Better to buy than rent!!

THE_GHOULISH_CODPIECE

ag359 wrote: »

PS: not quite right to say 1/3 of landlord's mortgage paid off. Under the comparison I set out in my post, it would be *interest* on landlord's mortgage paid off for 1/3 of the term. Not the capital.

Here you are incorrect. Average mortgage of 24 years. 2010 - 2002 = 8. 8/24 years = 1/3. Doesn't matter if it was interest or capital as 1/3 of the mortgage WAS down paid.

THE_GHOULISH_CODPIECE

Dirk_Rambo wrote: »

goolies m8. i still live with me mum. and she doesnt have a mortgauge

m8 pleese ask Senta fur a dicktionary this yur.

ag359

THE_GHOULISH_CODPIECE wrote: »

Here you are incorrect. Average mortgage of 24 years. 2010 - 2002 = 8. 8/24 years = 1/3. Doesn't matter if it was interest or capital as 1/3 of the mortgage WAS down paid.

No. My original post said that rent is roughly equal to the mortgage interest, not the capital.

Thrugelmir

Batchy wrote: »

I can't agree with those figures... as I you have not referenced them to any particular index.

However, I asked a question, about in 25 years time.

answer me these questions, do you actually believe that in 25 years time that house prices will be worth less than they are now.

That your CASH ISA will outperform inflation

And that rents will not attract some form of inflationary increase annually over the next 25 years?

Simple and fundamental questions to be honest!:rotfl:

Simple and fundamental answers.

Sunday Times - Money Section . (every week updated).

Inflation adjusted - yes. ( As total UK mortgage debt outstanding will show a reduction in that timeframe from its current levels).

I don't hold cash ISA's. Other than the period when the Icelandic banks were offering high (unsustainable) rates. Cash has always lagged inflation. Equities (with dividends reinvested) provide much better longer term returns. More recently A+++ Grade Corporate bonds offered exceptionally good returns. As interest from CB's within an ISA is paid gross.

Rents (like house prices) will reflect wage inflation. Wage inflation for many will remain low. European movement of labour will be a major impact. With increasing numbers working close to the minimum wage in unskilled jobs.

I don't disagree with your premise that buying makes financial sense. However your rationale is too simplistic.

We've yet to see the impact of higher interest rates.
The "UK" at some point has to refinance a huge amount of debt from external sources. So our .5% base rate should be kept in perspective. As the UK banks still heavily bandaged, slowly heal.

By comparison. Greece is borrowing at 5.2% and Eire at 5.8%. Base rate in Australia is 4.75% and China (borrowing) 5.31%.

Batchy

the.ciscokid wrote: »

Maybe I missed it, and apologise if I did, but you don't appear to be including interest on the 60k deposit that the renter wouldn't have sunk into the house.

I started a calculation saying not considering inflation.

I have not discounted the net cash outflows, nor the net cash inflows at the end, but I would have thought a NPV calculation based on 25 years would have been beyond most peeps.

The illustration at point 1, was to show, even discounting the fact in 25 years the property value would have increased, and rents would also have increased, pure cash flow, your better off with buying than renting. The Fact you can fix your mortgage but its difficult to fix rent for anything other than 12 months to 24 months is the main factor... and easily illustrated

in 25 years, your rent will/ could still be 25% of your income or more, the mortgage may only be 10% of your income by then!

Batchy

Thrugelmir wrote: »

Simple and fundamental answers.

Sunday Times - Money Section . (every week updated).

Inflation adjusted - yes. ( As total UK mortgage debt outstanding will show a reduction in that timeframe from its current levels).

I don't hold cash ISA's. Other than the period when the Icelandic banks were offering high (unsustainable) rates. Cash has always lagged inflation. Equities (with dividends reinvested) provide much better longer term returns. More recently A+++ Grade Corporate bonds offered exceptionally good returns. As interest from CB's within an ISA is paid gross.

Rents (like house prices) will reflect wage inflation. Wage inflation for many will remain low. European movement of labour will be a major impact. With increasing numbers working close to the minimum wage in unskilled jobs.

I don't disagree with your premise that buying makes financial sense. However your rationale is too simplistic.

We've yet to see the impact of higher interest rates.
The "UK" at some point has to refinance a huge amount of debt from external sources. So our .5% base rate should be kept in perspective. As the UK banks still heavily bandaged, slowly heal.

By comparison. Greece is borrowing at 5.2% and Eire at 5.8%. Base rate in Australia is 4.75% and China (borrowing) 5.31%.

Too simplistic.....???
So what your saying in real terms, adjusted for inflation, that house prices will / or maybe worth the same or less multiple of average income in 25 years time as they are now. ( I could even agree with that) HOWEVER...
Ill re phrase the question, do you think wage inflation will be negative between now and 25 years time? hence leaving house prices worth less than they are now?

All the average gains from equities can be undone in a bad month. Its all very well quoting gains, but equities rise and FALL, when they fall they normally fall very hard... this is the risk, but I would question anyone to suggest investing in equities is lower risk than investing in property! That is not everyones cup of tea, and certainly not mine based on my experiences.

If the uk raises interest rates, which is the only direction they are likely to go, then I would expect that to place a large amount of pressure to highly geared companies feeling the pinch at the moment making equities even more volotile.

I agree with the rationale that if you invest in equities they can outperform any market, but as well as that you could end up with "not a lot" lol.

In terms of the simplisticness of the calculation.

Im a chartered accountant by trade, I know how to do very complicated calculations, and would feel that if i did most of these, if would fly over most peoples heads and there would be no discussion.

The simplisticness of the calculation was all in the favour of the renter also... ie, no HPI, no rent inflation. yet the figures still show, buying actually makes sense! Regardless of falls, rises, or interest ratex ballooning up to 6% etc

abaxas

chucknorris wrote: »

The arguement was won long ago, obviously tenants pay for the maintenance costs via the rent. You are just too silly to know it.

I'm not trying to win an arguement by lying I think you are referring to what I said about premium bonds. I went to search for the thread to verify but now suspect that I am probably mistaken as it seems that might have been someone called asheron. That was a genuine mistake which despite the fact you called me a liar I will still appologise for (it was not a lie, it was a mistake, do you always assume people are lying? how sad).

But the premium bonds are irrelevant, the point remains that the rent covers the maintenance costs!

U turn 2.

I'm not going to bother trying to explain basic business principles to you. As it falls on deaf ears.

Believe whatever you want at least then, you are happy.

chucknorris

abaxas wrote: »

U turn 2.

I'm not going to bother trying to explain basic business principles to you. As it falls on deaf ears.

Believe whatever you want at least then, you are happy.

Being a chartered surveyor and a university lecturer and having ran two different businesses one a limited company the other as a sole trader for 20 and 30 years respectively I think I am far better placed than you to know about business.

nembot

I've just moved to a new rented property, current value 360k - monthly rent £650.

So at least in my case, buying is a lot more expensive than renting.

chucknorris

nembot wrote: »

I've just moved to a new rented property, current value 360k - monthly rent £650.

So at least in my case, buying is a lot more expensive than renting.

Your LL is only earning a 2.17% yield, that is unusually low is there something strange about this rental?

One of my flats in Battersea is worth slightly less than that but the rent is £1,600/month (and it is slightly under rented too!). In fact my cheapest flat worth about £270k (hard to say in this market) has a rent of £1,200/month. So you are doing really well with that deal.