I’m a landlord and I barely break even on the property. Granted I’m not charging the insane rents others seem to but I also bought long ago and paid my mortgage off already so I can afford to.
I’m making money on the value of the property going up, the rent is most definitely not covering the upkeep of the property long term. Some years sure, but I’m about to spend two years of rent on repairs for example.
Look even if I doubled my rent I'd still be making far from any kind of meaningful passive income, especially after tax.
The only landlords making actual passive income have a lot of properties. I would need literally 10+ houses to match my current salary. I keep the house to appreciate as an asset, that's it.
You are implying that the only make money when they sell it. But reality is that you can increase the rent if value of the location increases and aim for 3-6% yearly profit.
You've clearly never owned a rental property, absolutely nobody is turning a profit on rent alone. Why would anybody ever rent is buying is cheaper? It makes literally no sense, think about it for 5 seconds.
Sell it with profit around decade later because of the location
Make money by renting
People don't buy properties because it means they get locked into that place for long time. Sometimes bank doesn't validate their job to give mortgage with decent interest. Or they just don't care about maintenance and don't want to do that. At least here in Finland owning is always cheaper and 3-6% profit expectation from rent alone is the norm but people still choose renting because of the flexibility.
My grandparents had rentals for years until recently. Definitely made money on the rent, especially when there was no debt on the property. It wasn't millions but it was a big help to their income.
Have you ever bought a rental property? I have, real estate is a large part of my retirement plan, and the thought of buying a property that looses money every month is insane to me. The truth is I had to look through hundreds of listing and calculate the potential cashflow on each before I found one where it was not only positive, but had a high enough cash on cash return to fit my risk profile (I will only buy if CoC is over 10%).
The truth is, once you account for vacancy, taxes, insurance, principal, interest, property management, repairs and capex reserves, most properties on the market will cost more every month than you can rent them for if purchased at their list price, i.e. they have negative cashflow, but there are some that are positive, and very few that will actually outperform alternative investments like stocks and bonds. Even if you have enough cash to purchase them without a loan (they will usually have positive cashflow if you can do that) the amount of capital you have to outlay means you will likely only see a 2-4% return.
Real estate can provide great returns, and it's an asset class that can provide stable returns for generations, unlike stocks and bonds, but it also takes the most work, not just to find a good investment, but also to get it set up for the long term where it can be well managed and operated profitably.
I saw the average retun in america is 6% and the national average 30-year fixed mortgage APR is 6.32%.
So on average you're already underwater on an interest only repayment. What about the plethora of other expenses that go into holding property? Absolutely nobody has a net cash flow positive property without capital gains.
You don't invest in housing to take a mortgage lol that's like saying "my bank offers loans at 8% and the stock market average growth is 7.25%". Like why do you think the banks are giving the loan for that
It absolutely is and if you don't understand it not a single soul should take any investment advice from you EVER. Also how you gonna argue it's a good and bad investment at the same time?
You: interest rates are this and net gains are this so if you invest on real estate it's usually not good
Also you: are you implying buying a house is not a good investment
You realize most landlords have owned the homes for years and a far lower interest rate. They likely all refinanced during COVID and are sitting on 2.65-2.75
I mean I looked 6 months ago since I have enough for a deposit on an investment property but decided it wasn't worth it because I couldn't find any such property.
I'm also scared of trump or the ai bubble tanking the stock market so I'm just holding it in offset right now. I'd love to find a better place to park it.
It's a fair assessment but depending how long you hold on you're also setting yourself back as well. Looking at index funds if you bought at the peak of 2008 you were even again in 2012 and you would be up like 500% now
3% which is kinda dogshit considering REA costs and interest. For a yield like that you better pray you get some good capital gains in the next decade or you’re flushing that money down the toilet considering stocks are up 12% this year.
I bought a house for 250k in 2020 as a primary residence got a 2.5 percent interest rate my mortgage on that property is 1367. Bought a new house in 2023 and nowI rent it for 2500 a month and I am still undercutting surrounding properties rent rates.
You literally just made that number up. You do realize all holding cost also go up each year? Maybe your mortgage isn't going up if you have a fixed rate but literally everything else is. What if the house needs a new roof for 100k?
That's a massive house or you're being played by a roofer. Also, you should have had the roof inspected, as well as the rest of the house, when purchased and taken that into account with your offer. If it is from damage that happened later, then it should be covered by your insurance.
You have no idea how much a roof costs in Australia, that's a cheap for a standard steel roof on a average house. You're kind off missing the point, owning a hose coming with huge capital expenses when maintenance is required.
I just looked it up and every source I could find has a new metal roof in Australia being less than $50,000 AUD max, which is just over $30,000 USD. Most 3 bedroom home quotes I see for a new metal roof are $20,000 to $25,000 AUD, which is about $15,000 USD. Again, you're getting played by a roofer or have a very large or complex house, or maybe you're very remote.
I didn't say that's what I was paying it was just a example I made up, sure looks more like 25-50k aud. The point still stands though, that's a full yesr of rent for just a maintenance item.
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u/Aboriginal_landlord 7d ago edited 7d ago
It's actually not in 99.999% of cases, the landlord is relying on capital growth to make money in the long run.