House Owning vs Renting

chucknorris

phil_b wrote: »

There'll be those 30 yr olds living with mum and dad who'll still be there when they're 50 smiling and thinking 'well I beat all of you!'

Luckily their mums won't let them use the internet at home so they can't tell us how cleverer they are until they get to the library this evening.

HAMISH_MCTAVISH

Also Jonny, when allowing for the 6 moves, you just gave an equivalent amount to the renter, is that right? Which came close to 100K extra for the renter?

So if a buyer only moved once, or twice, he'd be another 80K or so ahead?

IveSeenTheLight

JonnyBravo wrote: »

Oh absolutely. But I'd bet the average isn't 125% across the country. Yes put it to 90% or even 100% and it's very hard to come out on top as the renter..... not impossible.... you'd just need very very low inflation

I'm wondering where the percentage was derived from then.
Arguably there may be properties for rent that are mortgage free or with very little mortgage left.
This obviously would raise the percentage.

To compare with a percentage of 70% as an average, your effectively saying that there will be some properties only taking in say 40% of the mortgage.

I think there is no definate answer to this that would show for the country the amount of mortgage debt (we could get that from the CML) against the amount of rent received (this is what I doubt we can get)

IveSeenTheLight

the_ash_and_the_oak wrote: »

This is something I don't understand - I only know about London and I don't know how people do this

http://www.rightmove.co.uk/property-for-sale/property-21246368.html?locationIdentifier=OUTCODE%5E1682&insId=5&minBedrooms=1&maxBedrooms=1&displayPropertyType=flats&oldDisplayPropertyType=flats&pageNumber=1&fromSummary=true&backToListURL=%2Fproperty-for-sale%2Ffind.html%3FlocationIdentifier%3DOUTCODE%255E1682%26insId%3D5%26minBedrooms%3D1%26maxBedrooms%3D1%26displayPropertyType%3Dflats%26oldDisplayPropertyType%3Dflats

#26 is up for sale at 270k

http://www.rightmove.co.uk/property-to-rent/property-27678269.html?locationIdentifier=OUTCODE%5E1682&insId=6&minBedrooms=1&maxBedrooms=1&displayPropertyType=flats&oldDisplayPropertyType=flats&pageNumber=3&fromSummary=true&backToListURL=%2Fproperty-to-rent%2Ffind.html%3FlocationIdentifier%3DOUTCODE%255E1682%26insId%3D6%26minBedrooms%3D1%26maxBedrooms%3D1%26displayPropertyType%3Dflats%26oldDisplayPropertyType%3Dflats%26index%3D20

#24 rents at 1075 pcm

I did show you recently a property in Aberdeen I was considering and prooved how the figures stacked up.

The other thing is from your example above, you are comparing the rent now with purchasing now, when in all likelyhood, the purchaser bought for a much lower price.

That's the thing to understand, you compare rent to mortgage interest.
As the years go on, it is likely that rents will increase while the mortgage interest will decrease.

the_ash_and_the_oak

HAMISH_MCTAVISH wrote: »

The Times mortgage calculator I linked earlier will show you the results for every year.

At year 4 in the example I used above the buyer is already ahead by around 25K, and at year 8 by around 60K.

Which is why so many of us say it is important to buy young and never waste money on rent.

thats actually pretty interesting - although tbh it didn't do that anymore when I changed the IR from 4.32% to anything above 4.5%

IveSeenTheLight

HAMISH_MCTAVISH wrote: »

Also Jonny, when allowing for the 6 moves, you just gave an equivalent amount to the renter, is that right? Which came close to 100K extra for the renter?

So if a buyer only moved once, or twice, he'd be another 80K or so ahead?

Nice point.
I only had 1 flat then moved into my lifetime home, so only 1 move.

(For clarity, I have moved again but not sold. This is because I moved and bought abroad making the UK home a rental. If I didn't have the overseas oppertunity, likelyhood is I would still be in the lifetime home)

chucknorris

IveSeenTheLight wrote: »

I'm wondering where the percentage was derived from then.
Arguably there may be properties for rent that are mortgage free or with very little mortgage left.
This obviously would raise the percentage.

To compare with a percentage of 70% as an average, your effectively saying that there will be some properties only taking in say 40% of the mortgage.

I think there is no definate answer to this that would show for the country the amount of mortgage debt (we could get that from the CML) against the amount of rent received (this is what I doubt we can get)

On our last purchase it wasn't so much the 125% that annoyed us (as we anticipated it and it didn't cause a problem) it was the idiotic surveyor who estimated the rent at only £900 a month when we estimated £1,180/month (we actually achieved £1,165). The Scarboro building society gave me 2 weeks to come up with an extra 64k to cover this rental ratio to interest payment shortfall, luckily I had it in a savings account. They gave most of it back to us when we rented the place, but if I had not had it to add to our existing deposit we would have lost the valuation fee, part of the soliciors fee and a lot of our time and effort. Previously they had said they would accept a letting agents estimate which we had previously submitted, so this was an eleventh hour moving of the goal posts

the_ash_and_the_oak

IveSeenTheLight wrote: »

I did show you recently a property in Aberdeen I was considering and prooved how the figures stacked up.

you did!

The other thing is from your example above, you are comparing the rent now with purchasing now, when in all likelyhood, the purchaser bought for a much lower price.

this is true of the current owner but not of the person he is selling it to right now imo

That's the thing to understand, you compare rent to mortgage interest.
As the years go on, it is likely that rents will increase while the mortgage interest will decrease.

this is true imo - but the thing I don't understand is that with BTL you are supposed to have rent covering 125% of the mortgage, not sure how the above is possible (unless you are laying down enough deposit to bring the figures down?)

also while rents may increase (still not totally convinced about this in the short term) not sure about mortgage interest decreasing - ie if in the above example the rent is not covering the mortgage interest then not sure how the capital is really being brought down so when it comes to refixing in 2,3 or 5 years not totally convinced mortgage rates will be lower than where they are today imo

the_ash_and_the_oak

IveSeenTheLight wrote: »

Nice point.
I only had 1 flat then moved into my lifetime home, so only 1 move.

(For clarity, I have moved again but not sold. This is because I moved and bought abroad making the UK home a rental. If I didn't have the overseas oppertunity, likelyhood is I would still be in the lifetime home)

definitely feeling this one. its not the number of moves imo - its the buy vs rent for each move/duration that counts.

HAMISH_MCTAVISH

the_ash_and_the_oak wrote: »

thats actually pretty interesting - although tbh it didn't do that anymore when I changed the IR from 4.32% to anything in the 5%+ area

I used mortgage interest at 5%. Rent at 900, mortgage at 200K on a 250K house, savings rate (net, after tax) at 3.5% which is generous, 3% HPI which is the long term average and 2% rent inflation.

The buyer was still ahead by 25K at 4 years and 60K at 8 years, and 305K at 25 years.