All rents cover mortgage, taxes, insurance, upkeep, and usually a percentage profit on top of it all. Unless your lord is renting to you at cost or below (in which case they're losing money (not counting equity)), then there is no way the cost to rent would be higher on an equivalent property.

Like just imagine if you wanted to rent out your property for $1900/mo - you couldn't do it.

[–] jj4211@lemmy.world 1 points 1 day ago

Actually, not necessarily.

In my local market, a house that would be about $2700/month in mortgage/insurance/taxes on a 30 year term after a huge downpayment would rent for about $2400/month right now.

There are some owners that in fact do count the equity, so they are willing to buy higher and be upside down compared to what a mortgage could be. The recognize the rent is only part of the income, that the property value going up is a potential gain to cash in that's worth a few hundred a month to 'deposit'.

Especially if the owners can pay cash and not incur the interest associated with a mortgage. It's a bit of an odd choice right now as just letting the cash sit in a savings account offers competitive ROI with the current interest rates, but you've got a lot of property bought under previous conditions.

This only holds for relatively short term though, you'd expect rent hikes to go to $3000/month within a time period where that ownership monthly payment might only go up to $2800/month due to taxes and insurance rates. So 10 years into living somewhere you are now paying more to rent it than you would be if you had purchased comparable, even ignoring the equity part of the equation. If you include equity, then you better be planning to get out in 2 or 3 years at the most if you are embarking on renting, otherwise it's much much better to buy even with higher mortgage payment, since you can cash in on the equity if you need to, eventually.

I'd say this is a relatively sane fiscal model of renting, that you need to give the renters a discount reflecting their lack of equity. I'm kind of glad to see rental rates being below mortgage rates in my area right now. That said, it wasn't too long ago that rental rates in my area were higher than what mortgage could be, but large companies bought up housing stock and made it supremely difficult to actually buy as a private party. With the interest rates jacked up, those companies are cooling it a bit since they don't have access to 'free money' anymore.

[–] npcknapsack@lemmy.ca 1 points 1 day ago (1 children)

My old house went up over 400k between 2019-2025. So, if I'd sold it in 2019, they could absolutely afford to rent to me at a lower price than if I tried buying it again.

[–] grrgyle@slrpnk.net 1 points 1 day ago (1 children)

Yeah that's the vagaries of the housing market and valuation, which is why I said equivalent property.

There's also no reason you couldn't sell that house for 400k less. The value is just the value. It's going to be the same whether you're renting or paying the bank for the same property.

I also won big by buying prepan, but who's up or down in the Canadian housing lotto doesn't change the physics of paying a lord's mortgage costing more than if you were paying the bank's mortgage directly.

Nevermind that whoever gets to be lord keeps the equity.

[–] jj4211@lemmy.world 2 points 1 day ago

I think the point is that properties on market are, as a rule, not very recently purchased with a 30-year mortgage. So the monthly cost now required to cover the owners costs may be based on financial conditions from 6 years ago. If the rental market has a lot of properties that have been held a while but house values have rocketed, then you have a critical mass of owners willing and ready to out-compete brand new mortgage rates even if they ignore their equity advantage.

In my area, that's what we see, real estate prices are dramatically up as are interest rates, so mortgage cost to acquire is a fair amount above the going rate to rent comparable properties. Someone getting a 30 year mortgage to rent out a property would be underwater for very many years in the current market conditions around my area, as they have to compete with more aggressive owners that have had their properties for many years.