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
What you just learned is probably a generalization and based on the current market. The person who owns a rental property likely purchased it a long time ago so the math for them is different from the math for a person looking at their options at this moment.
Totally made up example here:
For you a property would cost $700,000 to buy today and your mortgage would be about $3,000 a month and your taxes would be $1,100 per month so your total cost is $4,100 per month.
Someone who purchased 15 years ago who paid $350,000 for the property has a mortgage payment of $1,100 and taxes of $1,100 for a total of $2,200.
So the person who purchased 15 years ago can rent you the property for anything over $2,200 a month and make a profit. As long as they charge less than $4,100 it will be less expensive for you to rent than to buy and that will help ensure that their property has high demand for being rented. I hope this helps.
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