Just learned that when accounting for property tax and maintenance expenses for some properties in HCOL areas (namely CA), the age old truth that it is “cheaper to own than rent” is not true in this example.
But if renting is cheaper, how is the owner not operating at a loss and not closing shop / raising rent?
In: 5
The owner didn’t buy the home recently, so their mortgage payment is low compared to what it would be were they to buy today or the property is even paid off. Plus property taxes in CA are limited in how much they can increase, meaning a long time owner also pays a fraction of the property taxes a new owner would pay.
So a home that sells for $1m today and has property taxes of $15k has a mortgage payment of around $6000/mo. But if somebody who bought an identical home for $350k in the 1990’s and has now paid it off, pays property taxes of $5k on the house could rent the house out for $5000/mo and and still profit about $4000/mo. even after paying taxes, insurance, repairs.
Latest Answers