Yesterday I was looking through Facebook when I saw a post that linked to a Craigslist rant.  It's since been removed, but the message was "how do landlords expect us to pay $900-$1300 a month for rent?"   Also, "It would be cheaper to own a house."   In some cases, that is definitely true.  But why do landlords charge what they do for rent for homes?

Really it all comes down to supply and demand.  If there are fewer housing options, the price goes up.  If there is an abundance of housing options and not a lot of people needing a place to live, the price goes down.   That's how economics work.  Any landlord is going to charge the price the market will allow.

Also when it comes down to renting homes, here are a few of the issues that landlords have when they rent out their properties.

  • Damage done to the property.  Contrary to what some people think the security deposit doesn't cover a lot of expenses.  Here's an example.  If you pay a $1500 security deposit on a home, and ruin all the carpet, put a hole in the wall, and break a window it's going to cost a lot more than that security deposit.  Landlords don't like losing money.
  • Insurance Rates.  Insurance premiums are much higher on homes that are rented out.  This is from the insurance companies.  People tend to take better care of things that they own.  Think about rental cars.  People beat the crap out of them.  The same though is applied to homes.  Insurance companies believe that renters won't take as good of care of properties as they would if they owned them.  A higher rate is then charged to the owner of the property.
  • Vacancy.  Landlords assume that the property will be vacant or not paid on for at least some time during the year.   Statistically, this is true.  Late payments, renters just moving out without notice, and periods in between renters can really cause some issues with the operating income on a rental.  So as a business, it's figured in.
  • Home Maintenance.  I remember when I first became a homeowner and the furnace went out.  My first instinct after years of renting was to pick up the phone and call the landlord.   Oops.  That bill goes to me.  And let me tell you, it's not cheap.  What if your roof leaks?  It can cost $5,000-10,000 to put a roof on your modest sized house.  Part of renting is that you are paying for the convenience of having it be your landlord's problems.
  • It's Economics.   It comes down to supply and demand as does everything you pay for.  If people are willing to pay the price, that's what it will rent for.

So would it be better to buy a house?

Because of the above mentioned reasons, you can own a similar home to what you are renting for less money a month.  That's true in most cases.   I'll use my own as an example.

We were renting a 4 bedroom 1700 square foot house in Superior for $750 a month.   It wasn't a bad deal.   We moved across town to a better neighborhood and bought a 4 bedroom house with $1600 square feet and our mortgage with taxes and insurance added (escrow) was $563 a month.  That's affordable.  If you're smart with your money and work your budget right, you can put away a couple hundred dollars a month for emergency savings.

Buying isn't for everyone, and I understand that.  Some people aren't sure of their long term plans.  You would be surprised how affordable it is with different down payment options, loan plans, and interest rates.  But it is a complicated process, and owning your own home doesn't happen overnight.  It pays off once you do have your own home.

If you are a renter, you should be aware of your rights as a tenant.  The links below can help you out!

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