200k rent or buy????

Tubearhole

Hi

I  would really appreciate any practical advice in my question please. 
Do I buy a house or rent?
I am 45 married with 2 teenage kids.
My house is for sale and will have 200k in the bank after the sale. 
The 'norm' seems to say buy another home but my gut is saying why??

Why buy a house that I am responsible for to maintain when I can rent a modern home and pay for the rent with the interest from the bank and top up with mine and my wife's pt income.

If I buy a house I will never see that 200k. I understand that my kids will when they are possible in their 60's and I am gone but why not have the money in the bank and give the money to my kids when they really need it for things early in life like a car a deposit for a home a holiday or whatever. 

Am I crazy in my reasoning or just trying an alternative to 'the norm'
 

Stubod

Interest on £200k would be around £550 a month??.....would you get a rental property that you liked for that??.....and every year the rent will go up, while your £200k will be going down, so the gap between your interest and your rent will be getting larger and larger.

In the long run it is much better to buy than rent. Rent is largely dead money with no return...IMHO. 

vacheron

I've done both.

For me it would depend how long you would plan to live in the house / area before you may wish to move on again. 

Renting buys freedom, buying buys security. 
Mathematically, buying obliterates renting from a "head not heart" financial perspective.

The only thing I didn't make my decisions based on is the one thing most (including yourself) tend to quote first, "mantenance". I've lived in my house for 15 years, and I can count the non-discretionary maintenance tasks I have had to perform in the hundreds of pounds, not thousands. 

My grandmother rented for decades using the "what if the roof blows off" defence that many people had at the time.
Over those years she paid enough for probably a dozen new roofs, and missed out on hundreds of thousands of pounds in property appreciation.... and of course, the roof never blew off either! 

The most significant decider or me though was (under current UK law), the thought of getting established and then recieiving 60 days notice out of the blue to get out would not sit well with my sense of peace at all. You also are living in how someone else wanted their house to be decorated / furnished. 
(I do know plenty people who rent and re-decorate / re-carpet / landscape the garden, when they move in, but to me, improving someone else's house with your own money is one of the stupidest things to do that I can imagine!)

Also:

If I buy a house I will never see that 200k...........why not have the money in the bank and give the money to my kids when they really need it for things early in life like a car a deposit for a home a holiday or whatever. 

If you rent, you will never see that £200K either as you need to leave it untouched to generate the income needed to continue to keep pace with your rent. The worst scenario (which I have also seen twice on friends who have sold to rent), is that money burnt a hole in their pocket. The "new car" and "nice holiday" treats that they bought (and which you are suggesting in your comment above) seem small when you have hundreds of £k of liquid cash available, but they add up, and now these friends are unable to ever get back to owning again.   

Martico

As above. Rent is subject to inflation, plus that level of interest would be taxable

Grumpy_chap

Tubearhole said:

My house is for sale and will have 200k in the bank after the sale. 
The 'norm' seems to say buy another home but my gut is saying why??

Why buy a house that I am responsible for to maintain when I can rent a modern home and pay for the rent with the interest from the bank and top up with mine and my wife's pt income.

why not have the money in the bank and give the money to my kids when they really need it for things early in life like a car a deposit for a home a holiday or whatever. 

 

You already have some sound responses.

Remember, once that £200k is gone to your kids, it is gone forever.  Switching from buy to rent is not going to be an easy decision to reverse later.  Rent may seem sensible financially all the while you are working and have rising income to meet the increasing rent costs.  How will you achieve a pension / retirement income sufficient to continue the rent for a property plus all the other lifestyle choices you may wish to enjoy in retirement?

It seems somewhat ironic that your suggestion to switch from home-owner to home-renter includes the idea to release the funds to pass to your children sooner and potentially for them to buy their homes.

dreaming

You can still gift your children money to help with house deposit or whatever. I have just done this for my daughter by releasing some equity from my fully paid for house. I kept it to the minimum to give her a good amount plus some more for a few improvements to make life easier now I am 70 but also kept some in reserve for "emergencies" - although that is what insurance is for. I understand about the maintenance thing but it depends on your landlord. My daughter's last landlord was very lax about a leak 2/3 years ago and sent various cheap bodgers around to patch the flat roof with varying degrees of success, then when daighter moved out, complained about the bitumen marks caused by one of these so-called trademen throwing it on during bad weather. The landlord also got his brother to paint the outside window frames in the blistering hot sun and he got paint all over the glass as well which my daughter ended up scraping off.

ReadySteadyPop

Stubod said:

Interest on £200k would be around £550 a month??.....would you get a rental property that you liked for that??.....and every year the rent will go up, while your £200k will be going down, so the gap between your interest and your rent will be getting larger and larger.

In the long run it is much better to buy than rent. Rent is largely dead money with no return...IMHO. 

With the sudden mood change at all levels on immigration I suspect that a lot of landlords will struggle even to get tenants let alone feel they can get regular rent rises. Rent is a cost, mortgage is a debt, you can move away from a rental but you can`t move away from a mortgage debt, if you get caught out with interest rate rises or a bond market crisis the extra amount you will need to pay out on your house debt coming off a fix for example could be very painful.

Stubod

ReadySteadyPop said:

With the sudden mood change at all levels on immigration I suspect that a lot of landlords will struggle even to get tenants let alone feel they can get regular rent rises. Rent is a cost, mortgage is a debt, you can move away from a rental but you can`t move away from a mortgage debt, if you get caught out with interest rate rises or a bond market crisis the extra amount you will need to pay out on your house debt coming off a fix for example could be very painful.

....youv'e got to smile haven't you.. .......10 out of 10 for persistance.....!!! 

ReadySteadyPop

Martico said:

As above. Rent is subject to inflation, plus that level of interest would be taxable

If we get serious inflation interest rates will rise, there will be job losses and less wages to pay rent, rent is subject to wages and wage inflation not general inflation, general inflation is bad for landlords and those holding large mortgage debts. We are not getting "good" inflation now, the kind where wage increases fund mortgage debt payments and rents, we are getting the "bad" kind, volatile, unpredictable, dependent on geo-politics, in that scenario the 200k is better to be somewhere reasonably safe and accessible.

Tabieth

I doubt you’ll get enough interest on 200k to pay for a decent rental house. Plus you have no security or control with a rental property. You can’t decorate it to your taste and, although harder to be evicted now than it was, you can’t guarantee it will be a long term home. And rents go up, likely far faster than interest rates. And what happens when you and your wife have retired and are on a pension? If you buy now the mortgage will likely be fully paid off by then and so your outgoings will be significantly less. If you’re still renting in retirement you are paying full rent on loess income. 

I rented for many years as an adult, I bought my house this year. I feel so much secure and settled now than I did. My mortgage is significantly less than my rent, I’ve made my house to my style. Renting for right for me for a time but it’s not the longer term option. 

ReadySteadyPop

Tabieth said:

I doubt you’ll get enough interest on 200k to pay for a decent rental house. Plus you have no security or control with a rental property. You can’t decorate it to your taste and, although harder to be evicted now than it was, you can’t guarantee it will be a long term home. And rents go up, likely far faster than interest rates. And what happens when you and your wife have retired and are on a pension? If you buy now the mortgage will likely be fully paid off by then and so your outgoings will be significantly less. If you’re still renting in retirement you are paying full rent on loess income. 

I rented for many years as an adult, I bought my house this year. I feel so much secure and settled now than I did. My mortgage is significantly less than my rent, I’ve made my house to my style. Renting for right for me for a time but it’s not the longer term option. 

Recent history says no.

You do have security with a rental, there is more legislation in place to protect tenants than ever before. If the OP wants to pay some of the mortgage debt interest with the interest on the  200k (do they even have the 200k, or is it just "expected" money from a potential sale?) that is one thing, dropping their whole savings pot into the property market is not a prudent move in my opinion, the difference between "wealthy" people and the general population is that wealthy people preserve capital they don`t gamble it on the housing casino.