If you’ve ever rented a house before, you’ve probably assumed that the landlord was getting rich off of you. While owning rental houses is a good long-term investment, landlords are most certainly not getting rich off of tenants in the short term.
Consider a typical rent of $1,000. Where does that money go? Most homes have a mortgage, so the borrower is paying off the loan needed to buy the house. That might be $500 per month for principal and interest. Insurance is $100 per month and property taxes (which continue to skyrocket these days) are about $150 per month. In the absolute best-case scenario, the landlord is pocketing $250 per month.
But the reality is not nearly as good. If a property manager is used, that person takes 10% of the rent, or $100 per month. Then there are repairs and maintenance. Sometimes there are months when nothing happens. But what happens when the AC or sewer line needs replacement? Those repairs can easily be $5,000 or more. Ouch! This is a big reason many prefer to be a tenant over a home-owner.
So the next time you are complaining about how much money your landlord is receiving, remember all the different hands that are in his pocket! Landlords are not getting rich off of tenants after all.