Economics of Renting vs. Owning

Quote from scriabinop23:

ha.. it looks like the owner is trying to sell a covered call on their house. That lease premium is way to expensive. Not anywhere near fair market value.
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Plus, the credit amount from the lease payment is stupid low.

I've done this before as a renter/potential buyer and have ALWAYS received at least 30% of lease payments towards down payment upon purchase.

I bet you could rent a home in the same neighborhood for less than $2500/month.
 
Quote from Alex_in_Oz:

How are ya Crackedback! I'm only quoting someone else who stated that tenants in the USA pay property tax plus mark.
To be honest it sounded like crap to me too!
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I said it. Its not a direct payment, like some kind of invoice that is mailed to them. But its bundled up in their rent, along with all of the other costs. There is no free lunch. The mark-up is the profit which motivates the landlord to buy the property in the first place. If property taxes go up, you'll eventually see rents go up to cover it, plus a little extra. It happens just like any business passing its costs on to the consumer. Who do you think ultimately pays Walmart's electricity bill? You do, plus extra.

SM
 
I'll just tell the landlord in your neighbourhood what I tell them here:-
"I will excercise my freedom to 'shop around' and rent an apartment which is cheaper in the same area b) Interest rates ARE going up c) While the house is empty the HE/SHE ISN"T RECIEVING ANY MONEY while I am shopping around...........slowly making........ up.......... my ......mind.........

Old factories are now "artists studios", residential apartments here are literally everywhere and being built by people hoping, wishing, speculating on property with easy access to credit and cheap money. Well, there is now a huge glut in rentals (here at least)I bargained my landlord down from $320 per week to $240 in what is one of the best suburbs in Melbourne ( I sub-let to an attractive young woman)
It is quite rare for someone to own there own investment property here, most people here are mortgaged to the hilt.
Besides in the long term equities outperform property by a big margin. Even in a falling market you can make money. When was the last time you heard of someone shorting there home or 'investment property'?
It is a renters market down here and every month bank forclosures on mortgages increase.
People who got sucked in are now wishing they had been renting!



:D
 
Quote from Alex_in_Oz:

It is quite rare for someone to own there own investment property here, most people here are mortgaged to the hilt.
Besides in the long term equities outperform property by a big margin. Even in a falling market you can make money. When was the last time you heard of someone shorting there home or 'investment property'?
It is a renters market down here and every month bank forclosures on mortgages increase.
People who got sucked in are now wishing they had been renting!



:D
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So you're saying that investment property owners are rare and bank foreclosures are increasing? Wouldn't that create a shrinking pool of landlords and a rising pool of tenants? If so, rents should be, or will soon be, rising, right?

SM
 
How many people here who (now) feel renting long term is a good idea also cashed in on a large increase in home equity during the price run on housing?
 
To take the in a new direction, my trading buddy in Vegas comapared it like this..........he could buy a 1700sf condo overlooking the strip for about 800k plus with a payment of atleast $5,000 per month or rent a very similar unit for about $,3000 per month. What do you think is a better deal. I know Vegas is at the top of the bubble, but you get the point.
 
Quote from Smart Money:

How many people here who (now) feel renting long term is a good idea also cashed in on a large increase in home equity during the price run on housing?
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I can't imagine that too many people would actually sell a house in order to rent instead just because they felt their home was overvalued. Home ownership is a long term proposition and the transaction costs are high, particularly if you include intangible costs.

That is why they say housing prices are sticky on the decline.You really need overwhelming conviction to take profits, especially if you have a spouse to convince, kids in school, etc.

Of course if you're moving anyway, that's another matter.

Martin
 
How are ya SmartMoney!
When I say " they own their investment property" I should have said "own".
Property "Owners" (they do own some of the equity in the property they have a mortgage on, (or perhaps more accurately the definition should be:- people who live in the house they have a mortgage on rather than "owners") borrow against their equity in the house they CURRENTLY have a mortgage on. Australian Banks offer this facility.
An associate of mine borrowed A$200,000 from a bank 8 years ago, had A$50,000 of his own money and bought a house for just under A$250,000 He currently has another A$130,000 to pay off on his mortgage.
His property was (over)valued by a Real Estate Agent ( who did not disclose he acted for his bank!) at A$350,000 so the equity he already has in his existing house used to buy an 'investment property' built over a garbage dump which no one has even looked like renting.
Multiply this scenario by approvomately a factor of tens if not hundreds and thousands and you have the dreaded>>>> PROPERTY GLUT.
When you "buy" a house with a loan from a bank, the bank OWNS the title until you pay off the interest plus principle.
A lot of people have negative equity in "their" properties at the moment.:eek:
 
A lot of renters became 'owners' during the time of 'cheap mortgages' so excacerbating the glut.
In the suburb I grew up in, the vacancy rates are 35% or even more. All the old large Art Deco houses on 1/2 Acre blocks were buldozed and now have as many as eight apartments on them!
A few have one or two tenants living in a block of eight apartments!
 
Alex,

Is this Melbourne?

Any idea what Perth is like for vacancies? I'm fairly sure I will be spending next winter out there (summer to you).

Jay
 
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