Usually the issue would be that these places cost large sums up front to acquire, and there is inherent risk in lending money or selling something for payment over time.
The most equitable solution under those circumstances IMO would be a pay-towards-ownership rental model with an agreed stewardship rate for routine maintenance and if they terminate lease early, the accrued funds towards the ownership are disbursed. This allows the “renter” (future owner) the ability to eventually accrue the value of the home without risk of loss of investment, while also allowing the “owner” (steward) to ensure that maintenance can be performed. Would have to work out how to pay for incidental maintenance like a failed water heater or storm damage, but splitting cost across owned percentage may be fair, or based on fault, etc.
It’s a lot of hassle for something that we should instead fix at the systemic level, but so long as we’re looking at the current system then this ought to do well by both parties and would be accessible for those fortunate/lucky enough to be pulling significant salaries to help those less fortunate.
Cooperatives are also a good option long-term but I’m thinking in terms of folks that are living hand-to-mouth being able to earn towards a permanent home right away rather than a group of people with enough surplus money to pool for shared home(s). A well-established coop would be a better support network and may be able to grow faster (help more folks) than the alternatives.
I think the biggest problem is how does the landlord break lease? Because if you can be kicked out you lose all that you’ve accumulated against your will. If you can’t be evicted, you’ve forced the landlord to both keep you as a renter and keep ownership of the property until it’s paid by the renter, which isn’t necessarily realistic.
They should be able to sell the property if they need to. The person renting being part of the transaction and forced to be allowed to continue renting is only kind of a solution, because the new owners might want to live in that house, or have a say in who rents it. There’s also the issue of funds already accumulated by the landlord. Does that get deducted off the price they sell it for?
I think there’s just a few too many veriables for it to work as a solution.
These are good points. In a place where rent was actually cheaper, moving from place to place would be more of a nusence and less of a gamble with homelessness. The reality is that people will need to rent because they need a place to live, and that renting isn’t a great solution compared to buying, that not everyone can afford to buy, that some renters can destroy investments and prevent a place from being rented again, lots of landlords are predatory with their rent increases.
One thing that that doesn’t seem to be true at least with what I’ve seen, is that lots of rentals prevent buyers from buying houses. I’ll leave the ethics of should someone buy a house with existing renters who will need to be evicted to another discussion. That said, buyers who are interested in a house can usually make an offer even if the house is not on the market, and that offer may even be accepted, pending the end of the rental contract or if the contract allows, 30 days notice. I was kicked out of an apartment this way - I didn’t have to go, but they were renovating and the new rent would be $400 more, or I could buy it outright as their endgoal was to sellt hem as condos. Lots of management companies are also realtor companies. After I moved out of the last rental, it was sold for half a million dollars (it wasn’t near that nice, very tiny and very old with outdated wiring) about a month after I moved out. The photos to sell that place were unreal, they must have done a complete makeover the day after I moved out and sold it less than 30 days later.
The two major issues with the US housing market right now are:
The prices are high because the demand is high. My advice to buyers is offer 50k over asking price at least to start. When the seller gets multiple offers yours has a better chance at being one of the higher offers in that bundle. Houses can be sold in a week.
The interest rates right now are so bad that no one who has an existing mortage at a decent rate wants to sell, as it would mean financing another home at a much higher rate. This limits inventory of houses available for buyers and renters alike. My advice to buyers is please, please try to wait until the interest rates return to something below 4.5%, ideally something like 3%.
The rent-to-own model also doesn’t work to well at least in the US because you’re essentially agreeing to a price of the house in x amount of years. After x amount of years, even if the house isn’t worth $y it will still be sold to you for $y.
I don’t know the details of her situation, but it’s something like in a market that averages over $1000 for housing, she rents out at below $1000. I mean to say for her properties she could choose to rent at the market rate but this would mean the people who wants to rent to, people who aren’t able to afford >$1000 for housing, would you know… be unable to afford it.
As for barely making a cut for themselves, I’ve only known a few landlords but none who owned the house and title (without a loan with the bank). the landlords I do know, herself included most likely got 30 year fixed mortages on their properties, meaning their interest rate stays the same for 30 years.
Each month those landlords need to pay the mortage and will need to pay for repairs or repair the properties themselves. Say the mortage, due to the landlord’s credit rating is pretty good, and comes in around $800 a month. Say that on average the landlord has to pay $50 a month on maintenance. The landlord needs to charge $850 to make no money, to afford no food for themselves, or otherwise “break even”. What I’m saying here is that in this market, a property just like hers (x beds, y baths) rents out for $1200 a month. I’m saying that she’s more likely to rent her property out at $900 or $850. Although when people fall on tough times, she’ll also just waive the rent or work with them with what they can pay.
Meaning if they just sold the place to the people renting it out would be even more affordable?
Probably not. You’re assuming that the renters have good enough credit to get a loan from the bank at the same interest rate that the landlord can, that the renters can afford a down payment (sometimes that’s $10k+ right there). Keep in mind these are the renters that could not afford a $1200 a month place themselves. You’re assuming that the bank would give them the loan in the first place. You’re assuming that the current interest rates are reasonable (at time of writing, in the US, they are not - the difference between a 3% and 6% interest over 30 years is enormous and would make their rent far greater than $1200 a month).
You’re right that there are some renters who can afford to buy her properties if she put them on the market. Those renters hypthetically live in the property next to hers with x beds and y baths and they’re looking for a place to live. She could sell the property to them, but she’d then need to evict her current tenants, and since there’s a lack of landlords like her, they will probably need to move to another town or be homeless.
Meaning if they just sold the place to the people renting it out would be even more affordable?
Usually the issue would be that these places cost large sums up front to acquire, and there is inherent risk in lending money or selling something for payment over time.
The most equitable solution under those circumstances IMO would be a pay-towards-ownership rental model with an agreed stewardship rate for routine maintenance and if they terminate lease early, the accrued funds towards the ownership are disbursed. This allows the “renter” (future owner) the ability to eventually accrue the value of the home without risk of loss of investment, while also allowing the “owner” (steward) to ensure that maintenance can be performed. Would have to work out how to pay for incidental maintenance like a failed water heater or storm damage, but splitting cost across owned percentage may be fair, or based on fault, etc.
It’s a lot of hassle for something that we should instead fix at the systemic level, but so long as we’re looking at the current system then this ought to do well by both parties and would be accessible for those fortunate/lucky enough to be pulling significant salaries to help those less fortunate.
Cooperatives are also a good option long-term but I’m thinking in terms of folks that are living hand-to-mouth being able to earn towards a permanent home right away rather than a group of people with enough surplus money to pool for shared home(s). A well-established coop would be a better support network and may be able to grow faster (help more folks) than the alternatives.
I think the biggest problem is how does the landlord break lease? Because if you can be kicked out you lose all that you’ve accumulated against your will. If you can’t be evicted, you’ve forced the landlord to both keep you as a renter and keep ownership of the property until it’s paid by the renter, which isn’t necessarily realistic.
They should be able to sell the property if they need to. The person renting being part of the transaction and forced to be allowed to continue renting is only kind of a solution, because the new owners might want to live in that house, or have a say in who rents it. There’s also the issue of funds already accumulated by the landlord. Does that get deducted off the price they sell it for?
I think there’s just a few too many veriables for it to work as a solution.
These are good points. In a place where rent was actually cheaper, moving from place to place would be more of a nusence and less of a gamble with homelessness. The reality is that people will need to rent because they need a place to live, and that renting isn’t a great solution compared to buying, that not everyone can afford to buy, that some renters can destroy investments and prevent a place from being rented again, lots of landlords are predatory with their rent increases.
One thing that that doesn’t seem to be true at least with what I’ve seen, is that lots of rentals prevent buyers from buying houses. I’ll leave the ethics of should someone buy a house with existing renters who will need to be evicted to another discussion. That said, buyers who are interested in a house can usually make an offer even if the house is not on the market, and that offer may even be accepted, pending the end of the rental contract or if the contract allows, 30 days notice. I was kicked out of an apartment this way - I didn’t have to go, but they were renovating and the new rent would be $400 more, or I could buy it outright as their endgoal was to sellt hem as condos. Lots of management companies are also realtor companies. After I moved out of the last rental, it was sold for half a million dollars (it wasn’t near that nice, very tiny and very old with outdated wiring) about a month after I moved out. The photos to sell that place were unreal, they must have done a complete makeover the day after I moved out and sold it less than 30 days later.
The two major issues with the US housing market right now are:
The rent-to-own model also doesn’t work to well at least in the US because you’re essentially agreeing to a price of the house in x amount of years. After x amount of years, even if the house isn’t worth $y it will still be sold to you for $y.
I don’t know the details of her situation, but it’s something like in a market that averages over $1000 for housing, she rents out at below $1000. I mean to say for her properties she could choose to rent at the market rate but this would mean the people who wants to rent to, people who aren’t able to afford >$1000 for housing, would you know… be unable to afford it.
As for barely making a cut for themselves, I’ve only known a few landlords but none who owned the house and title (without a loan with the bank). the landlords I do know, herself included most likely got 30 year fixed mortages on their properties, meaning their interest rate stays the same for 30 years.
Each month those landlords need to pay the mortage and will need to pay for repairs or repair the properties themselves. Say the mortage, due to the landlord’s credit rating is pretty good, and comes in around $800 a month. Say that on average the landlord has to pay $50 a month on maintenance. The landlord needs to charge $850 to make no money, to afford no food for themselves, or otherwise “break even”. What I’m saying here is that in this market, a property just like hers (x beds, y baths) rents out for $1200 a month. I’m saying that she’s more likely to rent her property out at $900 or $850. Although when people fall on tough times, she’ll also just waive the rent or work with them with what they can pay.
Probably not. You’re assuming that the renters have good enough credit to get a loan from the bank at the same interest rate that the landlord can, that the renters can afford a down payment (sometimes that’s $10k+ right there). Keep in mind these are the renters that could not afford a $1200 a month place themselves. You’re assuming that the bank would give them the loan in the first place. You’re assuming that the current interest rates are reasonable (at time of writing, in the US, they are not - the difference between a 3% and 6% interest over 30 years is enormous and would make their rent far greater than $1200 a month).
You’re right that there are some renters who can afford to buy her properties if she put them on the market. Those renters hypthetically live in the property next to hers with x beds and y baths and they’re looking for a place to live. She could sell the property to them, but she’d then need to evict her current tenants, and since there’s a lack of landlords like her, they will probably need to move to another town or be homeless.
There’s not a clear right or wrong answer here.
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