First of all, fuck landlords and double fuck people that buy up single family homes to rent out. This is not an endorsement, just a basic explanation of opportunity cost for anyone interested.

Fuck landlords, in case you missed the first one.

Now that that’s out of the way, opportunity cost is what you lose by not doing something else with your capital.

For example:

You assume you could make an average of 10% a year in the stock market.

You have 100k equity in a rental property.

You collect rent, after paying the mortgage, taxes, maintenance, and any other expenses you make 10k in a year.

That’s 10% of your 100k in equity, the same you estimate you’d make in the market, no opportunity cost.

Some number of years later between paying more of your mortgage and increase in the value of the property you have 500k in equity.

You only increased rent enough to cover increases in taxes, maintenance, and other expenses so you still only make 10k a year.

That is now 2% of your 500k in equity.

The 8% difference between the 10% you think you could make in the stock market if you sold the place and the 2% you’re getting without jacking up the rent, is the opportunity cost.

Of course there are more things to take into account, this is just to give you a basic idea.

Fuck landlords.