> It perplexes me, and the rest of our neighborhood, how someone can float a mortgage, much less an investment mortgage, without a renter.
In the USA it is happening all the time because, surprisingly, landlords have little skin in the the game. LLC is the name of the game. Each investment property is "owned" by its own LLC that bares 100% of risks and liabilities associated with the property and shields the landlord from the creditors. The property is financed entirely through commercial loans from the banks or other lenders. If the property does not generate enough profits for the landlord they quietly take all the liquid assets out of the LLC and stop paying their loan and property taxes. It takes long time (often years) for banks and local governments to start legal proceedings against the said LLC. During this period of time the property is sitting there boarded up. Finally the LLC files chapter 7 -- liquidation and all its assets, close to zero at that time, are given to the creditors.
You may ask why the banks give loans to such high risk entities? First of all, if the property is bringing profits the loans are being paid of and it is the majority of the cases. Secondly, if the loan fails the banks do not have much skin in the game either. They slice and dice the loans and package them into "real estate investment vehicles". Then they sell the packages similarly to how they did it before the financial crisis of 2008. The terms and abbreviations are different now but the gist of it is still the same.
Landlords have 100% risk. Look what happened to California, when the state said tenants did not have to pay rent. Same for Washington, NY, IL, etc... The vast majority of people with rental properties are just regular people trying to make a living.
My landlords have basically frozen rent since 2010. I pay half of what the people in the houses around me do. I'm very thankful to have landlords that aren't greedy.
You because you didn’t have to come out of pocket the high cost of a down payment, handle maintenance costs, deal with the risk of mortgage default if you lost your income, deal with the possibility (and thus hold insurance for) of liability if someone is injured and sues, or lose out on the opportunity cost of money spent on the house versus what else that money could have purchased. To say nothing of you don’t know what their interest rates are, how property taxes or cost of home owners insurance may have changed (in the U.S. your escrow payments change often if taxes and insurance change) or how liquid the house is (ie could they sell if they needed to and at what discount to the market value).
Oh, and don’t forget that they’re paying interest on the mortgage and that - when adjusted for inflation - the actual increase in value versus what they’ve paid in in mortgage interest over the years is probably far less than the non adjusted gains it looks like.
It’s pretty easy to demonize owner landlords when you’ve always been a renter because you think only about a monthly payment. I’m not going to tell you that’s it’s a relative luxury to be fixated on one simple payment each month, but it’s also not the case that owning a home as an individual is some kind of pot of gold.
An owner that values their tenant and keeps their rent flat isn’t a saint. But they’re also doing a good thing in a time when they could be - by account of this thread - exploiting people for as much as possible. We don’t need to order them a parade, but it might be worth broadening your understanding of what the cost of a home is before you blanket assume they’re worthy of scorn.
Seems like I struck a nerve in some way? It's 2024 and you can call a man a dog to his face or even stomp on his blue suede shoes, but as soon as an argument has a walletary impact, the response is swift and lethal.
Maintenance is just not an argument. Unless you choose – yes choose – to rent to destructive tenants, or in other ways are irresponsible with your property, maintenance cost is a tiny fraction of what you get from rent. The same for insurance, taxes, etc that you list. Nobody is unaware of these costs.
With that said, I'm not demonizing over these landlords. I'm sure they're fine people and could be worse like you say.
A renter should not be any more grateful to the landlord than a worker should be grateful to the shareholder for paying their salary. It is an exchange. I do think it is better when homeowners at least rent out their property instead of just letting it rot abandoned like many choose. The most decent thing of course would be for them to sell property they don't need and we wouldn't be living in this dystopia from the beginning.
The youth of the industrialized nations are vanishing on a grander scale than ever seen - for petty gains to a few. And those gains will be short lived when the economy folds in on itself due to the impossibility for productive people to have a home. In the end you cannot have an extremely highly skilled workforce that is needed to sustain a modern economy, while at the same time keeping them dumbed down enough to accept total life long exploitation and their own genetical extermination.
> A renter should not be any more grateful to the landlord than a worker should be grateful to the shareholder for paying their salary. It is an exchange.
All true, but there can be a lot of "quality of life" variance in how that exchange is implemented in practice. I've been a tenant a couple of times and now had a couple of tenants myself. Landlords can make things more or less difficult while offering the same agreement, and tenants can make things more or less difficult while complying fully with the same agreement.
I'm grateful whenever someone chooses to do better than the bare minimum required by the agreement. If anyone reading this takes good faith for granted, I urge you to at least read horror stories on reddit.
If their fixed costs are low, the tenant could be making more through investments after staying in the same house for 15 years.
Buying makes a ton of sense if you're going to live somewhere for a long time of course, but if you start out not sure and you have a nice landlord that doesn't take advantage of you with perpetual rent increases every year, then it can make sense to ride it out and invest your "inflated" income every year instead. By the time the tenant moves out, they have a nice portfolio to leverage for a new property and the landlord has gotten a decent return on their investment with a stable tenant.
In this scenario, it seems to me that main driver of disparity in our society is landlords' push to always increase rent even when the mortgage is being paid 2x or 3x over each month, just because it's allowed.
I'm not saying we need rent controls necessarily as a way to fix the problem, but that is one problem that rent control solves. Perhaps paired with some other scheme (3% max increase per year for first 5 years of renting, then capped at 1%?) we could find a more equitable way to account for inflation of repair costs while not screwing tenants with "forced" moves every few years when the rent becomes unaffordable.
Where can we find stats on this? Lots of claims in this thread feel good but don't point to number-sources.
I do know a few retirees who rent-out the home they raised their family in and live in a new primary. But my town also has some developers who build and rent.
Non-sequitur to this but VA loans do. That said, VA loans are watched like a hawk for this. It's considered fraud if the loan is not on your primary residence and you cannot rent any portion of it.
In the USA it is happening all the time because, surprisingly, landlords have little skin in the the game. LLC is the name of the game. Each investment property is "owned" by its own LLC that bares 100% of risks and liabilities associated with the property and shields the landlord from the creditors. The property is financed entirely through commercial loans from the banks or other lenders. If the property does not generate enough profits for the landlord they quietly take all the liquid assets out of the LLC and stop paying their loan and property taxes. It takes long time (often years) for banks and local governments to start legal proceedings against the said LLC. During this period of time the property is sitting there boarded up. Finally the LLC files chapter 7 -- liquidation and all its assets, close to zero at that time, are given to the creditors.
You may ask why the banks give loans to such high risk entities? First of all, if the property is bringing profits the loans are being paid of and it is the majority of the cases. Secondly, if the loan fails the banks do not have much skin in the game either. They slice and dice the loans and package them into "real estate investment vehicles". Then they sell the packages similarly to how they did it before the financial crisis of 2008. The terms and abbreviations are different now but the gist of it is still the same.
EDIT: typos