Because you can get better returns? A lot of investors are break even with rents and just use their leverage as an appreciation play. If you see RE staying flattish for 5 years but think TSLA is going to the moon, you sell.
That's a very bad strategy. You either buy a house to flip for immediate profit or get positive cash flow from rents. Buying a house with no cash flow from rent waiting for appreciation is just sitting on dead money. Then it would have been better to use the down payment to invest in stocks in the first place.
Such an investing genius on par with Warren Buffet. If you know any stock investment that gives 5%-10% return annually guaranteed, sign me up.
Let me know what broker can get you 5x leverage with no recourse
I don't understand where your 5x leverage is coming from. Are you saying that housing appreciation is guaranteed? Are you saying that 2008 never happened? You know what happens when the housing market crashes? You can't do shit. You can't sell the house because either (a) lease contract or (b) negative equity. Dead money. No cash flow. At least, with the stock market, you can get out.
If the government doesn’t raise taxes on the investors, then the fed has to raise rates to indirectly tax them. You would sell your rental if rates went to 20% right? You may think I sound crazy but I fully support a mortgage rate of 20% if it obliterates the housing market and forced a reset. It’s the price needed if governments won’t raise taxes on non local investors. Either the
Explain to me how a 20% mortgage rate affects my rental if I locked it in at 3%? It has NO EFFECT on my rental whatsoever. And as you said, if a 20% mortgage rate obliterated the housing market, why the heck would I want to sell my rental at such a low price? You make no sense at all.
In a low interest rate environment yeah, housing returns are pretty close to guaranteed.
In low interest rate environment, stocks do the same. And like I said, as soon as the mortgage rates rise, housing market will drop, but you can't get out. So, either way, investing in the stock market is superior to investing in the housing market unless you're in the flipping business.
The 20% or even 7% rate drives down rents as they are a function of prior sales/valuations. As SGIP pointed out a statewide rent control law would also be easy for the Dem supermajority to pass, and given the majority of CA residents are renters...
your mindset is similar to someone buying a dividend paying stock and saying higher interest rates have no effect on your dividend. Assuming the dividend/rent stays constant due to weaker conditions from higher rates, what happens if stock/home prices fall by 50%? The income generation now pales to the principal loss. Investors think just like how I’m thinking and discount their investments to market rates. Higher interest rates always will fix asset prices, be it housing or anything else. Higher rates will force investors to sell their homes and push prices down.
You make no sense whatsoever. Your comparison makes no sense whatsoever. Holding a rental has absolutely NOTHING to do with holding a dividend stock. Two completely different things. You don't know what you're talking about.
You sell because you are forced to. The economic conditions will force you to if you also start losing rent and have to cover the cost of maintaining the rental. I’m not sure if you have gotten too used to the low rate conditions the last 15 years. What I’m describing is how things used to be. People sold properties for these reasons all the time. Your scenario would simply lead to an eventual foreclosure the moment financial hardship hits.
Again, tell me, why are you FORCED to sell if you still have positive cash flow? Do you mean losing rent as in losing tenants and can't find new tenants? That would be the ONLY condition. Otherwise, why would you be losing rent?
The market rate of rent will fall below the upkeep cost. So your net cash flow will be negative. Yes, I’m envisioning very tough times ahead, including double digit rates. The alternative is a very deep recession on an election year eve, which is unlikely but would save us the high rate experience. That won’t happen.
Uh - that will come with an eviction moratorium too, which means cash flow goes to zero, and I could see that without any help for mortgage forebearance. What dumb tenant would pay their rent? Better get ready for the hunger strikes like the example I posted from the East Bay.