Hacker News Reader

Comment by UVB-76 | Hacker News Reader

I find the inverse to be strange, i.e. the notion that the rental value of a property should be less than the cost of a mortgage.

Not least because landlords incur overheads over and above those an owner-occupier does.

There is a large 'buy-to-let' industry in the UK, whereby millions have taken out mortgages to buy properties for the sole purpose of renting them out.

The rental income pays the mortgage, and usually provides some profit on top, all while the value of the property itself continues to appreciate.

View on HN

In the US anyways you have favorable tax treatments for interest and property taxes, but rent (of private properties like houses) tends to exceed principle + interest + taxes in many areas. I find that to be fairly weird, because you've essentially got a very low out of pocket expense at that point (or even nearly net positive) in raw money exchanged, yet principle is recoverable on sale and tax deductions offset a portion of property taxes.

Basically if buying a house and renting it out immediately turns a profit, that's a renter-saturated market, and it seems best to be on the non-saturated side of the market

Not least because landlords incur overheads over and above those an owner-occupier does.

But isn't there also an economy of scales argument to be made. If you own dozens of buildings and hundreds of flats, you should be able to keep your pr. flat cost lower than someone who just bought one flat.

None of the overheads I'm thinking about lend themselves to economies of scale.

I'm talking about things like:

* Admin costs (contracting, etc.)

* New tenant costs (marketing, agency fees, reference checks, credit checks, inventory, etc.)

* Landlords' insurance

* Extra safety checks (e.g. annual gas safety checks)

* Cost of downtime between tenants

* Cost of rectifying wear and tear (cannot recover from tenants)

There's also a difference in terms of maintenance. If I'm an owner-occupier and something breaks, I can live with it for a while, shop around, get a few quotes, and get it fixed at my leisure.

As a landlord, if something goes wrong with one of my properties I have an obligation to repair it as soon as reasonably possible.

Then every now and then you get a tenant who completely trashes a property, causing damage far in excess of any deposit, and which you're unlikely to ever recover.

Reply on news.ycombinator.com