this post was submitted on 19 Aug 2023
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onguardforthee
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Oh wow, a landlord who doesn't understand the concept of breaking even, i.e. not profiting off those poorer than you. What a surprise!
If you're renting out your own personal home while you rent a different home there's no real issue, but if you're buying an investment property, renting it out at a profit, and not keeping it as nice as you keep your own home, then you're just being a rent seeking leach that's providing no value to society. You're just enriching yourself on the backs of people poorer than you. It's literally the same thing as Nestle buying up drinking water rights and then selling the people back their bottled water at a profit.
Everyone who rants and raves about landlords seems to totally misunderstand just how goddamned expensive it is to be a landlord. As the property owner you are responsible for:
With all that you get nailed on your income taxes. You can claim only mortgage interest, property management fees, and maintenance expenses against the rental income. The balance of the rent collected is treated as income and you're taxed on that income... so you have to factor that in as well.
I bought my property at a decent (local) price before the prices skyrocketed during the pandemic. My mortgage is at a reasonable interest rate (I didn't mortgage when interest rates were super low). To rent out my property (2500 sq ft 3 bedroom with top of the line appliances and finish) and simply break even over all expenses and have a zero gain/loss at the end of the year I'd have to rent my property at about $3400/month.
When I did rent it out I made the conscious choice to rent it out much lower and eat the loss each month. It sucked... but I was able to keep my house while i was working elsewhere, and eventually move back in once I was back in BC (I rented a different property until my tenants gave notice they were leaving).
Your example of a landlord renting a property for profit while not taking care of the property... well yeah that happens everywhere in the world. Some people suck. Those landlords are not the majority in my experience. They stand out because they are shitty people and you and I notice them.
Does this math account for the equity gain from the value of the property?
Equity gain only really counts if you're flipping properties. If you're an owner and landlord you're typically not flipping said property... you're renting it and sitting on that property for as long as you can. Any equity gain is not a guarantee... the local prices go up... and down. You can't base your income and expenses on an imagined future value and eat the losses year-on-year and actually survive financially... unless maybe you're a corporation owning multiple properties and can absorb losses. Individual owner/landlords can't... just can't reasonably be expected to eat losses on their properties. They must at a minimum break even.... and saying that "oh you can sell your property and get equity gains" is myopic at best. If you insisted on that way of owning and renting, ALL property would be owned by the super rich or corporations... and people like myself who own one home that they rent out will never do so because they can't afford to do so while entertaining 10 or 20 years of eating losses on a rental.
I don't understand why the ability to sell is myopic. The way I see it, a rental property works the same way as any investment. It's a thing you own that has value and that can be sold for that value. Think stocks for example. When you buy stocks, the amount you spend in buying them isn't a loss. You're simply putting money into savings. You don't need to "flip stocks" (i.e. day trade) for it to make sense to account for the value of the stocks themselves. You hold it long term in the form of stocks until you need that money and you cash out.
If you can't afford that, then it just means you can't afford to save money. The solution is definitely not to only allow large corporations to own rentals, nor is it to allow you and I to exploit someone less well off in the name of equality. The solution we should be looking for is something that would allow anyone contributing to our society to have the choice to either own or rent their home.
A property is not stock nor is it ANY way comparable.
I personally own stock in several Canadian companies. I paid... lets say for illustration purposes... $100. That $100 goes into the markets and I get a stock certificate in some form. I hold that certificate and that's it. It doesn't cost me any money to hold that certificate other than the initial $100 I paid. I can sit on that stock for my whole life or sell it at any point. I don't pay a penny more until it's sold. Then and only then do I declare capital gains or losses. I don't pay a yearly tax to own that stock. I don't pay income tax on that stock. I don't have monthly maintenance fees for that stock. A house on the other hand does cost you a substantial amount of money to maintain regardless of imagined resale value.
People say "It's immoral to buy a house for an investment, landlords must provide hosing for renters at cost." and the turn right around in the next breath and state "A rental property is an investment." Pick one. You can't have both.
Of course there's expenses involved. My point is that the equity part is the same and does not factor into the expenses. If you want to buy a share of some $100 stock but don't have enough money for it, then you can take out a loan for that $100. Let's say that every month, you pay 1$ in interest and $1 in principle on each payment for a total of $2/month. Your monthly expenses for owning this stock is $1, not $2. With each payment, you get $1 with of equity, and when the whole thing is paid off, you have something that is worth $100 which you paid $200 for.
Sounds like you're grouping me with others that have differing opinions. Not that there would be any contradiction in anything I said even if that were my position. If you treat housing like an investment, then it mathematically behaves like any other investment. Morality does not factor into the math.