Advice on reducing asking price

MobileSaver

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

lookstraightahead

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

When I rented my rent was never increased whichever property I was in. Landlords with good tenants don't want gaps or non payers. When I was a landlord I didn't increase rent.
There's quite a big risk to rent increases with good secure tenants, even more so now when a landlords mortgage is increasing. And they're unlikely to sell anyway as they'll lose even more money. And if they do great, that's more houses on the market which will help buyers who perhaps couldn't afford to buy.

usually a landlord is happy with a bird in the hand. A tenant can non-pay for a year. They can move out if they're not happy after a month. 

A landlord isn't going to say "if this tenant doesn't pay me an extra £100 a month I'm going to sell in a fickle market" very often.  They're not going to necessarily struggle, and certainly not as much as homeowners on variable interest rates.

BV88

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

It’s not a flaw is it, I very clearly state that over time as rent increases along with house prices, the financials skew further and further toward the buyer. It’s the obvious financial winner over the long term with an appreciating asset. However you choose to ignore that bit…

I fully agree that it won’t continue, what’s most likely to happen is that gross rental yields will once again be higher than average mortgage rates and risk free savings rates. This will happen from some combination of rent increases and house price declines, plus maybe interest rate declines. So once again renting will cost more than buying. Over what time period, who knows, I would guess maybe 2 years. 

The point I am trying to show is things have changed so rapidly in terms of house prices rises and interest rate increases that we are now in a rare situation. A situation where average rental yields are lower than both average mortgage rates and average risk free cash savings rates. When that situation happens, your landlord is paying you to live in their asset, make hay while the sun shines! In reality no renter will feel like this because their costs are increasing, just not by as much as purchasing an equivalent property, where the cost has exploded. 

MobileSaver

lookstraightahead said:

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

When I rented my rent was never increased whichever property I was in.

You can't have it both ways. The whole point of the post by @BV88 was that these are exceptional times where interest rates have increased significantly over a short period of time making mortgage payments more expensive.

Most landlords have a mortgage so their outgoings will now be higher; you can't honestly believe that most landlords will take it on the chin and carry on losing money every month to subsidise their tenant's home?

lookstraightahead

MobileSaver said:

lookstraightahead said:

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

When I rented my rent was never increased whichever property I was in.

You can't have it both ways. The whole point of the post by @BV88 was that these are exceptional times where interest rates have increased significantly over a short period of time making mortgage payments more expensive.

Most landlords have a mortgage so their outgoings will now be higher; you can't honestly believe that most landlords will take it on the chin and carry on losing money every month to subsidise their tenant's home?

Must landlords will likely keep their properties as they will lose money by selling in this market, and they will bide their time as landlords run a business and short term hikes won't work for them. Tenants can say no to rent increases (if they want the hassle). Landlords keep money aside for downturns if they're proper business people.

They don't all sit there saying "my tenant is paying my mortgage ha ha what a silly tenant" the way you think they are. It's a long term investment with ups and downs just like any business. Tenants have a phenomenal amount of rights.

Now more than ever landlords won't kick out their tenants and sell their houses. They'd be completely bonkers. And it can take years to evict tenants. 

RelievedSheff

lookstraightahead said:

MobileSaver said:

lookstraightahead said:

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

When I rented my rent was never increased whichever property I was in.

You can't have it both ways. The whole point of the post by @BV88 was that these are exceptional times where interest rates have increased significantly over a short period of time making mortgage payments more expensive.

Most landlords have a mortgage so their outgoings will now be higher; you can't honestly believe that most landlords will take it on the chin and carry on losing money every month to subsidise their tenant's home?

Must landlords will likely keep their properties as they will lose money by selling in this market, and they will bide their time as landlords run a business and short term hikes won't work for them. Tenants can say no to rent increases (if they want the hassle). Landlords keep money aside for downturns if they're proper business people.

They don't all sit there saying "my tenant is paying my mortgage ha ha what a silly tenant" the way you think they are. It's a long term investment with ups and downs just like any business. Tenants have a phenomenal amount of rights.

Now more than ever landlords won't kick out their tenants and sell their houses. They'd be completely bonkers. And it can take years to evict tenants. 

I'm not sure most landlords would lose money if they sold now. For most they will have owned the property for long enough that it's value now will be most likely substantially above what they paid for it.

The estate where we live is a nice example. Several landlords have bought quite a lot of the properties here scattered around. 

The houses were bought brand new. They will have owned them for almost 4 years now. They have all been let for that time. House prices are up around 40% over those 4 years. 

If they sold now they would make no losses. They have had 4 years of rent (£1200-1500pcm), zero maintenance costs and houses worth 40% more than they paid for them.

MobileSaver

BV88 said:

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

However you choose to ignore that bit … So once again renting will cost more than buying. Over what time period, who knows, I would guess maybe 2 years.

I didn't ignore it. You talked about a 5 year fixed rate mortgage and then said "Over longer periods ... the economics get worse for renting". Certainly to me that suggested you were ignoring that average rents will increase year on year while the mortgage is fixed for five years.

I agree there's been a rapid change but the scenario you describe is clearly unsustainable and so has to and will very quickly change.

Average 5 year fixed risk free cash saving rate = 4.5%

Is that really the average or is it pretty much the best possible rate?

Regardless, if your figures accurately reflect the real-world situation then isn't the best bet for most landlords to sell up and stick their windfall in a variety of fixed-rate savings accounts? Which of course won't bode well for those wanting to rent.

MobileSaver

lookstraightahead said:

MobileSaver said:

lookstraightahead said:

MobileSaver said:

BV88 said:

So at current averages renting is cheaper per month ... your landlord may essentially be subsidising you to live in the property.

That's the flaw in your calculations; as you say, the homeowner's monthly payment is fixed for five years but the renter's monthly payment are almost certainly going to increase over the five years.

It's just common sense, if it ever gets to a point where the landlord's outgoings are more than their incomings then how long do you think they're going to keep subsidising their tenant? They'll either increase the rent or just sell the property making less rentals available; both of which mean the renter's monthly payments will increase.

When I rented my rent was never increased whichever property I was in.

You can't have it both ways. The whole point of the post by @BV88 was that these are exceptional times where interest rates have increased significantly over a short period of time making mortgage payments more expensive.

Most landlords have a mortgage so their outgoings will now be higher; you can't honestly believe that most landlords will take it on the chin and carry on losing money every month to subsidise their tenant's home?

Must landlords will likely keep their properties as they will lose money by selling in this market,

I mean, really?!?! How many landlords are going to get less than they paid if they sell today, in six months or even in 12 months time?

House prices have risen around 12% over the last year alone so even if they dropped by 12% a year from now they're still breaking even. The reality is that the vast majority of landlords bought much further back at much cheaper prices so the chance of them "losing money when they sell" is practically zero.