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I'm including everything other than maintenance in those numbers. I had a 18 year old HVAC system I replaced earlier this year but I had been saving for it and knew it was coming. I had a new system installed within 3 days of calling out the company which I can almost promise would not have happened if I was renting. Can you get a good landlord? Sure, I know they must exist but I've not (nor have my close friends) ever found one. Heck, even if somehow (it's simply not possible in reality after staying for 5+ years from what I can see) you come out even on renting or buying a house I'd taking buying just so I didn't have to interact with and beg another party to uphold their end of the contract. I won't bore you or anyone else with stories of renting and waiting on things to be fixed or contracts to be upheld but suffice to say, I have no interest in renting again after the experiences I've had. On paper a lot of the places I rented were a good deal (especially for someone like me who doesn't want do most of the work themselves) but in practice it always sucked.

> Can you get a good landlord? Sure, I know they must exist but I've not (nor have my close friends) ever found one.

I always wonder why the only 'financial geniuses' that are landlords are, to a person, such bad landlords.

The article's analysis missed one big thing in the comparison: rent (necessarily) includes a profit margin for the owners. In a mortgage this is the interest payment on the loan, but in a mortgage the owner gradually shifts from lender to buyer. (In fact, one way of looking at paying down a mortgage early is that the buyer is earning higher returns at the expense of the lender.)

It wouldn't surprise me at all that a mortgage, after accounting for all factors, is still cheaper than renting.

Rent does not necessarily include a profit margin for the owner. There is a rental market rate and if the landlord's expenses exceed that rate, they can and do rent out the unit at that rate. It's still better than leaving it empty. Loss-making business ventures are common, and if we're talking about owners who have a separate source of income than property ownership, loss-making side hustles are exceedingly common. (there's a lot of complexity that sometimes does incentivize big commercial-property landlords to leave office spaces empty in some cities, but, I think that's a different market yet again)

It does not necessarily include a profit margin for the owners, because houses & condos are simultaneously purchased by non-landlords who aren't trying to generate a return- so that's who sets the prices. And in practice real estate attracts the deeply financially unsophisticated, or the wealthy doctor who's willing to take losses for 5+ years for future appreciation.

I mean, there's lots of small restaurant businesses out there, but they don't necessarily generate a real profit or make real financial sense. Some industries just attract irrational or unsophisticated people!

> That sounds awesome, but that's about a 7% rate of return, which is quite a bit less than if he had simply put his money in an S&P 500 index fund.

Yeah, he made a 7% return on the real estate itself. BUT, he was also collecting rent on the house the 10 years you were living there. That's a lot more than what he would have gotten from the S&P.

But then you have to subtract all of the costs of owning the physical property over a long time span- everything that broke. Plus the taxes, insurance, water & sewer etc., as Bruenig notes.

I previously worked in a commercial real estate brokerage for apartment buildings, got to know a lot of landlords, and saw the finances of their properties personally. Over a long enough time span, 90+% of the building has to be replaced- everything from the roof down to the basement is essentially on a clock to obsolence from the moment you sign the deed.

Plus the landlord was paying income tax on the rent while your market gains are untaxed till you sell, etc.

Granted, but look at it from a purely analytical point of view. The land lord has invested in the property, whatever property it may be. He/she is now renting out that property to you to make a profit and has factored in the cost of upkeep, taxes, labor and wages for not only their staff but also themselves. That's renting. If you're renting a single house from a landlord who rents out a couple of houses, that margin is smaller, but they are still going to want to pay for those houses, costs and make a small profit.

No one gets into these things to lose money. If they start to lose money, they fix up the property and hope for a good market, I would think.

Well many, many rentals were originally owner-occupied SFHs or condos. So they weren't purchased to be profitable.

From my experience at a commercial real estate brokerage, forming a personal relationship with dozens & dozens of landlords- it's an extremely unprofessional small business, attracted by people who think 'land, they're not making any more of it' is a sophisticated statement. It also attracts a lot of 'more money than sense' types who are willing to eat losses for the first 5+ years because they think they'll make more money over time. I would conservatively estimate 20-33% of new landlords are actually losing money every year. Could be way higher than that!

Imagine saying 'there's tons of day traders, no one gets into day trading to lose money, so they must all be making $'. In fact, no- it just attracts a lot of unsophisticated folks. Same thing with owning a small retail business or a restaurant- there's lots of restaurants, they're also terrible businesses! I would put being a small landlord closer to owning a restaurant

That seem crazy... not crazy in the, "I don't believe you" sense, crazy in the sense that people would just keep rolling with losses in renting and not just flip houses, which is still a pain, but you don't have to deal with renters and are sort of doing the same job.

In OP's example, the landlord had to buy a fridge, cut down some trees, and replace a floor. Clearly, 10 years of rent payments would cover that.

Being a landlord has costs, but I'm not sure what your point is. Renting property is clearly profitable, or it wouldn't be so common.

  A lot of the expenses happen when you switch tenants. In between tenants, before the new tenant arrive, the carpet may have to be replaced, the house may have to be repainted, various other maintenance jobs that are deffered must happen.

Market value doesn't describe returns on a house. Rental income (and thus defraying of the mortgage, and thus effective defraying of the cost of goods sold) significantly tilts that number.