I Cannot See Value

chucky

Graham_Devon wrote: »

I think, and I must point out think....he is taking house prices from some time ago, when they were cheaper and comparing to rental today.

I.e start point for house is some years ago, start point for rental is today.

Ends up around 30%. There's no other way you can get to that point otherwise.

how about if you worked it out this way - if (that's an if) you had mortgage interest paid each month at £100, rent was also £100 that would increase with inflation. that additional rental cost due to the increase in inflation would be treated as extra capital repayments on your mortgage so reducing the mortgage interest and making it cheaper mortgage interest.

now - add the expected mortgage rate increases and all the costs linked to renting and buying to work it out.

you then see at what interest rate renting is better or worse because it's the mortgage interest rate (and the amount outstanding) that drives the cost of your mortgage for a homeowner

Mr.Brown_4

chucky wrote: »

where i am the general rule of thumb is that if a one-bed is selling for £350k the rent is £350 per week. this all varies on the spec of the flat of course but that would be the case in general.

A 5.2% yield. If there are no voids, service charges, agents fees, solicitors fees, repairs or maintenance. If it was possible to borrow 350k at say 5% then a 0.2% profit per year to be had, or 700 pounds per year for a 350k investment.

chucky

Mr.Brown wrote: »

A 5.2% yield. If there are no voids, service charges, agents fees, solicitors fees, repairs or maintenance. If it was possible to borrow 350k at say 5% then a 0.2% profit per year to be had, or 700 pounds per year for a 350k investment.

you forget to put the tracker rate at 0.9% over BOE or which ever rate you like.

the actual yield is only worked out against the money you've invested - work it out against a 20% deposit.

Mortgage interest repayments £3,920 minus £18,200 rent = £14,280 = a 20.4% gross yield - go figure. it's good money.

so what's you're view on rent vs house buying then?
nice of you to just to come on to the forum to stalk me... :T

jetta_wales

Ok, ok seriously enough calculations I've already in just a few days noticed how Hamish can get on peoples nerves but it doesn't matter you might find you agree with him on some things as well as dissagreeing hugely on others (I say 'might') but this is really going nowhere now and since most on both sides of the argument have all bought their own home anyway it's a little empty as none of us are going to rent for life.

Should I get the cookies and milk again?

Mr.Brown_4

chucky wrote: »

you forget to put the tracker rate at 0.9% over BOE or which ever rate you like.

the actual yield is only worked out against the money you've invested - work it out against 20%.deposit.

Mortgage interest repayments £3,920 minus £18,200 rent = £14,280 gross yield = 20.4% go figure

so what's you're view on rent vs house buying then?
nice of you to just to come on to the forum to stalk me... :T

20% deposit = 70,000 pounds. All I need now is a BTL mortgage for 80% of 350k at BOE rate + .9%? Got a link?

I also need 70,000 pounds but that's a mere detail.

chucky

Mr.Brown wrote: »

20% deposit = 70,000 pounds. All I need now is a BTL mortgage for 80% of 350k at BOE rate + .9%? Got a link?

link......

Mr.Brown_4

chucky wrote: »

link......

Very funny. That's why I thought BTL mortgages were about 5% plus fees, plus large deposit, plus rent cover mortgage. So perhaps not so easy to get into BTL now as it used to be. Good tip on the yield though, I have always thought it was based on the property value - maybe it used to be when people owned the property outright.

You wanted my views on renting v. buying? Over the long term buying is cheaper. That depends on getting a proper mortgage, not an interest only one, of course.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I think, and I must point out think....he is taking house prices from some time ago, when they were cheaper and comparing to rental today.

I.e start point for house is some years ago, start point for rental is today.

Ends up around 30%. There's no other way you can get to that point otherwise.

No Graham, it is average house price, and average rent, from today.

Read it again.

HAMISH_MCTAVISH

Charterhouse wrote: »

No. I haven't forgotten that. Stop posting in capitals as if I'm stupid. Do you understand discount rates and the concept of present value?

If not, go look it up and check.

You're going to have to explain this further, as I think you're wrong, but I've also had 3 hours sleep the last 2 days in a row, so it may just be my sleep deprived mind acting up.

I am using a zero inflation model for simplicity.

However with inflation, rents will rise with inflation, but be worth the same amount as if they were in todays money.

But you seem to be extrapolating inflation at one rate and then back discounting it out at another, greater, rate, to arrive at a discounted figure in todays money, .

So where does the differential come from, and why?

The 35 years of rental payments after the owner stops paying are only worth £65,800 in today's money. It's virtually irrelevant to a decision taken today

So in your hypothesis, for the 35 years period starting 25 years from today, rent will only cost the equivalent of £1800 a year in today's money. The value of rent will decrease by 75% in 25 years? I think not.

I take it you understand why we assume you are talking out of your bottom......

jetta_wales

HAMISH_MCTAVISH wrote: »

You're going to have to explain this further, as I think you're wrong, but I've also had 3 hours sleep the last 2 days in a row, so it may just be my sleep deprived mind acting up.

I am using a zero inflation model for simplicity.

However with inflation, rents will rise with inflation, but be worth the same amount as if they were in todays money.

But you seem to be extrapolating inflation at one rate and then back discounting it out at another, greater, rate, to arrive at a discounted figure in todays money, .

So where does the differential come from, and why?



So in your hypothesis, for the 35 years period starting 25 years from today, rent will only cost £1800 a year in todays money.

I take it you understand why we assume you are talking out of your bottom......

Good grief, why have you had such little sleep? that's not healthy at all hun.