Renting 'now cheaper than buying'

macaque_2

nollag2006 wrote: »

Its always been thus. I've been renting out houses since the mid-90's and very few of them get rents high enough to cover the mortgage payments for the first few years.

After a while, it comes good though, as rents start to eclipse the mortgage payments

Hardly a newsworthy story - must've been a quiet day at the Beeb

I am not sure you are right about this. Although most goods and services generally follow inflation, I think the UK is experiencing a slow but steady rent correction. A 4 bedroom house in France or Germany can be rented for less than £800 per month. In the US, rents are even cheaper. Historically, the UK has had an acute shortage of rented propety. The cause of this was rent laws which gave tenants unfair rights. Those laws were changed and since then the rental sector has grown steadily. This is gradually bringing sanity back to rental market. Speaking as a renter myself, I pay significantly less (in real terms) than I did 5 years ago.

dolce_vita

nollag2006 wrote: »

Its always been thus. I've been renting out houses since the mid-90's and very few of them get rents high enough to cover the mortgage payments for the first few years.

No, it hasn't "always been thus".

I have been buying and letting property for over 20 years, and have never had a situation where the rent has been less than the mortgage for the same property.

Even if you bought in the mid 90s you should be making a profit
month-to month unless you paid too much to start with or have MEWed all your profits.

Which is what most newbie BTL chancers have done and why they can't cover the mortgage with the rent alone.

I have not increased the rent on any of my properties for over 3 years but if I had to buy them now then the mortgage would be much higher than what I could charge as rent.

This is not a problem of rents being too low.
But house prices being too high.

carolt

Problem is though I'd never get to stay for 23 years and after that I'd also need somewhere to live... The monthly rent doesn't include the agents fees, the credit checks, the wrestling the deposit back of some scum bag, the moving costs, the hassle of having someone else buy you the cheapest and cr&ppiest of everything and the hassle of getting anything fixed.... add into the random 2 months notice when they cash in the asset, the contracts that prohibit putting a shelf up, decoration chosen by someone else you can't change and even if you rarely can never know if you'll be able to stay, the contracts that forbid kids and pets.... moving your kids at 2 months notice potentially every 6 months, giving the furniture away that doesn't fit in the new unkown place.... that's why despite the financial benefits people want permanent stable tenure and unless you are one of the very few who manages to get into social renting you have no chance of without a mortgage - even IO mortgages have a place renting off the bank but at least on a non-restrictive tenancy - most people want a home not a financial vehicle so comparing rent and mortgage will never reflect the sentiment or people's weightings.... (barnaby-bear)

Pants. Sorry to be rude, but anyone who thinks that buying offers greater security and stability than renting at the moment either has not read the article or believes that gambling is a sensible way of 'earning' an income.

According to the article, 'Private rents in 2006 were two-thirds the cost of a 100% mortgage on a two- or three-bedroom house, for a young household on average incomes.' Or put it another way, for those without huge existing equity in their homes , it costs 50% more per month to buy than to rent. For example, average 3 bed semi, rent £1000/month, mortgage costs £1500 a month.

I'm not making this up - this is the conclusions of the research quoted in the BBC article.

And that is WITHOUT including the huge extra costs involved in buying and owning - mortgage fees, stamp duty, solicitors fees, repairs, product breakdowns, repairs, building work, mortgage payment protection, buildings insurance etc.

And WITHOUT taking into account the added risks of losing substantial amounts more money - potentially tens of thousands of pounds - if house prices fall, as they increasingly likely to do, with all the added complications involved in negative equity such as not being able to move house at all, inability to remortgage to a new cheaper fixed rate etc.

Unless there are a hell of a lot of barnaby-bears out there with money to just pour down the drain in search of this elusive 'stability' I can't believe many people can really believe this makes putting up with the inconvenience of possibly not being able to paint your walls purple... (And to be honest, if that is really what matters to you, you just have to shop around - there are plenty of landlords who don't mind...).

Oh, and did I forget to mention the risk of not being able to keep up with your mortgage payments and having the bank repossess 'your' home? They won't necessarily give you a generous 2 months notice. And they may well take more than just your deposit (which is now legally protected anyway). Speak to some of the people who lost their houses in the last market 'downturn' and who were still paying back the negative equity 5 or 10 years later....

If you're going to argue in the face of the BBC, !!!!!!!, at least put a bit more effort into putting down points that can't be knocked down QUITE so easily.......:mad:

barnaby-bear

Ron2256 wrote: »

My colleagues keep telling me how much money they have to spend on maintaining there house and how much hassle it is to get things sorted.
The fence's blown down, the boiler's packed up, the roof is licking, the gutter needs fixing, there is mold on the ceiling...
Every weekend is about getting this and that done.

It's a lot of stress and again a lot of money. And if they want to sell, they have to rip the bathroom out, update the kitchen, redo the drive...

When I come home, i've got none of this to worry about and my rent is less than 2/3rd of an i/o mortgage.

And if i've got a problem, I give a phone call to the landlord and let him do the run around.

When I had the fence blow down the LL couldn't be ars^d and it took months of chasing, likewise for the cooker - if something breaks we can afford it we get the perfect efficient appliance we like; the hassle with renting was the moving the upheavel the uncertainty - it's what you find hassle I guess and if you can afford the difference; yeah there's a cheaper option but for us it's stability and having stuff how we want. If you can't afford it that's a hassle though so it wouldn't be the best option. Everyone's situation different.

Gorgeous_George

jay7 wrote: »

You can either buy this house for £272,500 and pay £1535 interest only mortgage (i.e. money down the drain)...

... OR you can rent a very similar house next door with an extra room for £1050.

Here's how they compare:
It is cheaper to RENT the property for an initial 23 years.

Yup, spot on.

You could choose to pay £533,231 over 25 years to own the house (at 6.13%) or you could go for the other option of paying the same to rent it for 27.4 years (assuming 3% pa rental growth).

After paying the mortgage for 25 years, you live rent-free. After paying rent for 27.4 years you still need to pay rent.

Sure, there are other costs involved but you need to look at the figures over the shorter term to make renting seem profitable.


GG

barnaby-bear

Gorgeous_George wrote: »

Yup, spot on.

You could choose to pay £533,231 over 25 years to own the house (at 6.13%) or you could go for the other option of paying the same to rent it for 27.4 years (assuming 3% pa rental growth).

After paying the mortgage for 25 years, you live rent-free. After paying rent for 27.4 years you still need to pay rent.

Sure, there are other costs involved but you need to look at the figures over the shorter term to make renting seem profitable.

GG

People pay for private education when they could get education for free a lot of people will pay a huge premium for a stable home for their kids and once you get a bit of equity and a few overpayments in you have a buffer against misfortune - most people weren't repossessed in the last recession the most overstretched/unlucky were. It takes nearly a year to be repossessed in a family home (not btl investment) - better than 2 months on an AST. People want homes and a lot of people do have some equity and a buffer. You can save money not eating out, not going on holiday, not buying consumer tat - people still buy that stuff because they want it - same goes for home ownership and tenure...

carolt

Am I missing something, Gorgeous George? - you're usually quite on the ball....

But doesn't jay7 say 'You can either buy this house for £272,500 and pay £1535 interest only mortgage' - so how does that make ' After paying the mortgage for 25 years, you live rent-free.' ???

Surely if the comparable figures are not for a repayment mortgage, you've paid off precisely.......zilch?

carolt

And I can't disagree, barnaby-bear - obviously if you've got sufficient cash that you can afford to buy a place outright or nearly so, or don't mind losing large amounts of the cash you have put in, then buying a house does offer long-term stability, opportunity to do what you want with it, etc. But for most of the people on this forum (this is mse, after all!) that doesn't really apply. Not many of us are in a position to be that casual in whether or not we'd be a few tens or even hundreds of thousands of pounds worse off.

So I'm happy to agree to differ.:)

barnaby-bear

carolt wrote: »

Am I missing something, Gorgeous George? - you're usually quite on the ball....

But doesn't jay7 say 'You can either buy this house for £272,500 and pay £1535 interest only mortgage' - so how does that make ' After paying the mortgage for 25 years, you live rent-free.' ???

Surely if the comparable figures are not for a repayment mortgage, you've paid off precisely.......zilch?

But you own the option to buy a house at 25 year ago prices AND have had 25 years of tenure AND could take the difference between todays price and 25 years ago.... I don't want an investment vehicle the difference is £200 hundred a month between rent and repayment for which we get security and our kids can have pets and stability and stay put and not being allowed to paint your kids bedroom is actually a big deal. We aren't fools we know we are paying a premium for a luxury (tenure) but for the cost of a few meals out or a slightly flasher car it's something that works for us, renting didn't we did it when it made financial sense but with sufficent buffer and money to waste it's something we choose to spend money on. Our home isn't about making us money it's just a home :T - great if prices fell though 'cos we could get a bigger one.

barnaby-bear

carolt wrote: »

And I can't disagree, barnaby-bear - obviously if you've got sufficient cash that you can afford to buy a place outright or nearly so, or don't mind losing large amounts of the cash you have put in, then buying a house does offer long-term stability, opportunity to do what you want with it, etc. But for most of the people on this forum (this is mse, after all!) that doesn't really apply. Not many of us are in a position to be that casual in whether or not we'd be a few tens or even hundreds of thousands of pounds worse off.

So I'm happy to agree to differ.:)

But it's not that extreme, the figures aren't that extreme and yep people will value a home for their kids and not risking moving them around and having their cr8ppy barbie wallpaper and stinky rabbits around over cash. If we could rent long term with tenure and do decorating like when we lived in Germany then great but it's not an option here - if we could get council type lease then yep but after the scum bag landlord's i've had to deal with - nope, will happily pay to avoid their weasely little faces....