This is a good point, and I was curious to see exact numbers on the invest vs be a landlord opportunity cost.
The rich person gets to rent the house, while the "newly weds" are living in it. And most importantly - the house itself will appreciate in value at a rate near 5%
Assuming they both buy a $500k house w/ a 20% down payment and a 5% loan. Realistically the young couple would get a worse rate but lets say they both get 5%. Monthly payment is $2,522.29 w/ taxes and insurance lets call it $3000 a month.
The newly weds are just eating that entire cost every month for 30 years, whereas the Rich landlord rents it out. After a quick and dirty Zillow search lets assume $3500 a month rent to start, so he's making $500 a month profit on an asset thats already increasing in value 5% ish per year.
So, with these assumptions:
- Home cost increases 2% a year
- Rental price increases 3% a year
- Home value increases 5% a year
Total rental profit is $537k
Final home value is $1.56 M
Total Loan cost: $873k
Bringing the landlords return on 100k to be $1.224M in profit over 30 years (Final sell price - total loan cost + rental profit assuming they stuff it under a mattress). Whereas $100k at a 5% yearly return will be ~$430k
disclaimer: Im not the best with Excel and ive never actually bought property so im sure there are flaws in my math.
The rich person gets to rent the house, while the "newly weds" are living in it. And most importantly - the house itself will appreciate in value at a rate near 5%
Assuming they both buy a $500k house w/ a 20% down payment and a 5% loan. Realistically the young couple would get a worse rate but lets say they both get 5%. Monthly payment is $2,522.29 w/ taxes and insurance lets call it $3000 a month.
The newly weds are just eating that entire cost every month for 30 years, whereas the Rich landlord rents it out. After a quick and dirty Zillow search lets assume $3500 a month rent to start, so he's making $500 a month profit on an asset thats already increasing in value 5% ish per year.
So, with these assumptions: - Home cost increases 2% a year - Rental price increases 3% a year - Home value increases 5% a year
Total rental profit is $537k Final home value is $1.56 M Total Loan cost: $873k
Bringing the landlords return on 100k to be $1.224M in profit over 30 years (Final sell price - total loan cost + rental profit assuming they stuff it under a mattress). Whereas $100k at a 5% yearly return will be ~$430k
disclaimer: Im not the best with Excel and ive never actually bought property so im sure there are flaws in my math.