UnThreaded | Threaded | Whole Thread (97) | Ignore Thread Prev | Next
Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76421  
Subject: Re: Home Ownership not a good investment Date: 4/24/2014 9:43 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 2
This occurs because the P&I on a fixed rate mortgage is constant while rent grows with inflation although most of the other expenses of ownership (property taxes, insurance, maintenance) also growth with inflation.

You don't think property taxes, insurance, maintenance are included in the rent I charge my tenants? Where do you get the idea that I'm somehow giving them a free ride on all of this? If anything, as those prices go up, the rent goes up more.

An issue we had some debate about was whether the principal part of the P&I payment should be considered a monthly expense, as it really is a form of savings. I think we finally agreed that it was really a measure of available household cash flow and the principal payment was really a form of forced savings as part of the monthly housing expense that would be recaptured in later years...so it was kept categorized as a monthly expense.

And I'm curious if the tax benefits were included in this calculation? Because the renter is paying those taxes, but the landlord is reaping the benefit. I get depreciation, which gives me a break on profit, but the renter never sees that. I get an income tax deduction, which the renter doesn't. If my cash flow is negative, I get a credit which I can use to shield other income, but the renter doesn't get that either.

Appreciation in the property? I realize that when I sell the house. All the tenant sees is that rents in the area are going up, and he pays more. Meanwhile my mortgage stays the same, year after year. In fact, it usually goes down, because once my equity reaches 20% I can eliminate the P&I insurance, which is a benefit only to the bank, not to me.

When I started renting out my condo I got around $600/mo rent and I barely broke even, and probably some years I didn't even do that, at least if "cash flow" is all you look at. But all that time the renters were paying the mortgage, while I was reaping the appreciation. When I took my 30% deduction for mortgage interest expense and the other things, the benefits showed up not in the "rent" line but in my bank statement, because my income tax bill went down. Now I have no mortgage, and the renters send me a check for nearly $3000 every month. How is that possibly better for a renter?
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (97) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement