House Owning vs Renting

abaxas

HAMISH_MCTAVISH wrote: »

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.

I can only comment on the NE of england.

But if you are paying £900 a month rent of a property worth £250,000. You must have 'stupid twart' tattooed on your forehead.

Thrugelmir

Putting my investors hat on, I would have to question whether a gross rental yield at 6.25% at the outset is realistic. (80% of mortgage cost).

I would expect a higher return.

The current market conditions are only temporary. Over time rents will rise again to be higher than the cost of a mortgage on a house.

The reason being that multiple occupancy of a house yields better than single familiy occupancy. Professional landlords will of course look to maximise their return.

IveSeenTheLight

the_ash_and_the_oak wrote: »

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?)

It is 125% of the mortgage interest

the_ash_and_the_oak wrote: »

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

In this instance the example would not appear at first glance to be a good financial investment.

You seem to be very interested in the conversations regarding rent v's buying.
I rented for 3 1/2 years in my early life, in my experience a complete waste of money.
Unless your life dictates such, I would not recommend anyone to rent other than when people leave home initially in order to fully understand living costs.

HAMISH_MCTAVISH

abaxas wrote: »

I can only comment on the NE of england.

But if you are paying £900 a month rent of a property worth £250,000. You must have 'stupid twart' tattooed on your forehead.

That's a rental yield of only 4.3%, which is below the national average. I deliberately used rental amounts that were cheaper than the national average, so the bears wouldn't moan about it.

Up here, that 250K property would be closer to 1500 a month in rent. You can get 900 a month on a 160K property in some suburbs here.

But then running the same calculation with Aberdeen rents and prices shows the buyer being over half a million quid ahead of the renter at 25 years..... And I would guess it's well over a million at 40 years. A number sufficiently large that bears have a hard time comprehending it.;)

chucknorris

abaxas wrote: »

I can only comment on the NE of england.

But if you are paying £900 a month rent of a property worth £250,000. You must have 'stupid twart' tattooed on your forehead.

You should get around a bit more, £900/month on a 250k property is only a 4.32% yield which is quite low. In london I have 2 flats which are worth about 260k and renting for £1,180 and £1,140 per month

the_ash_and_the_oak

IveSeenTheLight wrote: »

It is 125% of the mortgage interest

apologies for typo. I meant interest of course!

abaxas

chucknorris wrote: »

You should get around a bit more, £900/month on a 250k property is only a 4.32% yield which is quite low. In london I have 2 flats which are worth less that 270k and renting for £1,180 and £1,140 per month

I cant comment on places other than where I live or have lived.

Maybe it's just cheap in the NE.

HAMISH_MCTAVISH

abaxas wrote: »

I cant comment on places other than where I live or have lived.

Maybe it's just cheap in the NE.

What is the typical rental yield in your area?

What do flats and houses rent for and sell for?

abaxas

HAMISH_MCTAVISH wrote: »

What is the typical rental yield in your area?

What do flats and houses rent for and sell for?

Previous property 3.33%, current 1.74% yeild. Worked out on the prices the properties were on 'sale' at.

chucknorris

abaxas wrote: »

I cant comment on places other than where I live or have lived.

Maybe it's just cheap in the NE.

Yields can vary dramatically from area to area, I am originally from your area (North Shields) but I now live in Dorking (after 15 years in London)

When I spotted a better house for sale in Dorking I thought I would explore the notion of keeping my existing one and renting it out. I got an estate agent around and was quite shocked to find I could only get about £1,200/month (on a 500k house) that's an awful yield of only 2.88% yet in Battersea, London (23 miles away) I was almost getting that same rent on flats worth just over half as much. Obvioulsy it was a no brainer, you can't rent out in Dorking, not only that but he warned me to expect significant voids (which I don't get in Battersea)