Or only if you prevent supply from meeting demand.

When I was a landlord I found it very difficult to even cover the mortgage, let alone cover association dues and maintenance. I would try to raise the rent a little in between tenants, and it would greatly reduce interest in the listing.

Why should the rent cover your mortgage?

Likely NOT the landlord's personal domicile's mortgage, but the mortgage on the rental property itself. Landlords with mortgages on their rental property can go upside down on their notes too.

If you can't bear any risk of losing money perhaps you should buy money market funds instead of real estate at 20x leverage.

I bought a house just before the financial crisis and a decade later needed to move but I was underwater. I didn’t have enough money to sell it so I rented it out.

how did this not break your mortgage agreement? most private mortgages have a clause that states the mortgaged property will be your primary residence. specifically. it is to prevent private mortgages being obtained for rental properties.

Shrug. It never came up. I was all squared away with a good legal document for the lease, verified renters insurance, all that. Never even occurred to me the bank might take issue with it. Oh well, no harm done.

Why wouldn't it?

We're talking about a mortgage on the rental property itself not on the landlord's personal residence.

> We're talking about a mortgage on the rental property itself not on the landlord's personal residence.

Yes. Everyone in this conversation understands that. There's no relation between the amount and terms on your mortgage for your rental property and the market price to rent a given unit.

If I take a 20 year mortgage does that mean I should charge more rent than if I took 30 years because my payment is higher? Should I drop rent by half when I'm done paying my mortgage since I no longer have a payment? It's nonsensical.

There's especially no reason to expect that rent should cover 100% of the principal fraction of your mortgage payment. Taxes, maintenance, interest, etc. are pure costs which are understandably passed on to tenants. The principal fraction of a mortgage payment is not a cost, it is building your equity.

If rent is covering all costs and "only" 50% of the principal fraction of your mortgage payment you're still making a profit. Because you're paying, let's say, $1000 of the mortgage payment with your own money, but you're getting a $2000 increase in equity.

Indeed - it is increadible that so many people just assume rent should basically buy another person a house by default.

If the increase in equity should be satisfactory, that's an argument for just letting everyone live in the place for free. I mean, you're coming out ahead.

I know other landlords with multiple units. If they don't think something will be an income producing property, they won't buy.

My point is that you charge market price. Because that's how markets work.

Price to rent ratio varies very widely between different markets. If you don't want to buy in a market with a high price to rent ratio that's fine. There's simply no rule that guarantees a price to rent ratio such that rent covers all costs plus the full payment on a 30 year mortgage in all markets at all times.

Because that's how it normally works? Why would any renter pay that much? If they have that much disposable income each month, they could just buy instead of renting.

You aren't aware that plenty of people rent houses?

By renting instead of buying, you don't incur any of the costs or headaches associated with with home ownership or repair. There are also plenty of people who are only living in one place for a limited period of time, and additionally, plenty of corporations will rent out homes in decent locations if their employees need to be there for extended projects.

I am aware; I was a renter until a couple of years ago. I have rented houses in the East Bay (Alameda, CA) and Seattle, and in each case, my rent was 70%-80% of what the monthly payment on a 30 year mortgage on the same house would have been. The same was true of apartments I rented in Manhattan.

Maybe it doesn't work that way in other markets, but you'd have to be nuts as a renter to pay enough to cover your landlord's mortgage.

Let me assure you then, that in most markets, you will pay far more than the cost of a 30 year mortgage plus taxes and insurance for renting a house. You're subsidizing the cost of vacancies and also paying for some of the maintenance.

A 3 bedroom, 2 bath home in a decent but inexpensive part of the DFW where I live will run you $2K per month. These prices will skyrocket as rental prices catch up to the mortgage market. But just for comparison, 2 years ago that same house would have been on the market for about $220K and would have had a monthly mortgage of about $1200 a month on a 15 year loan or $800 or so on a 30 year loan.

In my neighborhood now, people rent for considerably more than they would pay per month if they bought here. They want to live here but nothing is for sale. It’s large single family homes. Renters tend to be people who have frequent job transfers and people who are having custom homes built nearby.

Also I’ve never rented anything for less than what I could own something comparable. Maybe you can in some markets. But generally I expect to pay more monthly. It’s a trade off for avoiding everything that comes with home ownership. Down payments, maintenance, and the overall commitment. It’s hard to just pick up and move when you have to go through the process of selling, making contingent offers on another place, multiple closings, all that.

What markets have you rented in?

I have been a renter in NYC, Seattle, and the Bay Area; every single time, I looked up how much the property last sold for and calculated how much a mortgage on it would cost me per month. My rent was normally 70%-80% of the expected payment on a 30 year mortgage.

I was never paying below-market-rate rent, either! Maybe it doesn't work out this way if you're renting in an area with lower average property values?

Obviously there is no rule that it should. I know plenty of people that kept their old house (and mortgage) when moving and tried to rent it out to build some equity and make money.

Because people who buy a place would like to reasonably be able to pay something that takes 30 years or similar to pay with the rent itself.

That is a reason why you invest in the first place.

That's a pretty arbitrary measure though - you're making "free" money either way to pay towards that mortgage while retaining the whole value of the asset while it is gradually purchased. Whether you've got enough to cover mortgage or not doesn't necessarily flip a binary switch making it a good investment or not.

Property ownership is a market barred from entry by a high buy in cost to account for some risk - but the risk is rather minimal and most properties are going to be value accruing over time. We can observe this by looking at how cheap general property insurance tends to be (unless you're in a really risky area - i.e. building a house in a flood plain).

> That's a pretty arbitrary measure though

It is, but I think I would find reasonable getting a mortgage if it does not impose a load on my finance by having it rented.

It sounds like the bank was doing to you what people are complaining about landlords doing to tenants.

I think it was simply a function of renters in my area having other options at the price point.

The amount of rent people are paying is exorbitant if it covers the mortgage for owning the property.

Normally, rent on a property is significantly less than the monthly payment on a 30-year mortgage on the same property. Where were you renting out spaces where people were willing to tolerate rent that high?

Where does this "normally" occur? A house in my neighborhood would rent for over $3000 a month and cost about $1600 a month in mortgage / insurance / taxes, and that's been my experience when looking at any property anywhere in my entire city.

Manhattan, Seattle, the Bay Area. I haven't rented anywhere other than that, so I don't know how it works outside of those markets (which are admittedly unique as far as market fundamentals go).

I paid $1400/month for rent on a place in Alameda, CA. The last recorded sale of the property was for ~$400,000 a couple years before I moved in. That mortgage would be ~$2400/month given average interest rates at the time.

That's crazy comparative to most places I've lived. $1400 will get you a 2 bedroom apartment in a run down complex in the DFW area. Right now, $2350 gets you into a doublewide in Alameda.