Re:Detroit wants to be the first big American city to tax la...
by eru on Tuesday October 17, 2023 @09:45PM
(#37923938)
Whether your landlord owns outright or has a mortgage doesn't make much of a difference for this analysis. That's because even if you own outright, you have opportunity costs of capital.
> If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.
Where does that 2.5% come from?
If mortgages cost more than the rental yield, then your landlord should sell the place and use the proceeds to get into the mortgage business. (If not, your landlord is doing the landlording as a charity, because they are leaving money on the table.)
> If you buy a place for $1,000,000 at 7%, you can’t compete with someone that owes $100,000 at 2.5% on the same place, which is often the reality.
Where does that 2.5% come from?
If mortgages cost more than the rental yield, then your landlord should sell the place and use the proceeds to get into the mortgage business. (If not, your landlord is doing the landlording as a charity, because they are leaving money on the table.)