How to Divide Renting/House costs on part buy Dilemma?!

neas

my place worth 150k is approx 420 rent a month. so your talking at least 380-400 quid.

If i offered you a tax free return of 10% on your 25000 pound would you put the money in the bank?

Of course you would....

If I offered you a tax free return of -10% on your 25000 pound would you put money in the bank?

No... no insane person would... but because its a house... and houses only ever go up you dismiss the 10% loss per year that your investment (or divestment) will take.

The 2500 a year you lose locked in the house could pay your 50% share of a 400 quid rent easily.

neas

Or better still I offered you a Fixed rate -7% Tax free savings account that you couldn't close or get at your money for 5 Years.... You'd take that wouldn't you?

How you got 25k I dont know oO

Sir_Danalot

neas wrote: »

Or better still I offered you a Fixed rate -7% Tax free savings account that you couldn't close or get at your money for 5 Years.... You'd take that wouldn't you?

How you got 25k I dont know oO

I got 46 k :rotfl: !

Thanks for input. My situation is a bit different to how you think. But I would like to wait a while if possible before getting a place, see where the prices go.

My head hurts.

JimmyTheWig

Sir_Danalot wrote: »

I may have under estimated the rent a bit. The rent on a 120k place, when buying a 25% share is £219 on a recent example I looked at online, so a place worth more (130k) will have a bit more rent too. It is mainly the principal I am trying to decide on though, the places I have looked at have been around about those figures.

I agree you need to decide on a principle that works, but part of that really depends on the numbers.
That rent just sounds way too cheap to me.
Are you getting some great discount on the rent because it's shared ownership? Is the rent subsidised somehow? Do you have to pay ludicrous service charges, etc, to make up for it? Or is it just that the value is over-rated which is making the rent look so low?
Where abouts in the country is this? Is your partner moving from a more expensive area?
If you were to rent a place, similar to the ones you are looking at buying in to, how much would this cost?

Lets look at the one that you've got a figure for - that's a 120k place where rent on 75% of it is £219 a month.
How much would a place like this in the same area cost to rent outright? Logic says that it would be £219 / 75% = £292.

So by putting in 25% (30k, in this case) you are saving £73 a month in rent.
If you rented outright you could keep your money in the bank. It is easy to get 6% interest at the moment on savings. Lets assume you have to pay 20% tax on your interest (though with ISAs and, potentially, your low income this might be the worst case scenario) this 30k would earn you £120 a month.

So by part-buying the house you save £73 a month in rent. By putting the same amount of money in the bank you earn £120 a month in interest.
You are much better off, on a month-to-month basis, putting the money in the bank and renting outright.

Obviously if house prices shoot up over the next few years then you would have been better off buying the 25% stake. But as good as no-one expects this to happen. Most people think prices will come down. Which just adds weight to the renting argument.

Sir_Danalot

My, that's a lot of questions.

I'm not sure on things like service charges. And yes, the rent does seem low, but that was an example I got from right move, so I believe it to just be something to do with the part buy market. Bearing in mind that most people would have to take out a mortgage on the part of the house they wished to own, if they had to pay full rent as well it wouldn't really help those less well off getting on the property ladder, (or slide, depending what happens with all that!). So, the cheaper rent must be to enable those people to get a place, subsidised maybe, I don't know and my eyes hurt from researching millions of things online! Why can't they put text as white on a black background?! Less glare and just as easy to read, anyway, that's for another forum!

I wouldn't have to pay tax on interest in my current situation. I may be able to get better pay when/if I move. We are looking at properties in and around the Market Harborough area, quite expensise until you get 5 miles or so out of town where the surrounding towns and villiges are more reasonable. Her rent for a 1 bed small flat is £475 I believe atm. But as for putting the money in the bank, assuming I was renting a house at around £500 (with my partner, and a house is essential really as I am a musician and need a room for that with a sound proof booth!), then I would have to be paying £250 just on rent, which far outways the interest I would earn. Even if the rent is a bit less interest still wouldn't cover it. I can potentialy put more, say 35 - 40k in a high interest account, but I would have to wait for a year until it achieved it's AER to actually get, say 6.5% interest from that account, (as the interest is compounded with these).

Basically, my strength is that lump sum, not my my earning power, so I have to try to make that work for me and maybe down the line a bit my earning will increase, be it a pick up in my current line of work, or taking on a different job when that is possible.

Still, I will look more into the renting side of things. Although, with me making a loss in my business, would anyone want to take me on? Like I say, my partner is the main earner 21k a year, so if I tried to rent with her, even though I make a loss (small loss), would I stand a chance do you think?

If only I could find an account with massive wopping interest!