Rent is the real Financial Millstone.....

DaddyBear

HAMISH_MCTAVISH wrote: »

I've noticed that our resident bear population are fond of using the term "millstone" to describe a mortgage.

Examples:







Now, over the course of an adult lifetime, a typical person would need to house themselves for around 60 years.

The average rent is round £700 per month, and so the cost for 60 years (not adjusted for inflation) of rent is around £504,000.

Whereas the cost to buy the average house is around 160K, plus another 120K or so in interest, for a total of £280,000 in expenditure. But as you end up owning the asset, the true lifetime housing cost is just £120,000.

So even the most shortsighted of bears should realise that at over 4 times the lifetime housing cost compared to buying, rent is the true "financial millstone" around the neck of the young today.

Congratulations Hamish, you seem to have found a house that needs no maintenance over 60 years. Where can I get one, they sound almost too good to be true?

geneer

THE_GHOULISH_CODPIECE wrote: »

I've said it before and I'll say it again, rent is dead money.

:rotfl::rotfl: :rotfl: What a renaissance man.
The forum really is lucky to have such a stunningly original thinker sharing his new and exciting ideas.

geneer

HAMISH_MCTAVISH wrote: »

I've noticed that our resident bear population are fond of using the term "millstone" to describe a mortgage.

Examples:







Now, over the course of an adult lifetime, a typical person would need to house themselves for around 60 years.

The average rent is round £700 per month, and so the cost for 60 years (not adjusted for inflation) of rent is around £504,000.

Whereas the cost to buy the average house is around 160K, plus another 120K or so in interest, for a total of £280,000 in expenditure. But as you end up owning the asset, the true lifetime housing cost is just £120,000.

So even the most shortsighted of bears should realise that at over 4 times the lifetime housing cost compared to buying, rent is the true "financial millstone" around the neck of the young today.

:rotfl::T:rotfl::T:rotfl:
Oh lordy! The highly useful and relevant "60 year" calculation.
Its like some outlandish comedy parody of a bullish troll.
I'm starting to suspect that those posters with a reputation for the same have the self awareness of a rock.

Generali

DaddyBear wrote: »

Congratulations Hamish, you seem to have found a house that needs no maintenance over 60 years. Where can I get one, they sound almost too good to be true?

Apparently a good rule of thumb is 1% of the value of the house.

JonnyBravo

Generali wrote: »

Apparently a good rule of thumb is 1% of the value of the house.

A year??
Seems a bit high to me.

RenovationMan

That'd be £4500 per year on my house. The actual spend so far is:

Money spent since we moved in May 2010: £11,000
Money to be spent for remainder of year: £19,000

However, it depends on what is classed as maintenance and what is classed as decorative. If I were renting this house I would have zero maintenance charges but I would then have much higher gas bills from the obsolete and badly installed gas boiler and central heating system, no insulation in the roof and an outdated kitchen.

I doubt very much that many landlords are concerned with the energy efficiency of their BTLs because there not paying the utility bills.

If annual maintenance is slapping a bit of paint around the house and having the central heating serviced each year, then I would struggle to hit £4500 to be honest.

JonnyBravo

Yep you make a fair point RM.
I suppose when you factor in the boiler every 20-30yrs, a new roof every 100-200 yrs etc it is these large costs that will make the average get up to 1%. Clearly most years I'd guess most people would spend well under 1%.

RenovationMan

JonnyBravo wrote: »

Yep you make a fair point RM.
I suppose when you factor in the boiler every 20-30yrs, a new roof every 100-200 yrs etc it is these large costs that will make the average get up to 1%. Clearly most years I'd guess most people would spend well under 1%.

When I've seen these sorts of discussions before, a lot of tenants go on about not having to pay for boiler breakdows and roofs blowing off, etc. But these sorts of things can be covered by insurance anyway, and if I were a BTL landlord I would have this sort of insurance in place with the tenants rent paying for it.

I think a roof is expected to last a good 100 to 150 years and modern boilers should be replaced every 8 years, but boilers cost about a grand, so its not a kings ransom over the lifetime of a house and the boiler pays for itself in reduced energy costs anyway.

I used to rent an apartment and it was all electric with a key meter. I used to charge up the key at the newsagent and it cost me more to heat/light that tiny apartment than what I paid for my 4 bed detached house.

Its all very well for tenants to go on about the fact they dont pay maintenance, but the reality is that they pay insurances in their rent and a lot of the maintenance and decoration they 'dont pay for' simply doesnt get done.

DaddyBear

dkmax wrote: »

Mortgage interest is also dead money so that argument doesn't get anyone very far.

Why does some chump always roll out this argument? IF you are on a REPAYMENT mortgage, the interest is NOT dead money. It is a means to owning your property outright and having no housing costs at the end of it.

Orpheo

HAMISH_MCTAVISH wrote: »

I've noticed that our resident bear population are fond of using the term "millstone" to describe a mortgage.

Examples:







Now, over the course of an adult lifetime, a typical person would need to house themselves for around 60 years.

The average rent is round £700 per month, and so the cost for 60 years (not adjusted for inflation) of rent is around £504,000.

Whereas the cost to buy the average house is around 160K, plus another 120K or so in interest, for a total of £280,000 in expenditure. But as you end up owning the asset, the true lifetime housing cost is just £120,000.

So even the most shortsighted of bears should realise that at over 4 times the lifetime housing cost compared to buying, rent is the true "financial millstone" around the neck of the young today.

The metaphor of the millstone relates to one drowning under a burden - New Testament (Matthew 18:6). It is interesting that you compare the average rent to the average house price rather than the average mortgage, especially considering the amount of debt required by mortgagees has quadrupled in 12 years. Average rent, according to you, is £700, whereas the average mortgage payment is £800 per month. Assuming an average income, both costs are punishing. But in reference to the metaphor of the millstone around one's neck, the lighter one is the rent.