Maths of Renting vs Buying

Kennyboy66

CLAPTON wrote: »

where I live a 4 bed decent sized house costs a modest 2k per month to rent

so that's 24,000 per year
which means at 20% tax rate you need income of about 28,000 pa just to pay the rent

against this, as owner you may spend say £1,000 per year on maintenance

I would guess that most retired people , even on very reasonable pension would see the matter as a no brainer


a family member, has just bought a modest one bed flat in london
the mortgage (repayment ) is about 850 pm
directly comparable rents in similar blocks charge 1,000 - 1,200 pm
they paid about 25,000 as deposit .. so say at 3% interest thats £62.5pm in lost interest
seems a better bet too

I'd suggest that anyone who thinks maintenance of £1k a year covers a decent 4 bed house is a tad unrealistic.

I'd say £4 - 5k per year, although ours is a 1930's semi so may be atypical.

abaxas

Kennyboy66 wrote: »

I'd suggest that anyone who thinks maintenance of £1k a year covers a decent 4 bed house is a tad unrealistic.

I'd say £4 - 5k per year, although ours is a 1930's semi so may be atypical.

It's the big spends that really rocket up expenditure.

But since they happen infrequently people forget about them.

Joe_Bloggs

nickmason suggested:-

So this reinforced that the obvious difference; that buying is paying up front, while renting is pay later.

The bit you have to pay up front is the deposit. If the required deposits are high and therefore time consuming to accumulate then renting is the only option. If you aspire to home ownership then you have to rent/budget frugally so that you can be in a position to build a deposit.This to will be helped by a budgeting spreadsheet and lots of enthusiasm.

So many lucky people these days rely on the deposit from the Bank of Mum and Dad. Given pension forecasts and later retirement, BTL represents a significant opportunity for them.

J_B.

silvercar

abaxas wrote: »

It's the big spends that really rocket up expenditure.

But since they happen infrequently people forget about them.

The big spends may also add value.

HAMISH_MCTAVISH

Kennyboy66 wrote: »

I'd say £4 - 5k per year, although ours is a 1930's semi so may be atypical.

In terms of maintenance only, somewhere between £1000 and £1500 a year is about right for a normal detached house.

The real money gets spent on optional upgrades, usually replacing items that are perfectly servicable.

abaxas

silvercar wrote: »

The big spends may also add value.

Or just maintain it.

abaxas

HAMISH_MCTAVISH wrote: »

In terms of maintenance only, somewhere between £1000 and £1500 a year is about right for a normal detached house.

The real money gets spent on optional upgrades, usually replacing items that are perfectly servicable.

But not 'upgrading' tends to mean a lower price of you sell.

Or in your mind a house that need 'updating' sells for the same as one that has already been 'updated'?

Kennyboy66

HAMISH_MCTAVISH wrote: »

In terms of maintenance only, somewhere between £1000 and £1500 a year is about right for a normal detached house.

The real money gets spent on optional upgrades, usually replacing items that are perfectly servicable.

Utterly delusional, and it makes me wonder if you own a house at all, however a rough list just from the last few years.

Guttering repairs (original cast iron).
Window repairs (original lead lights).
replace lead water pipes inside & out.
New boiler.
New roof on garage
Paint exterior house
Replace fence rear and side garden
Decorating.
New fuseboard & minor electrial upgrades.
Replaced windows at rear of house.
Replaced window sills on original windows at front.
Get tree surgeon out to sort very old trees out.
Blocked drain call out & minor repairs.
Replace drain section.
Decorating inside
Replace pebble dash rendering (falling off).

Not including major stuff done 5 years ago (new kitchen, bathroom, some structural repairs)

And got a list as long as my arm of stuff to do over next few years.

And our house looks "well lived in".


£1000 a year would barely cover window cleaner, annual boiler service, ground rent (leasehold), removing debris from gutters each autumn & minor bits and bobs.

wastedtalent

nickmason wrote: »

I was struck by this post on another thread, which has since ended up a spat about something or other.



I constructed a spreadsheet to do the same maths, and found very different results; that for two of the last four flats I have rented the cost of buying is still greater than the cost of renting after 50 years.

(All figures in today's terms, after 58 years)
House 1 (SW): Rent £625pm, Value £280K. Renting £435K, Buying £499K
Flat 2 (SW): Rent £600pm, Value £180K. Renting £418K, Buying £320K - buying becomes cheaper after 39 years.
Flat 3 (London): Rent £900pm, Value £280K. Renting £626K, Buying £499K - buying necomes cheaper after 41 years.
Flat 4 (London): Rent £1300pm, Value £500K. Renting £905K, Buying £890K - buying becomes cheaper after 56 years.

In that last example, after 25years buying has been £325K (in today's money) more expensive, but this obviously is then reduced as there are no further mortgage payments, and over the next 31 years that extra £325K is eroded by the need to continue to pay rent.

But you also own 500k worth of property?

There's definitely something missing in the calculations.

Engeroosi

At the end of the day if the monthly cost of a mortgage is less than the cost to rent the same house then I would always rather pay the mortgage, at least after 25 years then you will own it and have no mortgage or rent to pay!!! And rent is only going to increase where the mortgage payment will remain roughly the same depending on interest rates. As a renter you still have the same bills to pay with regards to council tax, energy bills and you still have to look after the property, ie maintain the garden.