What value do landlords add/provide?

Mistermeaner

I put up some shelves once. I thought I needed a combine harvester. It didn't go well

antrobus

PasturesNew wrote: »

I would disagree ... I watch (too much) Homes Under the Hammer and am surprised by the difference between rents and purchase price. Anticipated returns on capital can vary between 2% and 12-15%....

Then you'd be wrong.:)

PasturesNew wrote: »

...In my road, say, a house will cost you £210-230k for a 2-bed; to rent one it'll cost £750/month. I'm sure within 5-10 miles I could find a 1-bed that costs £120k to buy yet returns £500-600/month.

Each house, each area, is different.

Exactly. In your road a house will cost you £210-230k, so if you want to live in your road, you have to pay £210-230k upfront for the privilege. Or you can rent a house, which will only cost you £750 a month, because somebody else has provided that £210-230k.

Renting a house always involves spending less money because you don't have to come up with the initial capital amount.

System

Although a mortgage could provide that credit cheaper, just mortgage credit checks are more stringent than rental credit checks, so you could "afford" a higher monthly rent than ypu could "afford" in mortgage

System

Or even personal loan for deposit+ mortgage + insurance = still cheaper than rent
No middle man, no tax man, less insurance man

chris_m

HAMISH_MCTAVISH wrote: »

And in return, you have bought them a house.

Assuming that they didn't already own it.
Before he passed away my father's tenants weren't buying him a house, he'd done that years before. They were, however, paying part of his care home fees.

antrobus

MatthewAinsworth wrote: »

Although a mortgage could provide that credit cheaper, just mortgage credit checks are more stringent than rental credit checks, so you could "afford" a higher monthly rent than ypu could "afford" in mortgage

Of course you can borrow the capital required. Or at least a big chunk of it. But that doesn't change the fact that you (a) have to find the capital and (b) assume the risk associated with owning the asset.

Hence the answer to the question; what does a landlord bring to the party? is that they provide the capital and take the risk. And it would be the same answer irrespective of whether the landlord was a private individual, a corporate body, or indeed a government.

System

The capital side - loans perhaps
Risk side - insurance or a savings account - if insurance companies make profit then the customer generally won't, so I think savings beat insurance

Landlords themselves gamble that ownership is better than renting

BobQ

Mistermeaner wrote: »

I put up some shelves once. I thought I needed a combine harvester. It didn't go well

Which proves the adage that a fool with a tool, is still a fool.......:)

and just as the landlord brings the capital or takes the risk in providing a house so does the owner of the combine harvester or the rental car.

antrobus

MatthewAinsworth wrote: »

The capital side - loans perhaps
Risk side - insurance or a savings account - if insurance companies make profit then the customer generally won't, so I think savings beat insurance....

If your house burns down and you don't have insurance, it's gonna take a helluva lot of savings to make up the loss.:)

MatthewAinsworth wrote: »

...Landlords themselves gamble that ownership is better than renting

No, they are 'gambling' that ownership is better than than investing their capital elsewhere.

System

Antrobus - yes insurance is mostly there for what you can't afford to self insure, so buildings insurance - you expect to make a loss, but need it. Contents or car insurance - not worthwhile (though car is forced)

Landlords very business model is made on the expectation of a return - its only a gamble because its not guaranteed (interest rates, service charges)