If renting is dead money what's this

---lee---

Markyt wrote: »

...can someone give me the average return on say £600 / month invested in rent?

Easy! 0% AER (tax free)

subjecttocontract

If you rent a small house how will you ever be able to afford something better ? OK, your rent may be less than the mortgage payments but the vast majority of people will spend most of the difference......not save it.

If you buy, you have the opportunity over time of trading up to a larger house as values increase. I have property worth a £million ....I couldn't have done that if I were renting.

Where can you rent a house with a pool, sauna, gym, a few acres and lots of rooms......that YOU can afford ?

If you want to improve yourself......buy. If your content to live in a small/ mediocre property for the rest of your life then rent.

neverdespairgirl

Markyt wrote: »

If renting is not dead money, can someone give me the average return on say £600 / month invested in rent?

Ta.

I can give you our example.

We live in a 3 bed place in WC1, central London, and pay £1k per month for rent and water.

If we bought this place on a 100% mortgage, the interest would be £2.5k per month.

So we are getting an excellent return on our rent of £1k - saving more than £1.5k per month!

neverdespairgirl

subjecttocontract wrote: »

If you rent a small house how will you ever be able to afford something better ? OK, your rent may be less than the mortgage payments but the vast majority of people will spend most of the difference......not save it.

Speak for yourself! We aren't all profligate with our cash.

We rent, and save the difference between rent and what we'd pay on a mortgage (not quite the whole amount, but we wouldn't take on a mortgage on this place, it would be outside our financial comfort zone) and also have compound interest rolling up on our deposit.

Riq

subjecttocontract wrote: »

If you rent a small house how will you ever be able to afford something better ? OK, your rent may be less than the mortgage payments but the vast majority of people will spend most of the difference......not save it.

If you buy, you have the opportunity over time of trading up to a larger house as values increase. I have property worth a £million ....I couldn't have done that if I were renting.

Where can you rent a house with a pool, sauna, gym, a few acres and lots of rooms......that YOU can afford ?

If you want to improve yourself......buy. If your content to live in a small/ mediocre property for the rest of your life then rent.

Yes, because it's so easy as a single young guy to buy a house isn't it?

There are other reasons to rent rather than stay with my parents, not just financial. My own life for one.

beecher

subjecttocontract wrote: »

If you want to improve yourself......buy. If your content to live in a small/ mediocre property for the rest of your life then rent.

Interesting take on what 'improves' you as a person.

Dick_here

neverdespairgirl wrote: »

We live in a 3 bed place in WC1, central London, and pay £1k per month for rent and water.

If we bought this place on a 100% mortgage, the interest would be £2.5k per month.

So we are getting an excellent return on our rent of £1k - saving more than £1.5k per month!

Are you actually saving (putting away) that 1k a month though ? If not, one day you'll have to move out of your rented place and you'll not have a home or any money. Not such a good return then...

happywarmgun

youngmoney wrote: »

I have made a huge number of assumptions, but assuming that property prices increase in the long term, it makes absolutely no sense to rent.

Phew!!

Thanks for the superb account why 'other things being equal', 'over the long term', you would want to buy not rent. The anlysis is sound. However, like comedy, it's all about timing. Right now, the short term factors suggest rent IS NOT dead money. Take my present situation:

I had to move due to expanding family. Looked at four bed detached houses in the circa 450k-500k bracket last summer. We found one place of interest but it was actually 575k. To afford such a place, with the equity we have - we were looking at INTEREST ONLY payments of around 1800 a month. Or a repayment at around £2600. Now the sellers of the house wanted rid, but wouldn't drop the price. However, we found they also had it on to rent with another agent (obviously hedging their bets).... we negotiated on rent and got it for 1400 a month.

Now - on the principal that rent to a landlord is as dead money as interest repaid to a bank we are over 400 quid a month up on if we had an interest only mortgage deal and 1200 better off a month(!) than if we had a repayment mortgage. Those savings are being invested elsewhere. These assets are appreciating. Had I have bought the house the value of it would currently be depreciating. We will probably buy again in two years (somewhere bigger again) and will have a stonking deposit as a result of this, no negative equity, and in the meantime we've lived in a brilliant, beautiful house where the landlord pays for any work that needs doing. If the landlord put it back on the market I would probably make an offer - but it would be a good 100k below last summers asking price - I'd still be super up on the decision to rent!

So - it all depends on personal circumstances and where we are in the cycle. In the long term your analysis is spot on - in the short term though there may be smarter moves. Renting is wise choice for many people at the moment.

neas

beecher wrote: »

Interesting take on what 'improves' you as a person.

capitalism for you.. people seem to think having perceived 'wealth' makes them better oO.

Its just bits of paper.. you aint gonna take it with you when you die..

Riq

neas wrote: »

capitalism for you.. people seem to think having perceived 'wealth' makes them better oO.

Its just bits of paper.. you aint gonna take it with you when you die..

I already want to be buried like an Egyptian Pharoah.
I am going to write in my will all my money will be withdrawn, exchanged for gold and buried with me.

I will demand also some Indian Jones-esque traps in my tomb.

Maybe something like Alien vs Predator too, that would be pretty sweet.