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Renting As A Life Long Strategy

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Guest bound

I was wondering: is it possible to make renting a valid life long financial strategy, assumming you can make your housing situation suitable stable. But then I quite like the mobility of renting.

Sometimes I think I quite like not having to worry about the upkeep of a house, especially seeing all the hassle that owning a house seems to be. I helped my girlfriend paint her walls a little while ago and my DIY enthusiasm has turned from 0 to negative.

From a purely financial point of view if we accept that renting is economically more sensible than owning at the moment, in the long time does owning versus renting balance out as neutral assuming that you save money and invest in other classes of assets - you could even expose yourself to propety via property trusts and what not. Or does the fact that you can gear yourself massively in property mean that it will be the way to go long term. Assuming you buy at a good or neutral time.

Bound

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I was wondering: is it possible to make renting a valid life long financial strategy, assumming you can make your housing situation suitable stable. But then I quite like the mobility of renting.

Sometimes I think I quite like not having to worry about the upkeep of a house, especially seeing all the hassle that owning a house seems to be. I helped my girlfriend paint her walls a little while ago and my DIY enthusiasm has turned from 0 to negative.

From a purely financial point of view if we accept that renting is economically more sensible than owning at the moment, in the long time does owning versus renting balance out as neutral assuming that you save money and invest in other classes of assets - you could even expose yourself to propety via property trusts and what not. Or does the fact that you can gear yourself massively in property mean that it will be the way to go long term. Assuming you buy at a good or neutral time.

Bound

I've been thinking along these lines although I'm sure that if I perceive property to be a fairer value again in the future then I will buy.

But realistically I've not yet been able to settle in one area, I'm 30 now and don't expect to be able to for some time to come. Moving now is a huge cost, stamp duty, EA fees, solicitor, removals etc etc

Also in the last 2 years in my very nice rented flat I've had a new cooker, new boiler, heater fixed, the shower leak is being fixed this weekend and I've just asked for a fresh coat of paint in the bedroom. And I can still leave without any hassle within 1 month.

I think the biggest benefit is that I'm not tied to a mortgage. I'm choosing to change career and I don't have to worry about how the mortgage is going to be paid or how I'm going to cope with any sudden repair costs. And I can move quickly and inexpensively anywhere, whenever I want. Today's homeowners have very little flexibility and mobility.

I predict that house prices will be either flat or down over the next 15-20 years and in this time i'd rather be renting whilst saving, until of course it makes financial sense to buy - if it ever does.

Edited by munimula

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Guest bound

I think I probably am in almost exactly the same situtation as you. 31 in the process of changing my career and so working part time for money while pushing hard into the new area the rest of the time. I am not stable and would like to live in a few other countries through my life.

But like you say, if a house makes sense to buy and it doesn't add stress to my life then I will buy.

It is nice to not feel suckered into buying a house. Quite peaceful really. Just appears houses are so overvalued at the moment that you can't make any possible argument for buying one.

Bound

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I was wondering: is it possible to make renting a valid life long financial strategy, assumming you can make your housing situation suitable stable.

Bound

Not if one accepts that in the long term buying is cheaper than renting. However, if in 40 years time it is still cheaper to rent then the answer may be 'yes'.

But if by sixty the house has been paid for then one could have another 30 years living rent free in the property (subject to maintenance costs) + inheritance for the family + lump sum to pay for nursing care in dotage if required.

Imagine 30 years of retirement at the mercy of landlords? There'll be no maintenance costs granted, but will the maintenance get done? If it does not would you afford the thousands required to take legal action? Will you be strong enough to to do that? I've been waiting two months for a shower tray and it still hasn't been repaired.

If one believes we will revert to long tem trends regarding prices the answer has to be 'no' IMO when one weighs the benefits that accrue with buying.

Most of us here believe house prices will revert to their long term trends. On that premise , the answer is 'no', renting is not a valid life long financial strategy'. Buying wins hands down IMO.

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Guest bound

"But if by sixty the house has been paid for then one could have another 30 years living rent free in the property (subject to maintenance costs) + inheritance for the family + lump sum to pay for nursing care in dotage if required." <- quoting Baz 63

What if one has been saving aside the difference between an IO mortgage on the given property and what they spent on renting and investing it away and earning returns in another assest class such that at the point of retirement rent is seen as another expense to be covered by the income generated from investments.

I guess I am saying of the two stratagies:

A: Buy house with mortgage and pay it off living in house for "free" at retired age.

B: Rent all life, save money, invest in whatever you wish to do and once retired generate income from investments which will cover cost of rent. Then go to retirement village with lump sum.

Is A inherently superior - and if so why? What makes a house such a good place to put money into. Is it that you can gear yourself up in your investment strategy more easily than with shares?

B appeals to me as a lifestyle I have to say, but does it make financial sense?

Bound

Edited by bound

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I think I probably am in almost exactly the same situtation as you. 31 in the process of changing my career and so working part time for money while pushing hard into the new area the rest of the time. I am not stable and would like to live in a few other countries through my life.

But like you say, if a house makes sense to buy and it doesn't add stress to my life then I will buy.

It is nice to not feel suckered into buying a house. Quite peaceful really. Just appears houses are so overvalued at the moment that you can't make any possible argument for buying one.

Bound

The problem with the growing taxes and costs on buying houses is that it ultimately puts a big restriction on mobility. This is absorbed when prices are rampantly rising but can't be absorbed very easily when they are not. Therefore unless you know that you aren't going to need to move, it can't be cost effective to buy when house prices aren't going to go up. Better off renting and enjoying the freedom that you get from renting. Keep saving, investing in better assets and wait for better times...whenever they come but if you are saving they will come

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no, in the long run you'll lose by renting.............If you bought a two-up-two-down in my town now for £140k (£45k just 6 years ago!)....on a 100% interest only long term fixed rate mortgage the payments would be approx £650 a month..........and would remain at that level indefinitely...........

If you rented the same property it would be £550 a month but this would increase probably in line with wage inflation and exceed the cost of buying after only 4 or so years.......

So after 16 years of 5% pa wage and rent inflation you'd be paying about £1300 a month which is double what the buyer will be paying then.........(still on his £650 interst only loan).

By then the buyer would also have made large capital gains on the house!

Buying seems to too good to be true........Can anyone pick holes in this except to say that if there's a crash timing your purchase is important?

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no, in the long run you'll lose by renting.............If you bought a two-up-two-down in my town now for £140k (£45k just 6 years ago!)....on a 100% interest only long term fixed rate mortgage the payments would be approx £650 a month..........and would remain at that level indefinitely...........

If you rented the same property it would be £550 a month but this would increase probably in line with wage inflation and exceed the cost of buying after only 4 or so years.......

So after 16 years of 5% pa wage and rent inflation you'd be paying about £1300 a month which is double what the buyer will be paying then.........(still on his £650 interst only loan).

By then the buyer would also have made large capital gains on the house!

Buying seems to too good to be true........Can anyone pick holes in this except to say that if there's a crash timing your purchase is important?

But will rents go up without wage inflation. Remember last year, for the 1st time average wage in the UK went down. To close the gap with the developing world, China, India etc can our wages here go up much? Mine has gone up only 1.2% pa over the last 5 years, cr*p yes but not unique.

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no, in the long run you'll lose by renting.............If you bought a two-up-two-down in my town now for £140k (£45k just 6 years ago!)....on a 100% interest only long term fixed rate mortgage the payments would be approx £650 a month..........and would remain at that level indefinitely...........

If you rented the same property it would be £550 a month but this would increase probably in line with wage inflation and exceed the cost of buying after only 4 or so years.......

So after 16 years of 5% pa wage and rent inflation you'd be paying about £1300 a month which is double what the buyer will be paying then.........(still on his £650 interst only loan).

By then the buyer would also have made large capital gains on the house!

Buying seems to too good to be true........Can anyone pick holes in this except to say that if there's a crash timing your purchase is important?

I can pick holes. Can you get a 16 year fixed IO mortgage? What if the house is now worth

30% less that it did 16 years ago?

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Can you imagine renting when you are 70, 80, 90 and being evicted because the landlord wanted to sell?

I'll probably buy in 5 years time. We will know by then whether indeed property prices have avoided crashing or whether they won't. Nothing lost waiting another 5 years as the chance of property going up in this time is near zero

The points made about not wanting to be in rented in your old age are all valid and true, don't think many would want to be in that situation.

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But if by sixty the house has been paid for then one could have another 30 years living rent free in the property (subject to maintenance costs) + inheritance for the family + lump sum to pay for nursing care in dotage if required.

What if one has been saving aside the difference between an IO mortgage and renting and eraning returns in another assest class such that at the point of retirement rent is seen as another expense to be covered by the income generated from investments.

I guess I am saying of the two stratagies:

A) Buy house with mortgage and pay it off living in house for "free" at retired age.

B) Rent all life, save money, invest in whatever you wish to do and one retired generate income from investments which will cover cost of rent. Then go to retirement village with lump sum.

Is A inherently superior - and if so why? What makes a house such a good place to put money into. Is it that you can gear yourself up in your investment strategy more easily than with shares?

B appeals to me as a lifestyle I have to say, but does it make financial sense?

Bound

But for many a house is not just an investment vehicle. Many families wish to settle and get their children into good schools etc. And for every great landlord, there are others who do not jump when you shout "new cooker please." And at any time you have the threat of a section 21 coming through the door giving you 2 months notice to quit.

I rented for many years and it was not all great, especially the landlords who "sold up" forcing me to move twice within a year. I also do not believe it is as simple for general Joe Public to make money in stocks/ other investments as some members make out here. It takes judgement and research to buy at correct time just as with property. IMO.

All markets are supposedly cyclical, so the stock market does crash too. For many there is "security" in buying bricks and mortar and if you speak to SOME home owners they do not have 100% mortgages or bought in last 2 years, others are sitting a good chunk equity; therefore they could sit out a drop in prices of 20% or so. that is the vibe i am getting from homeowners i am speaking too. Many are just not worried....yet.

Edited by beenhearingthisforyears

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Guest bound

I'll probably buy in 5 years time. We will know by then whether indeed property prices have avoided crashing or whether they won't. Nothing lost waiting another 5 years as the chance of property going up in this time is near zero

The points made about not wanting to be in rented in your old age are all valid and true, don't think many would want to be in that situation.

Indeed that is true. Hmmmm, trade-offs. Mobility, stability, liquidity, where are the best returns to come from ... I shall go and explore a renting v owning strategy and get back to you.

Can I just check these assumptions. Long term (25 years) expected returns in major stock markets = 10%

Long term (25 years) in stock markets with added risk > 13%.

Long term (25 years) returns in property = 7%

Historical rate of inflation = 3%

??? What are historical BoE rates.

Financial life strategy = 90% exposure to stock markets and commercial and residential property through index funds.

When able to, buy house outright when they appear to be at their most affordable. Rent in mean time.

Or is it better to take on a mortgage at some point?

Were there to appear children all bets are off ;-)

Bound

Edited by bound

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Guest bound

Were there to appear children all bets are off ;-)

Actually what do kids need a mortgage for. Surely they could live in rented accomodation.

The other thing is. If I bought in London now I would have to live somewhere that sucked, like South of the river ;-)

Bound

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I've thought about this a bit too. It would seem, in theory, that they can be equivalent:

- Own a property, get capital growth, pay it off in 25 years, live cost free.

- Rent a property, invest spare cash, make the same gains in 25 years, live off the investment income.

I suppose it's like renting with an endownment policy...

However, when you buy a house you gear yourself up with a mortgage. Thus, completely accidentally, you make more gains than if you had invested your cash in an otherwise similarly performing asset class.

In a period of HPI, a non-geared investor of equity has to make 3x (say) the HPI % to stay equivalent. In that last couple of years this has been more than possible, but during 'boom time' your average person is better off gearing to the hilt and putting everything on property.

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Actually what do kids need a mortgage for. Surely they could live in rented accomodation.

The other thing is. If I bought in London now I would have to live somewhere that sucked, like South of the river ;-)

Bound

South of the river is so much better. No tourists, spivs or skint toffs. :P

Isnt it the case that in Germany to rent ones whole life? House ownership is a British tradition, but not necessarily the best way. To put ones life savings in one asset class to ride out the ups and downs is not sensible, but like I need to tell any HPCers.

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Can you imagine renting when you are 70, 80, 90 and being evicted because the landlord wanted to sell?

or being repo'd because you MEW'ed you @rse off to help your kids get on the 'ladder?'

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But if by sixty the house has been paid for then one could have another 30 years living rent free in the property (subject to maintenance costs) + inheritance for the family + lump sum to pay for nursing care in dotage if required.

Or you can just save and invest and end up with enough money to pay for "another 30 years living rent free in (your newly purchased) property + inheritance for the family + lump sum to pay for nursing care in dotage if required." + your funeral.

All that without the stressful responsibility of owning a millstone for which a bank makes you pay back twice what you borrowed to wear it.

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Been thinking alot about this

. I think the most obvoius answer is buy a home if you can but this is changing

The very fact the the retirment age is rising and wil continue to do so means people can delay buying until late 30's 40's even. I se no reason to buy whilst prices are alarming to say the least. First and foremost is a home for my family not an investment therefore my rented home is fine due to the fact we live in a nice area

I'm happy seeing council tax rises, fuel rises, Hipps etc etc death of a thousand cuts I think

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But for many a house is not just an investment vehicle. Many families wish to settle and get their children into good schools etc. And for every great landlord, there are others who do not jump when you shout "new cooker please." And at any time you have the threat of a section 21 coming through the door giving you 2 months notice to quit.

I rented for many years and it was not all great, especially the landlords who "sold up" forcing me to move twice within a year. I also do not believe it is as simple for general Joe Public to make money in stocks/ other investments as some members make out here. It takes judgement and research to buy at correct time just as with property. IMO.

All markets are supposedly cyclical, so the stock market does crash too. For many there is "security" in buying bricks and mortar and if you speak to SOME home owners they do not have 100% mortgages or bought in last 2 years, others are sitting a good chunk equity; therefore they could sit out a drop in prices of 20% or so. that is the vibe i am getting from homeowners i am speaking too. Many are just not worried....yet.

I really agree with this I bought my flat because I was fed up renting and I would absolutely hate to go into retirement in rental accomodation, also I agree about the I/O and 100% mortgages I don't know anyone with an IO mortgage I have asked around, (I am not saying noone has them I just feel sometimes on this board it sounds like every mortgage in the UK is IO) I put 20% down on my flat and have paid off 10,000 (off the capital) over 4 years i hope to be mortgage free at 53. Nobody really knows what is going to happen in the future however I am glad I have bought but this is only my opinion it suits me

Edited by *sparkle*

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Can you imagine renting when you are 70, 80, 90 and being evicted because the landlord wanted to sell?

Don't be silly. If your still renting when your 65 you'd apply for Social Housing older peoples accommodation. Then you would finally be fixed for life.

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Don't be silly. If your still renting when your 65 you'd apply for Social Housing older peoples accommodation. Then you would finally be fixed for life.

haha very funny there won't be social housing or state pensions when I retire i will have to look after myself

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The housing market has always trended upwards. Short and at most medium term renting is an strategy in a falling or toppy market but in a 50 year economic lifetime it cannot be a reasonable approach.

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Don't be silly. If your still renting when your 65 you'd apply for Social Housing older peoples accommodation. Then you would finally be fixed for life.

The State has obligations to look after its elderly and by the time you come to retirement how much better off are homeowners ? Really ?

The way I look at it, if you buy now, slave on the mortgage and "own" after 25-30 years what happens if you're health starts to go ?

Yes, that's right your house is sold off to pay for your care. And if you rent you get the same care anyway.

Home ownership is a total con. If you don't have any children or anyone to even leave the house to, then I dont see any point in ever buying to be honest.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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