Do People Really Pay 1000+/month to rent a home?

General Landlording & Rental Properties
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Do People Really Pay 1000+/month to rent a home?

Patrick Jenkins
Member since 2019 · 3 posts · 2 votes

I'm looking into real estate investing and the first question that comes to my mind is, "what could I potentially rent out a home for?" So I drive around town (Houston) looking at For Rent homes and call a few of them to ask wha rent is. Pretty much everyone is $1000 + . Then I see some posts on here where people are renting their property for some almost $2000. And then I ask "is that real?" That's just totally nuts to me that people would rent for this much instead of buying a home.  

So to me, it seems too good to be true if this is what property is being rented for. But on the flip side, can anyone explain why someone would pay that much to rent? I'm sure I have a lot to learn, but I need to try to understand that side of it.

thanks

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y

I have multiple tenants paying $3,000 a month.

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  • Derek Hookani
    Kailua, HI · Member since 2018 · 10 posts · 5 votes
    7y

    Here in Hawai'i a lot of the residents are military and not permanently here so renting is probably the way to go for them even if it is the same or more than a mortgage.

    0Reply
  • Isaiah Williams
    Rental Property Investor · Columbus, OH · Member since 2018 · 97 posts · 66 votes
    7y

    @Patrick Jenkins

    What @Nathan G. Is saying about supply and demand is absolutely true. My father, for example, pays $1250 a Month for a 3 bedroom single family home right next to the school my little siblings go to simply because he couldn't find any other 3 bedroom apartments in the area. He demanded a 3 bedroom home, and the supply was so short he was willing to pay a ridiculous amount of money for that house because it met his demand.

    That house, by the way, is actually MY OWN property, and the $1250 a month he pays is BELOW MARKET. I could get about $300-$400 a month more if I rented it out at full market value. (And my mortgage is only about $750 including taxes and insurance BTW).

    How ever, what @Eric B. Is saying about renting being easier than owning is also VERY TRUE, especially about the costing less up front. Buying that house cost me over $10,000 (pml financed over $200k) after everything was said and done, and its still going to be awhile, especially since I'm so severely underneath the market value, before I will begin to see any real returns from the investment. I bought that house with full intention of renting it out short term to my father so that he had the home he wanted. My dad wants to own his own house, but he doesn't have $10K to put down for the slightly complicated PML deal I did, much less 20-25% if he went with a convential mortgage loan. He is paying me rent every month, but he is also saving as quickly as he can to be able to afford the 3.5% down payment he would need for an FHA loan.

    Some people at the end of the day can simply afford to own their own home, but they don't want to deal with the things that come with owning a home. Depending on your land lord, you don't have to worry about lawn care, the land lord does. When your roof leaks, the dishwasher breaks down, or the outlet stops working, you don't have too worry about it, the land lord does, and if you have a GOOD landlord, the landlord will take care of it quickly, but a lot of those kind of land lords are expensive. When the pipe burst and flooded the basement of my personal home, I had to deal with contacting the insurance agent, the water mitigation team, the plumber, and when it was found out that I had ASBESTOS underneath the tile floors(do your research on that!!!!), I had to deal with finding a certified contractor to handle that. It was expensive and TIME CONSUMING. If I was simply renting my house for maybe $1000 a month, I wouldn't have had to deal with any of that beyond calling My land lord and letting them know about the burst pipe.

    People want certain things and certain comforts in their lives, and for people who are willing to provide/ service these wants, they might be willing to pay THOUSANDS of dollars a month for them. I think the average rent for a 1 bedroom apartment in NYC is $3500?...

    1Reply
  • Isaiah Williams
    Rental Property Investor · Columbus, OH · Member since 2018 · 97 posts · 66 votes
    7y

    @Jennifer T.

    Ooh the financial discipline! I like that description a lot! Too many people unfortunately in todays world do live paycheck to paycheck and are unable to save up to owning simply because they are undisciplined when it comes to money.

    1st financial law from the book "The Richest man in Babylon" : one's "necessary" expenses will increase AND decrease in DIRECT proportion to ones income.

    3Reply
  • Account Closed
    Contractor · Los Angeles, CA · Member since 2015 · 887 posts · 323 votes
    7y

    @Patrick Jenkins

    Just check out Los Angeles. My co- worker was looking to rent the house next to mine and take told me they were asking $3K per month. I’m in a solid C+ area at worst, so there you go.

    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    I have 3 small single familys . They are all 2 bed 1 bath . They rent for $1300 a month .  I am a bit below market but not much .   This is in a Balto/ washington  suburb .  

    Now when I get someone from Northern Pa wanting to move down here , they are upset at the small size and what they see as a high cost .  I always ask them why are they moving ?   "Because the pay is much better "

    Welcome to Maryland  the pay is Better and the cost of living is higher 

    3Reply
  • Jordan Sitzler
    Auburn, WA · Member since 2016 · 26 posts · 5 votes
    7y

    In the majority of Western Washington, home prices are so high that renting is just cheaper.  Not everyone bought their home in 2009-2011, and not everyone has the knowledge or the ability to find a great deal on a property to call their own.

    A 3/2 in the South Puget Sound area will set you back about 1400-1750, or cost about 350-450k to purchase.  With maintenance it's just not a question.  

    Not to call anyone out, but I feel the original question shows some ignorance on what people coming of age or graduating from college are graduating into.  This isn't your grandpa's home market anymore and bread ain't 5 cents a loaf.

    0Reply
  • Jonathan Tavarez
    Flipper/Rehabber · Laurel, MD · Member since 2016 · 139 posts · 109 votes
    7y

    A quick search in rentometer.com or call to realtor or property manager for the area will give you an idea of rent averages. In my experience rent is somehow proportioned to property value (in Maryland up to $200K or so for SFH) and the thing that really makes the difference is neighborhood class. For example if the neighborhood is class C in average it would be easy to get a 1% return or higher but if it is B or A (and you are buying today) it wont be as easy to get 1%.

    https://www.biggerpockets.com/renewsblog/2015/12/09/class-a-b-c-d-real-estate/ 

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    7y

    I have fourteen rentals and the avg price is over $1300/month. I have no problem keeping them all filled. My least expensive is $1020 per month. 

    1Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y

    Also some renters are transient, here in DC I have tenants that rent a room for more than $1000 who are interns and are only staying in the area for a short time or tenants that just got a new job in the city and just moved here and they don't know the city's neighborhoods well enough yet to know where they would like to buy.

    1Reply
  • Suzzette Gaynor
    Member since 2022 · 10 posts · 1 vote
    4y

    Situations vary, for someone this option is preferable, perhaps someone's work doesn`t allow a settled way of life.

    1Reply
  • Suzzette Gaynor
    Member since 2022 · 10 posts · 1 vote
    4y

    Situations vary, for someone this option is preferable, perhaps someone's work doesn`t allow a settled way of life. Well, of course don`t forget that people with low financial means won`t be able to afford such housing. It also depends on the size of the house, repair, facilities, etc. I'm also in the rental housing business and I can understand exactly what the asking price is for. Generally, I`d advise everyone to pay attention to the possibility of Build to rent. This`s again a good option for passive income and maintaining your current business.

    0Reply
  • Jerry V.
    Contractor · Richardson, TX · Member since 2022 · 265 posts · 146 votes
    4y

    Not even going to read through all the replies! lol  but sadly yes, rent increases have out-paced home value %'s.  Example:  a 1200-1400sq/ft house in the Dallas, TX area just rented out for $1,800/mth.  (Decent older home, all new appliances, redone inside/out, etc)  "I" thought that was extreme!  But ... seems to be common for our market here... :(

    0Reply
  • Zachary Inman
    Specialist · Indianapolis, IN · Member since 2021 · 312 posts · 282 votes
    4y

    There are pros and cons to renting. Yes, some people will pay 2k+ for an apartment so they can be in a desirable area and have flexibility if anything changes because that's what they value. This is an investment forum, so obviously we all share the common interest of making our money work for us. The downsides of having less geographic flexibility and higher potential costs aren't as important because our values are different. 

    0Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    4y

    There is a lot to consider:

    1. Supply and demand. Yes, people are willing to pay that much if the demand is there.

    2. Perspective. People are moving to Houston from more expensive markets like Los Angeles, San Francisco, New York, etc. That's a cheap price in comparison. I'm renting out a studio guest house for $1,550 plus $50 water fee.

    3. Everyone needs a place to live, even if temporary. Maybe they are just moving to the area and will be buying. 

    4. There is a market of high income, low savings crowd. They can afford the $2K/month but don't have the $30K+ for the down payment and closing costs. This is especially true for recent college grads who locked in a high paying tech job.

    0Reply
  • Tony Kim
    Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes
    4y
    Quote from @Patrick Jenkins:

    I'm looking into real estate investing and the first question that comes to my mind is, "what could I potentially rent out a home for?" So I drive around town (Houston) looking at For Rent homes and call a few of them to ask wha rent is. Pretty much everyone is $1000 + . Then I see some posts on here where people are renting their property for some almost $2000. And then I ask "is that real?" That's just totally nuts to me that people would rent for this much instead of buying a home.  

    So to me, it seems too good to be true if this is what property is being rented for. But on the flip side, can anyone explain why someone would pay that much to rent? I'm sure I have a lot to learn, but I need to try to understand that side of it.

    thanks


     I ask myself that very same question when I see folks renting here for $5k a month. 

    0Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    4y

    Some people pay $10,000 a month or more to rent.

    In Houston for example you have a lot of big companies....some senior people come in for a 3 year rotation....they may have a nice home in UK, or Argentina, or Canada and if they're only there for 3 years, still want to live in a nice place, but don't want to buy and sell.....Therefore they pay the higher rent.

    Some people rent while they are building.

    Some people rent while they are in medical school...or starting their practice....or if their medical treatment will take a year or two or longer, may rent a house to stay in vs hotel.  Especially if they have pets.

    Some people need to sell their home first and may choose to rent after they sell while they look for the next one.

    Some people, probably a lot of people, have the income, but cannot save a penny for down payment or have bad credit....therefore forced to rent.

    $1000 for a house now is probably at the very low end of the spectrum....I don't know Houston, but I would think 1bed apt might be pushing $1000/month now.

    0Reply
  • Nick Vazquez
    Real Estate Agent · Greater Toronto Area · Member since 2018 · 36 posts · 18 votes
    4y

    Oh yeah, definitely. Here in Toronto, Canada you'd be hard pressed to find a 1 bed, 1 bath CONDO renting for UNDER $2000/month. It's more likely to be in the $2200 - $2500 range. I just leased a semi-detached single family home for $4100/month in Mississauga (suburb of Toronto). Obviously it's area specific but yeah, people pay more than $1000 for rent. It makes sense to rent in certain situations especially if purchase prices are way up and you can't afford the down payment or carry the mortgage. 

    0Reply
  • Cody L.
    Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
    4y
    Quote from @Patrick Jenkins:

    I'm looking into real estate investing and the first question that comes to my mind is, "what could I potentially rent out a home for?" So I drive around town (Houston) looking at For Rent homes and call a few of them to ask wha rent is. Pretty much everyone is $1000 + . Then I see some posts on here where people are renting their property for some almost $2000. And then I ask "is that real?" That's just totally nuts to me that people would rent for this much instead of buying a home.  

    So to me, it seems too good to be true if this is what property is being rented for. But on the flip side, can anyone explain why someone would pay that much to rent? I'm sure I have a lot to learn, but I need to try to understand that side of it.

    thanks


     Not sure if this is a real post or not but even our bad 1 bed apartments rent for $800+.  The cheapest home we have (not that nice) is $1,500.   I have several homes that rent for $4,500+

    The home I bought was being rented for $26k/month. 

    0Reply
  • Kelly Asmus
    Real Estate Broker · Portland, OR · Member since 2018 · 126 posts · 71 votes
    4y

    Anywhere on the west coast $1000 won't get you much. Rent has gone way up and we haven't been building enough housing to keep up with demand - so we're in a constant cycle of housing shortages. When something is in high demand and there is a shortage of it - the price goes up. Our leadership would rather restrict rental rates than ease up on being able to provide more housing. Lower fees for building permits and you'll see a boom in building. Not until we have enough supply will rates go down. 

    0Reply
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