Why buy – ever?

lisyloo

The problem is you need to live somewhere and rent over a lifetime will inevitably be more than mortgage payments.

Generally this is true.
There could be exceptions though. For example, for short term contracts it may not be worth the transactional costs.

The point being missed here is whether you make alternate provision or not.

Clearly paying a repayment mortgage does not equal rent, but if someone is renting and saving a pot for a home for perhaps when they are less economically mobile, then there's effectively no difference between having £X equity in a property and £X equity in the bank - the position is the same.
So reaching retirement with £0 in the bank and no property is very different to reaching retirement with £1 million in the bank in a house fund i.e. in addition to pension.
I'm not sure what is complicated to understand about that.

A section of society who often don't buy are soldiers in the military.
There isn't much point owning if you're on active duty in Hellmand province, however the smart ones start building a "pot" to buy a home for when they come out of the military.
Clearly there's a difference between having that large pot and not having the pot.
It's not whether you have the bricks, it's whether you have the resources because you made provision over many years.
A lot like pensions - some people have nothing, but some people have £1 million funds (and that's not a massive amount these days).

ukcarper

lisyloo wrote: »

Generally this is true.
There could be exceptions though. For example, for short term contracts it may not be worth the transactional costs.

The point being missed here is whether you make alternate provision or not.

Clearly paying a repayment mortgage does not equal rent, but if someone is renting and saving a pot for a home for perhaps when they are less economically mobile, then there's effectively no difference between having £X equity in a property and £X equity in the bank - the position is the same.
So reaching retirement with £0 in the bank and no property is very different to reaching retirement with £1 million in the bank in a house fund i.e. in addition to pension.
I'm not sure what is complicated to understand about that.

I agree renting can suite some people especially in the short term, but for most people I stand by what I said. Initially the cost of a repayment mortgage will probably be more than rent but over a lifetime that will not be the case.

CLAPTON

lisyloo wrote: »

Generally this is true.
There could be exceptions though. For example, for short term contracts it may not be worth the transactional costs.

The point being missed here is whether you make alternate provision or not.

Clearly paying a repayment mortgage does not equal rent, but if someone is renting and saving a pot for a home for perhaps when they are less economically mobile, then there's effectively no difference between having £X equity in a property and £X equity in the bank - the position is the same.
So reaching retirement with £0 in the bank and no property is very different to reaching retirement with £1 million in the bank in a house fund i.e. in addition to pension.
I'm not sure what is complicated to understand about that.

A section of society who often don't buy are soldiers in the military.
There isn't much point owning if you're on active duty in Hellmand province, however the smart ones start building a "pot" to buy a home for when they come out of the military.
Clearly there's a difference between having that large pot and not having the pot.
It's not whether you have the bricks, it's whether you have the resources because you made provision over many years.
A lot like pensions - some people have nothing, but some people have £1 million funds (and that's not a massive amount these days).

off topic but soldiers often buy to let : they can benefit from special rules that means there is no cgt when they eventually sell, so probably better than simply saving

lisyloo

off topic but soldiers often buy to let

The ones I know stay in military accomodation.
Knowing some military folk well I would have though it's quite difficult to manage an active investment whilst you are spending a lot of time away (with NO way to come back). I realise you can outsource managing property but that does tend to eat into the profits.
I'm not saying it can't be done just that it's not an ideal lifestyle for managing property because you can't event attend to simple DIY matters or even paperwork - absolutely everything has to outsourced.

wotsthat

mwpt wrote: »

You could read this guys blog:
http://www.retirementinvestingtoday.com

If you come back and say that the strategy is not optimal because he is renting, I am going to glare sternly at the screen and shake my head. I warn you.

There doesn't seem to be a search function so I couldn't see if or why he rents.

If he thinks he can rent cheaper than buying and make a better return on the difference that's a strategy but you glaring at the screen won't make it come true. History suggests that buying a house upfront gives a better return than renting and saving. The only way this would have worked for me would be if I'd rented somewhere less nice than I bought and ignored the lost utility value and, of course, massive financial loss.

I read a lot of this stuff and this is typical - save hard, spend little, passive funds, live mindfully, build a pot of 20x your outgoings and bob's your uncle. Then start a podcast about it and interview other bloggers advocating the same thing. Thing is, if you're willing to save c60% of your earnings then it matters less but he's taking a punt against house prices none the less.

Notable that 10% of his net worth is in property despite renting.

lisyloo

I agree renting can suite some people especially in the short term, but for most people I stand by what I said.

For a home, I would tend to agree with you that it makes sense to buy for most people.

For the unsophisticated (and I include myself in that) the best 2 things you can do are get a repayment mortgage and get a pension.
Over a long period of time it will pay off.
I started a pension on day 1 and because I never had the money, I never missed it and it really makes a masssive 6-figure difference over the decades - same with buying a house. A few hundred a month in repayments ends up in owning a house after 25 years.

wotsthat

lisyloo wrote: »

The one I know stay in military accomodation.
Knowing some military folk well I would have though it's quite difficult to manage an active investment whilst you are spending a lot of time away (with NO way to come back). I realise you can outsource managing property but that does tend to eat into the profits.
I'm not saying it can't be done just that it's not an ideal lifestyle for managing property because you can't event attend to simple DIY matters or even paperwork - absolutely everything has to outsourced.

That's what dads are for.

mwpt

wotsthat wrote: »

There doesn't seem to be a search function so I couldn't see if or why he rents.

He rents, and believes (rightly or wrongly, it doesn't matter) that UK property isn't good value for money at the moment. But that is irrelevant. I used it as an example of renting now and buying later. Something that seems not to exist in the property bulls minds.

If he thinks he can rent cheaper than buying and make a better return on the difference that's a strategy but you glaring at the screen won't make it come true. History suggests that buying a house upfront gives a better return than renting and saving. The only way this would have worked for me would be if I'd rented somewhere less nice than I bought and ignored the lost utility value and, of course, massive financial loss.

I read a lot of this stuff and this is typical - save hard, spend little, passive funds, live mindfully, build a pot of 20x your outgoings and bob's your uncle. Then start a podcast about it and interview other bloggers advocating the same thing. Thing is, if you're willing to save c60% of your earnings then it matters less but he's taking a punt against house prices none the less.

Notable that 10% of his net worth is in property despite renting.

I'm going to be a little rude here but why are you guys so obtuse? I could assume you're stupid rather than obtuse, but I'll give you the benefit of the doubt.

Once again, for the terminally "obtuse" amongst you, my point was only to contradict the "obtuse" statement that people who choose to rent plan to rent forever.

This cannot be that hard to grasp.

martinsurrey

mwpt wrote: »

He rents, and believes (rightly or wrongly, it doesn't matter) that UK property isn't good value for money at the moment. But that is irrelevant. I used it as an example of renting now and buying later. Something that seems not to exist in the property bulls minds.



I'm going to be a little rude here but why are you guys so obtuse? I could assume you're stupid rather than obtuse, but I'll give you the benefit of the doubt.

Once again, for the terminally "obtuse" amongst you, my point was only to contradict the "obtuse" statement that people who choose to rent plan to rent forever.

This cannot be that hard to grasp.

I think its because the numbers just don't stack up.

I ran through an assessment based on buying vs renting on the basis of a £400k house rising at 4% a year bought on a 3.5% 25 year mortgage against renting the same house paying a 3% yield, and investing the difference in a 7% investment return.

The only way I could get the investments to keep up with the house was to invest pre tax (as a 42% marginal tax payer, say in pension), but then at the end of 25 years you had to find a way to get £1.1m from the tax wrapper to buy the house, and the fund wasn't enough to cover the tax charge, forcing the person to rent forever.

The fund could support the rent, but couldn't ever buy.

wotsthat

mwpt wrote: »

Once again, for the terminally "obtuse" amongst you, my point was only to contradict the "obtuse" statement that people who choose to rent plan to rent forever.

This cannot be that hard to grasp.

It would have helped if your link was to something about how this chap was renting now, planned to buy later and his logic for the decision.