Buy or Rent?

johnuk_3

My wife and I are re-locating to the UK after living abroad, where we rented our house. We earn around £60,000 gross a year, but are no longer young enough to wish to take out a 25-year-mortgage. We have about £30,000 in savings and no debts. We work from home and need a decent sized, 3 bed home. Checking out Rightmove reveals that we could rent what we need for between £800 - £1,000 month. Buying a similarly specified home should cost around £2,500 in mortgage payments if we took out 100% mortgage, or close to it.

Investing the difference between renting and buying would seem to be the sounder financial choice, but there is more to choosing between buying and renting than that. For instance, We've been told by some letting agents that UK landlords won't allow tenants to run a business. Others have frightened us off with draconian contracts that don't allow the tenant to change as much as a light bulb, own a cat (not that we do!) or plant a few herbs in the garden.

Our main questions are:

What is the reality of renting in the UK?

Are all British landlords really such ogres?

What advice would the experts here give us about whether to buy or rent?

Thanks in advance.

johnuk_3

Does no one have an opinion on renting versus buying?
Just asking...

budget_counsellor_shaz

Sorry that nobody has replied to you yet.......I hope this will help you

http://forums.moneysavingexpert.com/showthread.html?t=574386

or this

http://forums.moneysavingexpert.com/showthread.html?t=573147

People have different opinions on this, in the end its up to you.

Shaz

pinkshoes

I would say having a 100% mortgage is a BAD move... it's best to save up at least a 10% deposit.

Do you have a private pension? If you don't, then owning a property is a good move, as £800/month on rent might not sound like much now, but your pension certainly won't stretch that far!! At least if you have a mortgage free home, you then only have to worry about finding money for the Council Tax bill!!

Maybe compromise by making a big effort to save up a deposit in the next 12 months, THEN look at buying.

Lavendyr

johnuk wrote: »

Investing the difference between renting and buying would seem to be the sounder financial choice

Definitely far more financially sound, but the "work from home" part is ringing alarm bells to me, because many landlords do not permit business to be conducted in the dwelling. I believe this is primarily for insurance reasons - i.e. it will cost the landlord more to insure a building which is also used as a place of business. But may be wrong. If you rent privately you may be able to negotiate with the landlord to be permitted to run a business from home, but this is the real sticking point.

johnuk wrote: »

Others have frightened us off with draconian contracts that don't allow the tenant to change as much as a light bulb, own a cat (not that we do!) or plant a few herbs in the garden.

While I'd agree that not allowing tenants to change light bulbs would be draconian, I can't agree with the last two. It is a fairly standard clause that pets are not permitted in many rented houses, though again there are several out there that do permit this and landlords may be open to negotiation, especially if you were willing to up the rent! And as for planting things in the garden, again I agree it sounds a bit odd but in practice I expect that a few herbs wouldn't be a problem - as long as you remove them when you leave.

I've rented in three houses now, and have had a completely different type of landlord in each. Some are very helpful and will sort things quickly (like my current landlords), others are lazy and/or haven't thought the renting process through (like my previous landlord). So there's really no typical experience. Most landlords are not ogres, but it's always a good idea to try and meet your landlord and get a feel for whether they know what they're doing, what their plans are (longterm/shortterm rent), generally make an impression of whether you feel you could make a good deal with them.

However, as I said above, first of all you need to find a landlord who will let you conduct business in the house and who is prepared to make sure that s/he has done everything by the book in that respect.

Hope that helps

johnuk_3

Thanks Lavendyr for your most helpful response - and everyone else too.

Pinkshoes: good point about the pension, thank you. I think your idea of a 'compromise' is a good one too. My wife and I are leaning that way. I.e., rent for a year or so to increase our savings and then see what the market's like.

I agree that working from rented accommodation is a possible sticking point, but as we have never rented before, we really have no idea how difficult it might be to find an accommodating LL. Does the nature of the business make a difference? My wife and I run a consultancy business. No heavy trucks rolling up at all hours, just occasional small deliveries and visits from clients. We've had the business for over 15 years.

Given the current state of the housing market, we are loathe to commit all our meagre savings to a mortgage. My sums suggest it would cost us a minimum of £2,000 a month for a 12 - 15 year 90% mortgage. That's an awful lot of money to find every month in addition to council tax, utilities and the usual bills. Always assuming, of course, that we could get a mortgage at our age (I'm over 50, my wife is in her late 40's). Especially since we're self employed and have been for over 15 years.

I guess we'll have to see what kind of LL's we can get. So far, we've looked at one property which would suit us where the LL is happy for us to run our business, but he really wants to sell, not rent. Unfortunately, he's not getting any offers at anything like his asking price!

Would it be a good idea to talk to some independent mortgage advisers?

What about letting agents? How keen are they to match a potential tenant to a LL? Or do they only care about the dosh? If we rented, we'd be looking at long term, or at least as long a term as we could get. Does that count for something with LL's? Equally, I have a proven financial track record. Never defaulted on anything, high credit rating, no debts, etc. Does that count with LL's?

Sorry for all the questions!

carolt

Renting, as lavendyr says, is very much a mixed bag. Landlords vary hugely - as a general rule, don't expect them to take the same interest in your home as you do. They often fall into one of 2 camps - either completely disinterested, leave you alone, let place fall into as much disrepair as they can get away with, and are happy as long as they can get the rent paid regularly. This kind of landlord won't care if you run a business/have a pet etc In many ways this is preferable to type 2, the over-involved landlord, ie those who try to check up on the property regularly, care deeply about exactly what you're doing in the property and will police every infringement of the lease rigorously. This applies particularly to people renting out their former home or recent entrants to BTL market with just 1 property. On the other hand, beware damp, poor decor in type 1!

Lavendyr's advice is spot on - when checking out the property, check out the landlord too - speak to them if possible before handing over any cash. Re your question about letting agents - no, they are only in it for the dosh - take everything they say with a pinch of salt and make sure you check up the property very carefully yourself. An example from my own experience - the letting agent of our current rented house told us the house had a loft, which was boarded and which we could use. The night before we were due to move in, the landlady phoned us (all negotiation had previously been through the letting agent) and mentioned in passing that we know about not being allowed to use the loft?! As everything was already packed in boxes, removal vans ordered etc, it was too late to go back on the move, but it has meant we've had to use the utility room as our 'loft'..... So no, never trust a LA.

That said, I haven't even bothered to discuss the decision of rent versus buy - I think given the figures you quote, it would be hard, not to say impossible to suggest you buy at this moment in time. At the very least, rent in an area you might like to live in long term, to see if you like it, whilst you save up some sort of deposit - if prices fall, as some are predicting, you will save yourself money if you do then decide to buy and be in better position re mortgages if you are no longer seeking a 100% mortgage.

By and large renting is fine and I am happy in our current rented house (bar loft!). I think home ownership is always preferable, long-term, but at this particular point in the house-price cycle, and having not lived in the UK for some time, renting so you have the opportunity to save, whilst refamiliarising yourself with the area/s you want to live in, seems to make sense.

Whatever a lease says, they are open to negotiation eg our lease says no pets but the previous tenants had 2 large dogs! (And we have goldfish but haven't told the landlord!) As your business hardly sounds one that would affect the property or annoy the neighbours in any way, I'd point out what good, reliable tenants you would be and explain your situation, and would be surprised if most landlords objected. Given the current market, if you were looking for a longer-term tenancy, I'd also check if the landlord might want to sell up at some point soon - not all are honest about this but some are, and you might even be able to buy, if it was at a suitable price. Obviously if you only want to rent short-term, this is less important, but if not, beware landlords who've recently got into BTL and might be subsidizing your rent with their mortgage - unless you want to be given notice just as you've settled in....

Doozergirl

carolt wrote: »

Renting, as lavendyr says, is very much a mixed bag. Landlords vary hugely - as a general rule, don't expect them to take the same interest in your home as you do. They often fall into one of 2 camps - either completely disinterested, leave you alone, let place fall into as much disrepair as they can get away with, and are happy as long as they can get the rent paid regularly. This kind of landlord won't care if you run a business/have a pet etc In many ways this is preferable to type 2, the over-involved landlord, ie those who try to check up on the property regularly, care deeply about exactly what you're doing in the property and will police every infringement of the lease rigorously. This applies particularly to people renting out their former home or recent entrants to BTL market with just 1 property. On the other hand, beware damp, poor decor in type 1!

You saved me a whole load of writing! I entirely agree. My experience of LLs is fairly limited but my first was a type 2 and it was absolutely suffocating. They stole a considerable part of our deposit even though the Letting Agent tought we'd left it in really good condition for a rental property. The LL had a total hissyfit at me and the LA that my DD at the age of 21 months had drawn on a bit of the wall and that (in my total paranoia of her taking my deposit) I had subsequently paid for !!!! Laura Ashley paint in the same colour and had the entire room professionally redecorated She only knew because I had to ask what colour it was. And then, after filling and sanding the two relatively small holes made by our dresser, I was slated for not painting over them. Just how many tins of paint was I expected to buy? Every wall was a different colour, I swear. :rolleyes:

So my advice is to find a type 1 landlord and a modern house painted in magnolia that won't suffer from damp and won't need too much doing to it I'm happy to sort out stuff that breaks when I'm here (the rent is cheap and we're in the trade). I just hope they don't sell!

I don't think you should rent from this person who wants to sell, because if the thought is there they will sell sooner rather than later. Letting a property because you can't sell it is bad.

carolt

That's tough, Doozergirl - in one flat we left, my toddler had torn off a large piece of wallpaper and there were a number of stains in the carpet. No problem - it was a type 1 landlord! - and we got all our deposit back, though if they'd asked I would have been prepared to pay as it was our fault.....

Doozergirl

carolt wrote: »

That's tough, Doozergirl - in one flat we left, my toddler had torn off a large piece of wallpaper and there were a number of stains in the carpet. No problem - it was a type 1 landlord! - and we got all our deposit back, though if they'd asked I would have been prepared to pay as it was our fault.....

If I let a house to a family live then I'd expect a bit of wear and tear! I wouldn't care but I spent a small fortune trying to get it perfect and personally spent 10 hours cleaning after I'd moved out, right down to every single window inside and out. Idiot that I am. She had the gall to say that she'd let me live in her home! I'm trying to get on top of everything now that we're not working and I am going to send the witch a small claimms summons, see if she defends it and then watch when they turn up at court and I don't;) I just can't be arsed to go through it all but I want to see her have sleepless nights like I did. :mad:

I'm just glad that the inventory was less than flattering on this place though it was fine - just a bit dusty really where they hadn't considered blinds and skirting. The LLs have never bothered to introduce themselves, though he did actually say hello last week because he was working on the development and saw H outside the house.

epz_2

am i the only one who thinks the option of paying up to £1700 a month renting from the bank when the market is at best likely to remain static for a while is daft.

why not rent somewhere really nice for a 6 months and see how you feel once you have a feel for the area etc. i would bet that expensive houses have less hassle from dodgy landlords than 2 bed flats, if you are concerned try to rent from a big landlord who you can check on.