is not possible they sell. A corporation doesn’t give a shit about you still living in the building before selling.
you very apparently have no idea how property development works. Those companies have at any point in time almost no cash on hand and while they might pay a good chunk of a building out of pocket credit is usually still the way they go. There are very few companies that don’t need credit for daily operations, in property development that number is even smaller because their daily operations include paying for construction basically all the time. Even if they were paying out of pocket the difference would be interest, not some magical 33% as you suggest.
Not sure what you are smoking but with a 25 year mortgage my calculator says that’s ~2k a month (without interest). Now interest will add some to that but not 100%. Unless you are getting a loan from a meth dealer in a back alley. Without any upfront payment some random mortgage calculator spits out 2.4k per month on that property for me. We can talk about the math when you come back with numbers that add up. Going with the numbers of your closing sentence anyway here’s some math for you: Rent: 2.8k / month House: 3k + 1k + 1k (1k repairs, 1k upkeep. Repair from earlier mentioned 20k/2years, upkeep from home owner annectodes around here estimated upwards)
25 years: Rent: 840k House: 1500
40 years (25 + 15): Rent: 1344k House: 1860k
50 years (25 + 25): Rent: 1680k House: 2100k
in which case yes, you are absolutely right. But that would also be the point at which I question how you arrive at a 4k or even just 3k 25 year mortgage for a ~600k property. To me that means either your bank is ripping you off or your credit history is so low the bank doesn’t even think you can afford your next breakfast. That level of difference isn’t even at a point where I can chalk it up to difference in interest rates. The number you gave me initially (4k) would be a 100% total interest rate. Again, I don’t see how that works out.
If your mortgage numbers are correct then you are probably also correct in that the owner would be running a loss on the property (a steep one at that) assuming they are still paying a mortgage on it.
That’s not at all what this conversation was about. It’s about upfront costs.
Making money off the renter isn’t needed when they can make money off of selling the property.
I never suggested anything of the sort. Please read my words better.
You are insane. You’ve dropped interest from your calculations entirely. It’s like saying “I put in a 580,000 dollar down payment and now the monthly payment is 0 so checkmate!” Try to put a decent interest rate on that like 5%-10% Which the average for my area is 7%.
You literally ignored the interest which I gave the numbers for. You need to read better if we are to have a conversation otherwise this is pointless if you are going to drop one of the major components that make up the final monthly payment.
They aren’t paying a typical mortgage on it though. Because they get a large business loan with a smaller interest rate overall to cover it then they build a portfolio from that and use the cash flow to buy properties outright for cheaper overheads than renting. So they then charge the renters a cheaper rate than the mortgage they could get. This is why renting entirely is important.