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Originally Posted by Slava
I might be missing something and I don't rent or rent out a property, but why would I rent out a place flr $1700/mo if its costing me $2500+/mo ?
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Rental rates are determined by the people that live and work in the area and what they can afford based on incomes. Over the last few years I've watched several properties sit empty for months at a time because the landlord refuses to price their rental at the market rate.
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There's another factor here as well though. Lets say you can save $500 a month by renting instead of buying. (I'm not convinced that is the case, but just bear with me). If you're like most people that money is wasted and not actually saved anywhere. I know that there are exceptions, but seriously it can't be a huge number percentage wise who are that disciplined. So when/if the market rises this is where the renter's are caught. The guy who has been putting money into a property now has a smaller debt against a rising asset, whereas the renter had a few years of hookers and blow. Sure, if the market tanks then the renter comes out ahead, but that doesn't appear imminent either.
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Rental rates haven't shot through the roof over the last few years the way home prices have, so if prices do rise, the renters will just continue renting as they have been.
I agree that most renters probably aren't saving the difference, but they are benefiting from that money in that they have it to use however they want ie. pay down debt, eating out, companionship and pharmaceuticals etc.
People act as if a mortgage is this magical equity bank that just keeps going up every month. Prices in Victoria dropped by about 9% in 2011. That's a huge hit to the equity bank for those that bought in the last few years with little down and long amortization periods. As a new owner, that would probably be keeping me up at night. As a renter, it's making me giddy.
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Originally Posted by stacey
Not sure which normal market you are in...  |
If it is never cheaper to buy than rent, why would anyone ever be a landlord?