Answer To 'should I Buy Now Or Rent' Questions

[Henrik]

A STR with dosh in the bank can also pay some/all of the rent with the interest on their savings so they are effectively living rent free.

This is not true, is it? If the STR uses the interest on the capital to pay for the rent, it means that the capital doesn't grow, so the purchasing power is diminished by inflation, right? No such thing as rent free - always consider the opportunity costs (IMO)

[Guest The_Oldie]

This is not true, is it? If the STR uses the interest on the capital to pay for the rent, it means that the capital doesn't grow, so the purchasing power is diminished by inflation, right? No such thing as rent free - always consider the opportunity costs (IMO)

I think you'll find that most STRs are not relying on the interest on their STR capital to pay their rent. In my case I leave 100% of the interest in the pot and pay my rent from other funds.

[Fortune]

Its all just speculation, yet some of you seem so sure of how the market will go. If you're so brilliant at predicting house prices in three or four years time I'm surprised you're not sunning yourself on some beach somewhere having retired at the age of 40, rather than spending all your time slagging of new posters on the interweb.

You make all these assumptions about future interest rates and future rental rates that you can't possibly know. My mate has just sold his house and is wondering whether to rent or buy. But he has no mortgage, just 200 grand sitting in the bank. He's paying tax on that money. So if he buys, he pays no mortgage AND no tax. So his situation is not the same as someone with an IO mortgage. There is no single answer that you seem to want.

What about all the shitty things that happen with renting, like crap landlords, or the fact that you can be kicked out of your home, a home that you might have lived in for years next to a school that your children are happy at, close to your friends and family, with barely any notice? Or the fact that you can't replace the horrible carpets. Or the fact that if the washing machine breaks you might have to wait days for it to be fixed or replaced.

You seem to imply that all houses in all areas will fall by roughly the same amount. That's obviously daft. Some properties will fall by 70%, some buy 10%, and some will actually increase.

What about someone that has seen his dream house, in a good area, with good schools, where his friends live. And he can afford it. If he waits, he can "probably" buy it in a couple of years time and save loads of money. But the word is "probably". We're all risk averse. Buy it now, and prices fall, he still has his dream house. Don't buy it now, and prices rise, he may never have it. Its a gamble. Does he want to gamble with his kid's education in order to make money? Not everyone does.

Are you a 'she is the best I can do' or a 'I'll wait until a better women comes along' kind of guy? Just curious.

[Paddles]

Thank you for pinning this. Thank you. Thank you. Thank you.

Now can we legitimately persecute and humilate the next sub-10 posts new member to start a new topic on this subject?

[pablopatito]

Are you a 'she is the best I can do' or a 'I'll wait until a better women comes along' kind of guy? Just curious.

I'm a "life is what happens while you are busy making other plans" kind of guy. I've put a lot of thought into my decision to STR. I've done the financial Excel bit, working out tax implications on my equity and so forth. But I've also done a lot of thinking about things like schools, the type of property I want to live in, the type of village I want to live in. I've experienced the rental market as both a tenant and as a landlord. Now, if a newbie wants to post their circumstances and if they happen to have similar circumstances to me, then I'll give them my opinion. I can't give them an answer, but I can maybe make them think of one or two things that they hadn't thought of yet. So maybe I can help them come to the right decision.

Now if a newbie posting a question, and if me posting an answer, offends some of you so much, then please, please can't you just ignore the thread? Do some of you have some kind of internet Tourette's ("I. Must. Post. A. Reply. In. This. Thread. I. Can't. Stop. Myself.").

I hang around quite a bit on Unix forums and thought some of those guys were the most patronising, smug, self-satisfied ****'s I'd ever come across, but some of you on this forum take the biscuit.

Let me beg of you again: You don't have to reply to every thread! You can ignore threads that don't interest you! You are not God!

[Nstansbury]

It'd be great to see this graph plotted on a log scale - so that equivalent percentage movements in price show up as equal movements on the graph - by not plotting on a log scale this graph makes the recent price movement look overly exagerated. I've done this for real prices against a log trend, and the recent bubble looks much more proportionate.

Nick

Edited February 28, 2008 by Nstansbury

[Scott]

I'm a "life is what happens while you are busy making other plans" kind of guy. I've put a lot of thought into my decision to STR. I've done the financial Excel bit, working out tax implications on my equity and so forth. But I've also done a lot of thinking about things like schools, the type of property I want to live in, the type of village I want to live in. I've experienced the rental market as both a tenant and as a landlord. Now, if a newbie wants to post their circumstances and if they happen to have similar circumstances to me, then I'll give them my opinion. I can't give them an answer, but I can maybe make them think of one or two things that they hadn't thought of yet. So maybe I can help them come to the right decision.

Now if a newbie posting a question, and if me posting an answer, offends some of you so much, then please, please can't you just ignore the thread? Do some of you have some kind of internet Tourette's ("I. Must. Post. A. Reply. In. This. Thread. I. Can't. Stop. Myself.").

I hang around quite a bit on Unix forums and thought some of those guys were the most patronising, smug, self-satisfied ****'s I'd ever come across, but some of you on this forum take the biscuit.

Let me beg of you again: You don't have to reply to every thread! You can ignore threads that don't interest you! You are not God!

The reason I started this post was due to another post reply that Paddles made saying he was fed up with new posters just saying that house prices only ever go up with no argument to back up their thinking. And yes, these guys usually state they have been looking at this forum for years even though they have only just joined.

I'm all for having a discussion which is surely what this forum is, but to have a new post regularly from these type of guys is frustrating and does fill up the forum posts.

I'm glad this post has now been pinned so that we can use this post to dicuss this issue, a bit like the gold post. Rather than having a few posts a week from new members saying renting is dead money, house prices only ever go up and not substantiating their argument is hugely frustrating.

And no, I don't have a crystal ball. If I did I would be a millionaire. But I have only been saying that house prices will drop since early last year. I sold to rent in July last year and so far feel I have made the right decision.

And if you'd like to look at my previous posts on other subjects you'll find that I'm not patronising - or at least I don't think I am. If I am I apologise.

[Without_a_Paddle]

I think you'll find that most STRs are not relying on the interest on their STR capital to pay their rent. In my case I leave 100% of the interest in the pot and pay my rent from other funds.

I think you'll find you are deluding yourself with that argument...

[Guest The_Oldie]

I think you'll find you are deluding yourself with that argument...

Well it's certainly true in my case, any other STRs care to comment?

[Bosh]

Well it's certainly true in my case, any other STRs care to comment?

I was very fortunate to have paid off my mortgage and STR last August. My STR fund would pay my rent twice over through interest alone.

I choose to pay the rent from my wages in order to live within my means and to ready myself for jumping back into the market.

It suits me wether we have a slow or fast crash and even prices freezing for 3-4 years will be ok. My fund will continue to grow if I am sensible and stick to the plan.

[Henrik]

I think you'll find that most STRs are not relying on the interest on their STR capital to pay their rent. In my case I leave 100% of the interest in the pot and pay my rent from other funds.

And you're doing exactly what you should be doing, of course. My point was that it's not correct to say "live rent free by paying the rent with interest from STR savings" as you then end up with less real purchasing power in your "STR pot" (due to inflation).

[OurDayWillCome]

My mate has just sold his house and is wondering whether to rent or buy. But he has no mortgage, just 200 grand sitting in the bank. He's paying tax on the interest he is earning from that money.

Bold bit is mine.

Edited February 28, 2008 by OurDayWillCome

[Guest The_Oldie]

And you're doing exactly what you should be doing, of course. My point was that it's not correct to say "live rent free by paying the rent with interest from STR savings" as you then end up with less real purchasing power in your "STR pot" (due to inflation).

Although, as a previous poster pointed out, money is fungible, so one could pay the rent from the interest from the STR fund and invest a much higher proportion of ones other income, same difference.

As stated in an above post, "The only true comparison is rent versus the interest on a 100% IO mortgage" or in my case, as I sold a mortgage free house, rent versus the interest received on the money that would otherwise be used to buy the house I'm renting and my rent is equal to half of that amount.

[Duke & Duke]

I just couldn't help but reply to this thread as you'll see from my posts (or lack thereof), I'm a newbie to this site & yes I have been lurking for a long time. Not sure why this should annoy so many people but I guess it does.

Although not new to economics & finance I have learnt a great deal on this site and would like to thank HPC for the entertaining threads.

Right, I feel better now for admitting my crime of being a lurker/newbie...

[Scott]

I just couldn't help but reply to this thread as you'll see from my posts (or lack thereof), I'm a newbie to this site & yes I have been lurking for a long time. Not sure why this should annoy so many people but I guess it does.

Although not new to economics & finance I have learnt a great deal on this site and would like to thank HPC for the entertaining threads.

Right, I feel better now for admitting my crime of being a lurker/newbie...

It's not newbie/lurkers we have a problem with per se. It is those that start an argument that 'house prices only ever go up / renting is dead money / buy now before it is too late' without ever backing their argument up or ever posting again. And it is happening regularly!

So, yes, welcome to HPC. I hope you will learn lots as many on here have.

[pablopatito]

It is those that start an argument that 'house prices only ever go up / renting is dead money / buy now before it is too late' without ever backing their argument up or ever posting again. And it is happening regularly!

Does it really? I'm fairly new and don't have time to read all the threads, but I haven't read any threads like this, never mind loads.

[Duke & Duke]

Understood although I've noticed that the Bulls who think prices are still going to rise have declined considerably in recent months. I would have thought that most new people would be asking is now a good time to sell !!

Having said that someone in my office is convinced house prices will rise this year.....utter madness

[Scott]

Does it really? I'm fairly new and don't have time to read all the threads, but I haven't read any threads like this, never mind loads.

OK. I'll refer any that come in direct to you (and I'm sure others like Paddles will too) - we'll see how many come in. If it is none then I'm happy to eat my words or will be happy that they have stopped.

If Paddles or someone else has the time then please feel free to trawl through past posts and let Pablo know which ones we're talking about!

If I get a moment sometime soon I will do it if no-one else has in the meantime.

[numpty]

My own view is that the effect of gearing allied with greed amplifies gains in inflationary times which in time bring about an envitable correction which is breathtakingly savage when it reverses - a series of waves. If you regard your home as an investment then you must accept that you will need to ride those waves carefully; however hindsight will show how easy it is.

A home provides security, permanency and stabilty, however this all lost when it is viewed as an investment

[Toilet]

Hello friends,

I was the original poster of the thread "Should I rent or buy?"

My original thread had no less than 42 or so reponses. The advice was extremely helpful. Especially since a few individuals condemed my question as a waste of time. I find today that someone has made a pinned thread on the back of this to those that dare ask the same question. Again 40+ responses and a very interesting discussion. I'm most grateful for such valid opinions as people have put forward a view from both sides. My question arose out of the fact that I will be paying my landlord £60,000 in rent over the next 5 years. As no-one can see the future, despite what they claim with lame graphs of the past etc. I thought this was a valid question. Furthermore, what many fail to understand is if I purchased a flat/house, despite paying high interest rates and risking nothing more than the mere possiblility of huge negative equity, the property would be mine. I know some will not agree but being in your thirties and not owning property does not impress anyone. You can tell people all you like about how you are watching out for the forthcoming HPC but there is not going to be a rush of women wanting to marry you. That's the way it is. Some of the anorak wearing single guys that have never had a girlfriend will disagree no doubt. If you don't believe me, try mentioning at a dinner conversation that you have been renting for 15 years. So to those that have responded, I thank you very much. It was an intelligent question and I received some fantastic responses to it. For a forum entitled, "House Price Crash" the responses were suprisingly balanced.

Now can we legitimately persecute and humilate the next sub-10 posts new member to start a new topic on this subject?

Let me tell you a little story......

10 years ago, I was learning to drive. Most drivers when they see a learner driver, take extra care and show patience. However, there would always be some turkey that would drive up behind the car within inches of the bumper, flash their beam lights, sound the horn etc. A-holes if you will. Even though they too were learners once they felt that because they had been on the road a little longer, no-one else had the right to be there. A-holes indeed. Gotta love 'em.

We're all very impressed if you have a higher post count on an internet forum. I'm sure that would help you in many situations in life and would really impress people. Personally, I couldn't care less. If you don't like someone's post, ignore it. It's an internet forum. There is no need to respond if you don't like it. If it annoys you so much, ask your mum for some money and go out and play. If the post is inappropriate, tell a mod. Leaving 3 responses in a thread to say how silly you think the question is, is somewhat pathetic. Do have a comment to make about the housing market or a possible house price correction?

Thanks again to all for your kind responses.

[Disillusioned]

Its all just speculation, yet some of you seem so sure of how the market will go. If you're so brilliant at predicting house prices in three or four years time I'm surprised you're not sunning yourself on some beach somewhere having retired at the age of 40, rather than spending all your time slagging of new posters on the interweb.

You make all these assumptions about future interest rates and future rental rates that you can't possibly know. My mate has just sold his house and is wondering whether to rent or buy. But he has no mortgage, just 200 grand sitting in the bank. He's paying tax on that money. So if he buys, he pays no mortgage AND no tax. So his situation is not the same as someone with an IO mortgage. There is no single answer that you seem to want.

What about all the shitty things that happen with renting, like crap landlords, or the fact that you can be kicked out of your home, a home that you might have lived in for years next to a school that your children are happy at, close to your friends and family, with barely any notice? Or the fact that you can't replace the horrible carpets. Or the fact that if the washing machine breaks you might have to wait days for it to be fixed or replaced.

You seem to imply that all houses in all areas will fall by roughly the same amount. That's obviously daft. Some properties will fall by 70%, some buy 10%, and some will actually increase.

What about someone that has seen his dream house, in a good area, with good schools, where his friends live. And he can afford it. If he waits, he can "probably" buy it in a couple of years time and save loads of money. But the word is "probably". We're all risk averse. Buy it now, and prices fall, he still has his dream house. Don't buy it now, and prices rise, he may never have it. Its a gamble. Does he want to gamble with his kid's education in order to make money? Not everyone does.

You're generalising. That's bad.

You are also saying that assumptions are being made when they are actually calculated predictions.

p.s. i think that, though there are some more veteran posters who have an attitude problem, you also have an attitude problem.

Hello friends,

I was the original poster of the thread "Should I rent or buy?"

My original thread had no less than 42 or so reponses. The advice was extremely helpful. Especially since a few individuals condemed my question as a waste of time. I find today that someone has made a pinned thread on the back of this to those that dare ask the same question. Again 40+ responses and a very interesting discussion. I'm most grateful for such valid opinions as people have put forward a view from both sides. My question arose out of the fact that I will be paying my landlord £60,000 in rent over the next 5 years. As no-one can see the future, despite what they claim with lame graphs of the past etc. I thought this was a valid question. Furthermore, what many fail to understand is if I purchased a flat/house, despite paying high interest rates and risking nothing more than the mere possiblility of huge negative equity, the property would be mine. I know some will not agree but being in your thirties and not owning property does not impress anyone. You can tell people all you like about how you are watching out for the forthcoming HPC but there is not going to be a rush of women wanting to marry you. That's the way it is. Some of the anorak wearing single guys that have never had a girlfriend will disagree no doubt. If you don't believe me, try mentioning at a dinner conversation that you have been renting for 15 years. So to those that have responded, I thank you very much. It was an intelligent question and I received some fantastic responses to it. For a forum entitled, "House Price Crash" the responses were suprisingly balanced.

The italic bit made me chuckle.

Toilet. What did you decide? Rent or buy?

[SMAC67]

Wow, history is bunk, who would have thought it. Damn those graphs. S**t, where do you live that you need to own a house to get laid?

"Anyone taken as an individual is tolerably sensible - as a member of a crowd, he at once becomes a blockhead". - Friedrich Von Schiller.

Feel free to join the bubble before it bursts. Best of luck.

[Toilet]

Wow, history is bunk, who would have thought it. Damn those graphs. S**t, where do you live that you need to own a house to get laid?

"Anyone taken as an individual is tolerably sensible - as a member of a crowd, he at once becomes a blockhead". - Friedrich Von Schiller.

Feel free to join the bubble before it bursts. Best of luck.

Hi Smac,

Your previous comments about your experiences were well noted. Thanks for that.

I'm not joining any bubble. I asked for opinions from adults. Predictions about bubbles about to burst were abound in 2004. No-one knows yeah? No-one. Not you. Not me. No-one. We can predict. We can make a best guess judgement based on the past. We can ask the invaluable opinions of people and form a decision based on hearsay and opinion. But we don't know what will happen. Prices may drop 30% over the next 5 years. But hey, guess what, they may drop a very tiny amount to. It may take 10 years for house prices to slowly reach the bottom of a trough.

The approach of "Ha ha ha ha your're all fools, I've seen the graphs, I know about Northern Rock, your bubble is going to burst, I know" is just as silly as the bird from Location Location Location, saying she'll eat her panties if there is a crash or whatever it was she said.

I didn't say that I want to buy now and that I am cheerfully ignoring all the media at present. I was asking a question whether buying now MIGHT just have some sense in it. I spoke of my situation and asked the opinions of others who have a view. I recieved those opinions. Excellent opinions. I also received childish comments from people, who after reading their recent posts, had contributed nothing recently to this forum. Real funny commedians too. Not. All living with their parents no doubt.

Everyone knows that questions are stupid. No-one should ask them. The world is flat, you can sail off of the edge. Anyone who so much as asks for an opinion on the matter is a fool. Especially those that don't have many posts on an internet forum. It means they are dumb.

Best of luck to you too.

Edited February 28, 2008 by Toilet

[Scott]

I was asking a question whether buying now MIGHT just have some sense in it.

Hi Toilet

Could you explain why you are a bear? Surely if you're asking the question above you're a neither!

If you are a bear can you perhaps give your reasons as to why you are a bear?

I'm an out and out bear because I think (notice I said think, not know!) that there is a 99% chance of a drastic fall over the next few years. If I were undecided I would definitely be a neither. Perhaps we need a 'not sure', 'not sure, but verging on bull' and 'not sure, but verging on bear' categories?

Thanks

Scott

[jez123]

I just found a place being offered 20% below it's 2001 price...........

That's before an offer goes in....

This is a new slant on "should I buy now" for me