Exactly. That’s not a good vibe, and no amount of ‘just trust me bro’ gets rid of it. (Especially if you proactively bring it up “just so you know, I can make you homeless but dw”.)
Less than half of the interest payment, or less than half of the mortgage payment? Because I don’t believe you when you say market rent is only half of the, what, roughly 5% APR interest rate on the loan?
Less than half the interest payment. It’s 90% leveraged, with interest of 6%.
If you factor in projected capital gain, then at this interest rate it’s barely break even. (That’s not to cry poor. I went into this planning on interest rate drops.)
Fair points. But by analogy, there’s not always an obligation to disclose stuff that might make others cautious. With concealed carry, for example, you wouldn’t go around brandishing it unless you want trouble.
Head tenant situations are pretty common here, where one person is in charge of landlord relations, so it’s not odd to not have any paperwork. I give the option of signing stuff, but people are happy to just do informal.
You should also consider the equity gained if it’s financed. I’ve known landlords that say, “I’m barely making any money”, ignoring the fact that they’ll own the property outright at the end of the mortgage.
Yeah this is valid. At current interest rates, and assuming average capital growth, and accounting for the benefit of my own room, I’m pretty much breaking even, just doing napkin math and not accounting for tax. (If interest rates drop then I’ll be sitting prettier.)
The way I see it is, I’m doing this so I don’t have to deal with landlords. I’m not able to live rent free, nor can I share that. But I can share the experience of being landlord free. (Sort of.)
It’s more than those unless you factor in interest, in which case it’s less.
It’s a little different from the threads, in that I’m not cashed up. A bit under 90% of the property is a bank loan, and banks demand a return on their money loaned, which is what the rent goes towards.
I’m technically charging less than my costs. But also, it’s quite common for houses to be rented out for less than the cost of ownership. We call it negative gearing, idea being to make a loss on paper after interest on the mortgage for tax reasons. (The real profit comes from capital gain.)
That said, I don’t have the capital to make it positively geared.
I take in less than half of what I pay to the bank in interest on the mortgage, so on paper right now it’s making a loss. (ofc the hope is that’s offset by interest rate drops and capital gain in future, so I’m not crying poor.)
Head tenant situations here aren’t uncommon, where one person has the place formally rented, and is in charge of paying the rent. I don’t pretend someone’s chasing me for rent or anything. I just say rent goes into that account.
I give the option of a written contract at the outset, but so far people have been happy enough to go with the informal setup.
threads, in that I’m not cashed up. A bit under 90% of the property is a bank loan, and banks demand a return on their money loaned, which is what the rent goes towards.
At cost, if we include the interest accruing to the bank as a cost.
Maintenance/upkeep etc is my responsibility of course. Utilities split.
I won’t say everything’s to my liking, but I’ll sink spare cash into improvements.