Selling To Rent

noodle_doodle

You'd save £16 a week STRing if you'd wanted the same house paid off by 2032.




Total housing costs for 25 years:

A) buy 200k house with 60k deposit: 140k mortgage, 25 year term, 3.5% interest = 210K total (thanks to karl jeacl'es mortgage calculator)

rent for 4 years (31K), then buy 170k house with 67k deposit (+7K interest), 21 year term, 3.5% interest = 145k + 31K = 176K total

34K saved on the mortgage by STR'ing!



But that's over 25 years, not in your pocket in 2007. So £1,300 a year till 2032. 4% inflation reduces that to the equivalent of £800 at 2007 prices by halfway through your mortgage term.

So an average of £800 a year, or £16 a week better off at today's value of money.

Not to be sniffed at, but not the platform to a better life STRs would have you believe. You'd be better off stopping smoking or boozing. I think you'd have to have such a large deposit to make a really huge difference, where interest made > rent paid, that you'd need to pretty minted already sadly enough (as with most things eh)

IveSeenTheLight

noodle_doodle wrote: »

A) buy 200k house with 60k deposit: 140k mortgage, 25 year term, 3.5% interest = 210K total (thanks to karl jeacl'es mortgage calculator)

rent for 4 years (31K), then buy 170k house with 67k deposit (+7K interest), 21 year term, 3.5% interest = 145k + 31K = 176K total

Just a quick question.

Is £645 pcm (£31k over 4 years) a realistic rent for a property that was valued at £200k in 2007?

FTBFun

IveSeenTheLight wrote: »

Just a quick question.

Is £645 pcm (£31k over 4 years) a realistic rent for a property that was valued at £200k in 2007?

Isn't that a yield of less than 4%? Seems pretty low, you could get that in a bank account around that time (often higher).

IveSeenTheLight

FTBFun wrote: »

Isn't that a yield of less than 4%? Seems pretty low, you could get that in a bank account around that time (often higher).

It is pretty low, hence my query if the rent calculation was realistic.
Certainly I know areas where properties values fall less can attain more in rent.

tartanterra

marlonthemagnificent wrote: »

i'm a director in a FTSE 100 company.

marlonthemagnificent wrote: »

you see, the great thing is....that i am

Don't worry, I believe you.

In fact if we are going to all start being honest, I'll admit I faked my death back in 1977 because I really wanted to run a greengrocers in Bridport.

Haven't looked back since, and things are really up since Jim Morrison, Kurt Cobain and Eric Morecombe joined the business.

All the best,

Elvis Presley (a.k.a. Tartanterra)

marlonthemagnificent

tartanterra wrote: »

Don't worry, I believe you.

In fact if we are going to all start being honest, I'll admit I faked my death back in 1977 because I really wanted to run a greengrocers in Bridport.

Haven't looked back since, and things are really up since Jim Morrison, Kurt Cobain and Eric Morecombe joined the business.

All the best,

Elvis Presley (a.k.a. Tartanterra)

is that the one on south street?
never seen you in there?

tartanterra

marlonthemagnificent wrote: »

is that the one on south street?
never seen you in there?

Haven't been there long.

Originally had a chip shop in Surrey, but Roy Orbison and Buddy Holly advised me to STR in 2003. Upside is, I couldn't afford to get back on the housing market in Surrey and my rent was going through the roof.

Jacked it in and bought the greengrocers in Bridport; luckily Marilyn Monroe was selling up to invest everything in stainless steel and aluminium.

noodle_doodle

IveSeenTheLight wrote: »

Just a quick question.

Is £645 pcm (£31k over 4 years) a realistic rent for a property that was valued at £200k in 2007?

Just used the figures the guy who started the post threw up in the air. Might be more, might be less. I've been generous to the STR argument here, I haven't snaffled money off their deposit for the extra removal men (my last removal bill was £800 ), and I've let them pay off their mortgage in a quicker time which obviously saves money. But it's still all for the equivalent of £16 a week. If they put the same effort into getting a better-paid job they'd make more then a grand a year extra - or they could spend 2 hours every weekend licking enevlopes for cash. It's not the magic bullet, and right now with price slooking static it definitely wouldn't work.

nollag2006

noodle_doodle wrote: »

...I've been generous to the STR argument here, I haven't snaffled money off their deposit for the extra removal men (my last removal bill was £800 ), and I've let them pay off their mortgage in a quicker time which obviously saves money. But it's still all for the equivalent of £16 a week...

You've also omitted to include any rent rises over that time frame. London rents are well over 20% higher than they were in 2007.

Just goes to show that STR is a massive risk for absolutely no gain, even for those who STR'd at the top of the market in late 2007.

I have one tenant who STR'd in early 2009, and regularly lectures me on just the market is due to collapse any day now. I only wish I had a camera to show how thoroughly shocked he was when I put his rent up 10% a few months ago.

:rotfl:

Don't think his STR story will be quite as close to breakeven - still, at least he's paid a good chunk of my mortgage for me!

:T

Cleaver

nollag2006 wrote: »

I have one tenant who STR'd in early 2009, and regularly lectures me on just the market is due to collapse any day now. I only wish I had a camera to show how thoroughly shocked he was when I put his rent up 10% a few months ago.

Cameras are pretty cheap nowadays. Maybe you could take the imaginary money made from your imaginary rent increases from your imaginary tenant in your imaginary scenario and buy a cheap camera from Argos? Then we could see the imaginary shock on his imaginary face.