A different take on the rent vs. buy conundrum...
Look at the following:
1) How many houses can you find today that you could buy and rent out profitably?
2) How many apartment buildings have "gone condo" in your neighborhood.
I think most of us would find that the answer to #1 is "very few" and the answer to #2 is "lots".
Why would this be? Well, for the latter case, the answer is probably that the owner can get better returns from dicing the building up and selling than he can from renting the units. In the former case, rents are just not high enough to cover ownership costs. Both of these trends have become more pronounced in the last few years.
Now put yourself on the other side of this deal - as the renter. If you are renting an apartment, you are getting use of an asset that is providing a lower return to the owner than it would to get essentially the same use if they sold it to you. If you are renting a house that is recently purchased, you are not covering the owners carrying cost. They would be better off selling it to you.
As I see it, smart investors are selling these days. You can answer for yourself who is buying...
1) How many houses can you find today that you could buy and rent out profitably?
2) How many apartment buildings have "gone condo" in your neighborhood.
I think most of us would find that the answer to #1 is "very few" and the answer to #2 is "lots".
Why would this be? Well, for the latter case, the answer is probably that the owner can get better returns from dicing the building up and selling than he can from renting the units. In the former case, rents are just not high enough to cover ownership costs. Both of these trends have become more pronounced in the last few years.
Now put yourself on the other side of this deal - as the renter. If you are renting an apartment, you are getting use of an asset that is providing a lower return to the owner than it would to get essentially the same use if they sold it to you. If you are renting a house that is recently purchased, you are not covering the owners carrying cost. They would be better off selling it to you.
As I see it, smart investors are selling these days. You can answer for yourself who is buying...
Comments
How many speculative buyers currently rent houses in the area? (Meaning they bought assuming the price would increase next year enough to cover their costs.)
How many will continue with this if the market flattens?
How much does demand have to drop in Seattle (on a percentage basis) for the market to soften?