If You Are Over 45...rent..do Not Buy

[r thritis]

That may be a bargain, but long term, would you not be better spending that £1825pcm on a repayment mortgage on a £300k property instead? Your 1825 per month is never going to buy that 700k property or anything close to it.

Yes but... Where are you going to experience the better quality of life? In the palacial 700k property or in the dingy 300k terrace.

Ok I exaggerate, but this is exactly the message put out on those property porn shows.

[zsuzsanna]

Can you give some figures about the rent/buy costs? i.e. what do you pay per month, and how much is the house worth? Where is it?

I believe that in much of the country, rent at least covers an interest-only mortgage. Double the rent sounds a bit extreme.

There is also risk in not buying. If you buy the house you can afford now, you will still own a house. If you don't buy now then you might end up having enough for a castle or a bedsit (or anything in between).

£245 000.000 house sold this June nest door, rent we are paying is£750.00/month

[DaggaDagga]

A terrible misconception. If you buy something really expensive by borrowing money and you are tied into paying say £1400 a month interest and repayment (whatever form this is in) for 25years and then I come along 2 years later and pay a lot less and I then pay £900 a month for 25 years.

Do you think that the fact that I have £500 more than you every month but we both have the same house doesn't matter.

Think about it son, think about it.

Oooh, patronise me, I love it

What is it about the people on here who've read "a bluffer's guide to sums" and think they know it all?!

Your assumption is that prices will fall. By a large amount. This is your hope, not a fact.

You won't have £500 a month more than me, coz I'm sure I earn a lot more than you!

[HousingBear]

It seems to me the quality of life is balance between the property you would like and what you are prepared to do to get it. A huge mortgage might get you a huge house but might also get you a huge heart attack or a huge divorce.

[Badger]

It seems to me the quality of life is balance between the property you would like and what you are prepared to do to get it. A huge mortgage might get you a huge house but might also get you a huge heart attack or a huge divorce.

Bingo! that's got it.

[Levy process]

I think the idea is that you should have paid off your mortgage by the time you reach 45 - 50.

How exactly is that going to happen for first time buyers aged 35 at today's prices? Are you enjoying your visit to Earth?

[DabHand]

Oooh, patronise me, I love it

What is it about the people on here who've read "a bluffer's guide to sums" and think they know it all?!

Your assumption is that prices will fall. By a large amount. This is your hope, not a fact.

You won't have £500 a month more than me, coz I'm sure I earn a lot more than you!

Ah you are a charmer thats for sure. You best flop your knob out on his forehead, for good measure.

Can you do me a favour and change your neither to bull. Don't be shy about your true leanings, l promise not to let PG sodomise you

much.

Edited November 9, 2006 by DabHand

[frugalista]

Ummm, no - 0.08%. What matters is the current market value. If you aren't getting a good yield on that you might as well sell it and put the £300K in the bank.

Yes I agree, yield must always be based on the current market value. I was just following MarkG's sarcastic train of thought....

Damn, that country estate in the Cotswolds I bought in 1343 for twelve guineas doesn't look like such a nice little earner any more. Current rent is 4 swine, 18 bushels of wheat and the squire's eldest daughter. Do you think I should raise the rent or just kick out the yokels and get some thrusting young professionals in instead?

frugalista

[DaggaDagga]

Ah you are a charmer thats for sure. You best flop your knob out on his forehead, for good measure.

Can you do me a favour and change your neither to bull. Don't be shy about your true leanings, l promise not to let PG sodomise you

much.

Hehehe. Thank you for the "flop" compliment.

And PG's cat (Valentine) is ugly.

I'm a "neither" though. That's why I have only one BTL, not a portfolio. It might go tits up, probably not.

[Charles_Darke]

Exactly right. Amazing how often this comes up on this forum.

What has happened in the past is irrelevant (other than showing what the return on your original investment is) - all that matters is the yield that you will make on your current investment (i.e. the equity that you could release if you sold) in the future.

Not always, you also have to consider gearing and tax.

Let's say you bought a property for £100k with £10 deposit. You got a nice fixed rate mortgage so paying £3k IO mortgage interest.

The property today is worth £300k, but you're renting it out £12k - a poor yield but a great return on your initial capital invested.

Argument is that the yield is poor. Let's look at the alternative (sell and put cash in a bank).

You sell for £300k less £4k of fees giving you £180k in the bank at 5% gives you £9k interest a year.

At this point, the keep vs sell is about the same. However, if your mortgage fix expires, you suffer additional 2k of costs.

Of course, this all ignores capital appreciation, which at 8% means you might be happy to have 2k less of pre-tax yield (smaller post-tax) in return for £14k of post-tax capital growth.

Yes I agree, yield must always be based on the current market value. I was just following MarkG's sarcastic train of thought....

Damn, that country estate in the Cotswolds I bought in 1343 for twelve guineas doesn't look like such a nice little earner any more. Current rent is 4 swine, 18 bushels of wheat and the squire's eldest daughter. Do you think I should raise the rent or just kick out the yokels and get some thrusting young professionals in instead?

frugalista

Depends on how good looking the eldest daughter is

[Smarter than the average bear]

Currently I am renting...

So you want all the ditto-heads here to line up and validate your decision, right?

[Europa]

So you want all the ditto-heads here to line up and validate your decision, right?

Of course - how can you possibly argue against the logic of forking out month after month throughout your working life and have nothing to show for it at the end? Obviously it is the smart thing to do

[RobK]

Not always, you also have to consider gearing and tax.

When would a calculation of yield on equity for any investment not include tax, gearing or costs??? A calculation of a (post-tax) return on equity would always include these things. And I said equity - not return on the value of the house itself, so the calculation includes the effect of gearing.

[PropertyGuru]

Ah you are a charmer thats for sure. You best flop your knob out on his forehead, for good measure.

Can you do me a favour and change your neither to bull. Don't be shy about your true leanings, l promise not to let PG sodomise you

much.

I wouldn't touch him with yours, Dabbers. He's probably the 3rd most pathetic troll so far this year (behind Eurinal and I'm A Bit Spart)

[laurejon]

You don't 'own' the house, you own a large debt (aka a mortgage).

If it is interest only, you are merely renting from the bank.

Correct, you are renting from the bank, however ask your Landlord for 200k worth equity increases for the last five years when you give up the tenancy and I suspect some men in white coats will escort you off the premises.

In addition, and much overlooked, the bank will let you stay for so long as you pay the interest. Not the case with a Landlord, if your face dont fit, you are history.

Edited November 9, 2006 by laurejon

[Europa]

I wouldn't touch him with yours, Dabbers. He's probably the 3rd most pathetic troll so far this year (behind Eurinal and I'm A Bit Spart)

Congratulations, PG - just realised you've now clocked up more than 1,000 posts. In under three months.

Things a bit quiet in the real world?

In addition, and much overlooked, the bank will let you stay for so long as you pay the interest. Not the case with a Landlord, if your face dont fit, you are history.

Quite correct - and the bank will not expect to take the equity gains when I come to sell. They also impose fewer restrictions on my choice of wall-paper.

[PropertyGuru]

Congratulations, PG - just realised you've now clocked up more than 1,000 posts. In under three months.

but the number of words is less than you did in your first month, blabberbrain

The size of the mortgage is irrelevant to a rational landlord

This is very silly. How's about you can get 10,000 a year in rent for flat 'A'. I'll sell it to you for 20 million. Fortunately, you can borrow 20,000,000 at 0.005%.

There you go. A nice 9k a year profit for you. Tempted? Of course not. You just managed to figure out that size of debt IS important to a landlord (or at least one who intends to still be in business after every tiny 0.25% rise).

Relative volatility, old bean.

[laurejon]

If you have 100% cash for a purchase, then it is for sure not only prudent, but makes sound financial sense to invest that money somewhere else taking 10% return, and stay off the property ladder. For sure if you pay cash 100% then in four years you will most likely pick up a bargain, and 3 months hard work renovating the dump.

However if you are one of those that has not saved at least 30% of your takehome pay for the past 25yrs as directed by the Government then you will have to have a mortgage, and that is a completly different ballgame.

You now have to take into account the cost benefit of buying now with cheap rates of 5% fixed for the life off the mortgage but pay a price that is almost peak. Or you will buy in several years time, having shelled out dead money in rent, and pay over 10% interest rates, on a property that is reduced in price 40% at best, and requires 30K of work to get it back in order.

[Guest X-QUORK]

Of course - how can you possibly argue against the logic of forking out month after month throughout your working life and have nothing to show for it at the end? Obviously it is the smart thing to do

You assume that we'll be renting forever? No mate, come 2011 I'll snap up a bargain thanks.

[www]

So this house will actually cost us less than half of what we've bought it for.

Are you Irish by any chance?

[Guest X-QUORK]

Are you Irish by any chance?

[Smarter than the average bear]

You assume that we'll be renting forever? No mate, come 2011 I'll snap up a bargain thanks.

Ah, it's 2011 now is it? And to think, I can remember when it was going to be 2005, 2006, 2007 . . .

Any advance on 2011?

[VacantPossession]

You sound a little desperate

I think the idea is that you should have paid off your mortgage by the time you reach 45 - 50. Alternatively, the mortgage you originally took out will have been eroded by inflation over the years and will be peanuts in comparison with rent.

But if you're happy to rent until the day you die, and to watch your monthly rent payments go up with inflation, then be my guest Quite why you expect anyone else to follow is beyond me.

Erm, yes... the housing market would indeed have crashed if it hadn't been for those pesky buyers

"Desperate" is an emotional state, and I do not suffer from it. You are assuming I am "desperate" because I do not share your extremely conventional view of life, and nor do I share your ultra conventional assumption that "by the time I reach 45-50 I would have paid off my mortgage". (I can just see you now, trudging your way to your local Station at 7.30 am every morning to catch your tedious train to your tedious job so you can pay off your tedious mortgage so you can sustain your tedious lifestyle). Sorry that's probaby not accurate but you convey that in your post.

I know you find this hard to believe, but I actually do WORK for a living and every penny I have saved is as result of that work, rather than relying on house price inflation to sustain my lifestyle. You will consider me naive and stupid, but I do actually quite like the idea of making my living through work and not through property speculation, or even letting it accrue naturally which is I suppose the foundation of your comments.

You see, I do not think that property should be packaged and marketed as an "opportunity". I recognise that puts me out of kilter with 99% of the population. Nor do I think that the UK's stone-age attitude towards shelter in general is in the least bit useful to modern life, which tends to be flexible given the opportunity, should be geographically diverse and is sometimes culturally not centred on the kind of life implied by your formula-driven response to my post.

I am giving you a hard time here because your response, unlike the other ones to this thread, seeks to patronise me on a subject which I have as much (if not more) knowledge that you have. I am in my present state of "deperation" (ie: having a monthly outgoing probably several hundreds of pounds cheaper (per square foot) than yours), because you desire to pay off your debt and have a nice cushion of property to sustain your nice retirement, and I agree I will not have the satisfaction of "paying off" the debt like you will, but frankly I do not care.

As odd as this might sound to you, some people don't do things purely for self interest, though temporarily it is a personal advantage not to subscribe to the mortgage convention, because my rent is enormously lower than the average mortgage.

But leaving me personally out of this, what your post manifestly fails to recognise is that the UK is unique in Europe for having an obsessive (some would say compulsive-obessive) attitude towards property. It has been falsely raised to an undeserved status as being the holy grail of life itself.

Why not have a little tour next summer of Holland, or Germany, or Belgium, to see at first hand how ridiculously they view our "little man" obsessions with "paying off the mortgage". To them, property is like everything else in life, a service which provides shelter (temprorarily or permanently) at a reasonable cost. It is only the UK (but sadly others in Europe are beginning to follow our misguided example) that property is both a compulsive club to join and a method by which income is gained without actually doing any work, and for that you have a succession of cultural, journalistic and governmental influences to blame.

With Good Wishes,

VacantPossession

[VacantPossession]

I think the original poster makes the mistake of thinking people only see houses as investments. Whilst this is clearly true for him and many others, for me I saw a house as a home and an investment.

No Mistake I assure you. There we are then, You DO see houses as an investment and you have SAID SO, right there in your reply! Did you check what you wrote?

VacantPoseession

Edited November 10, 2006 by VacantPossession

[Englebert]

I'm 46 (recently divorced) & was resigned to the fact that I couldn't afford a decent place of my own taking into account maintenance payments etc. etc.

I have however kept looking & have just found & bought a small 2 bed house that is perfect for me. Stone, end terrace with original beamed ceiling etc. Loads of character & in a picturesque rural village nr Durham. The only downside for me, is there is no parking immediately outside the house but I am prepared to sacrifice that. Basically, I've bought the place for 76k which means I have had to take out a mortgage of 20k over 20 years. I do think prices will drop at some stage but I loved this little place as soon as I saw it & to be honest, can't imagine losing a huge amount on it. if at all. I don't intend moving for a long time anyway.

Basically, what I'm saying is just keep looking & it is just possible you might find something affordable & that you actually like but It is tough & depressing at the moment I know.

"Basically, what I'm saying is just keep looking & it is just possible you might find something affordable & that you actually like but It is tough & depressing at the moment I know."

Gee, thanks for that wonderful insight.......I suppose I'll just have to try a bit harder and keep looking then....

Hehehe. Thank you for the "flop" compliment.

And PG's cat (Valentine) is ugly.

I'm a "neither" though. That's why I have only one BTL, not a portfolio. It might go tits up, probably not.

When it does go tits up, I'll be thinking about you.....you horrible little tsser man you!