Once you hit 3% of the value of the rental, the renter could just go and buy something with FHA support and pay only minimal interest even if they are high risk.
That is why commercial property (mall and stripmall) is such a mess currently. It is easier to raise the 5% to build new/buy new and spend 5% per year on the note than to make the first years 7% rent and have a 4%-9% rent for 3 to 5 years. The questionable terms that the commercial lenders have in contracts is destroying landlords in markets with 40% vacancy. With 2% overnight rates for years to come there is no point in renting and getting involved with someone who might be owing 7 years of mortgage payments at the end of their mortgage term.
We will see who is willing to book the loss first.
“Once you hit 3% of the value of the rental, the renter could just go and buy something with FHA support and pay only minimal interest even if they are high risk.”
In many areas of the country, housing prices have become absurd.
Absurdly high housing prices have a tendency to fall back to realistic.