I Like Renting Because

[Without_a_Paddle]

not just a creep, but a mortgage broker (even worse!)

No, I'm not connected with property sales in any way just someone who is not afraid to punch in a few numbers.

I might make the odd mistake now and again but I could see the (financial) flaw in the OP in a few seconds.

Stepping out of the housing market to invest the equity elsewhere is a risky business and I've just posted a few simple figures to show why.

If calling me a creep helps you deal with those figures then so be it.

[Bootstrap]

Once mortgage repayments outstrip rental income, BTL begins to show similarities to a pyramid scheme.

[Smarter than the average bear]

I Like Renting Because...

... you can find plenty of people here to validate your daft decision?

[abaxas]

... you can find plenty of people here to validate your daft decision?

That isnt an argument!

His decision is only as good as the moment in time, the debate about who laughs last is still ongoing.

[Guest The_Oldie]

I like renting because....

1, I pay £4,000PA less on rent than the net interest I receive on the cash that I would have to pay to buy the house I live in.

2, I don't lay awake at night worrying about a HPC.

3, If something breaks I phone the letting agent and they send a man round to fix it at the LLs expense.

4, I don't have to waste time and money on maintaining a house.

5, I can move every year and try out different areas to see which I like best for when I decide to buy.

[mikefluk]

Whilst I agree with everything you say, renting has at least one down-side and that is insecurity. The vast majority of tennants can be asked to leave their home with 2 months notice, sometimes less.

Apart from that fact, I too am happy renting and saving for the day houses become affordable.

Stuart

Depends how you look at it I suppose. Being given 2 months to leave can be viewed as an opportunity to live in somebody elses house for a while and it gives you time to look at different areas. When you buy you are knid of rooted to the spot and nosiy neighbours etc are more of a pain

[Guest d23]

Depends how you look at it I suppose. Being given 2 months to leave can be viewed as an opportunity to live in somebody elses house for a while and it gives you time to look at different areas. When you buy you are knid of rooted to the spot and nosiy neighbours etc are more of a pain

you do have to spin quite hard to turn being evicted at 2 months notice into a plus.............

i've never enjoyed 'moving into someone elses house for a while' and find the current poor tenant protection in this country a real disincentive to renting

[mikefluk]

it's good that you are happy with your decision but your stats don't look that comfy to me at all.

I reckon a typical person in a similar position would have been better (on paper) to have kept the house.

This assumes the house was worth say £220k (120k loan) in 2004 and will probably hit £255k in mid 2007.

IMO that person who STRd would be slowly sinking backwards even with similar equity (shares?) growth as you have had so far.

I doubt the person could buy back in and be better off than if they had kept the house.

Your plan is a nice idea but you are kidding yourself about being debt free. You are just taking a break from debt and it might not prove to be worth it (on paper)

You are making some heroic assumptions here and your thinking rather flawed. First of all how can you possibly assume my house was £220k ?? Actually we bought it in 1996 for £180k (4 bed detatched) and sold in 2004 for £342k. I took out a £150k mortgate but then remortgaged along the way plus took out a heap of credit cards etc. Anyway I was paying hefty interest charges so after selling I was totally debt free we bought a people carrier for the kids and I was left with £120k.

I now have my investments spread between UK equity income, cash, gold and silver. The house today is worth the same or there abouts (prices haven't moved at all)

Regarding kidding myself about being debt free are you serious. debts are real mate I know we had the,m and we don't any more. I wouldn;t dream of reentering the market now becasue (and read my words carefully PROPERTY IS WELL OVER PRICED. When prices return to normailty as they will I will buy back for cash and have no mortgage. I still have my endowments maturing in 7 years

Trouble is, what happens when you retire. Pensions will pay peanuts in the future so £650pcm would hurt. Savings have historically woefully underperformed house price increases, so your highh risk of being left up the creek in old age

I invested £50k (what I call the froth in the inflated property price) and invested in 10 separate equity income trusts. They are now worth £66k and my dividends are increasing year on year. These dividends are are re-invested. Plus which the surplus cash we now have every month is invested in a spread of assets (just not property) Your home isn't a pension; its a place to live, just like the one I am renting

If you owned a house and were killed in an accident, or died from a terminal illness the house would be paid off wouldn't it?

Is that not right?

Yes part of it would have been repaid by my endowments. I still have them so the same applies. its just my equity is in assets other than property. You guys need to realise that owning houses have an incredibly high maintenance cost (mortgage) or opportunity cost (equity that you cannot spend) They represent a huge risk. Just ask yourself how does my wealth look if property prices fall by 25% and interest rates rise by just 2% Do they still look a great bet. My portfolio covers inflation, deflation, stagnation, HPC

I like renting because.........

I get to benefit from the tax free capital appreciation certain in the long term.

Surely if renting is so good a person would rent everything they use... tv, washing machine, car, bike etc.

Tenant " I like renting because I have to."

Landlord " I like renting because of the income and capital appreciation, the lifestyle my tenants give me"

Renting is dead money - should be replaced by "money is dead".

What Capital appreciation ?? Thats already happened..the party's overand the hangover is coming. Rent is no more dead money than the interest payment on your mortgage. Thing is, for just about any property the rental is far less than the interest payment to service its capital value

so what. mortgage or rent. each is an outgoing. doesn't matter whether there is a 10% or 20% difference. what matters is what you earn and what you have left over after you've paid your rent/mortgage. people should focus on their income, not the price of houses.

People are hung up on this price to earnings ratio, because they just don't earn enough...

A home is to live in. Housing is an inevitable cost. Give it 15 years and the mortgage is paid off this monthly cost drops significantly, the renter however is still being moved on every now and then and has probably drunk the savings.....

Mortgage isn't really a debt, is just money rent.

I'd rather rent the money than rent the house. (Especially when the central banks are inflating the supply).

I disagree . if you sell it now and invest it wisely you can rent a superioir house to the one you live in have positive cash flow and grow your nest egg ready to pounce when the market goes belly up

I'm just quoting typical figures here Grey Shark.

Are you scared of figures?

If he turned the clock back to 2004 and remortgaged instead for 20yrs on £100k

the person would have been paying £650pm. (same as the rent)

(he could then have spent the 'saved' selling fees and rental deposit on a few years' holidays perhaps?)

By 2010 the debt would be down to £80k as it is a repayment loan.

;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

looking at the STR plan the £100k equity falls to £96k after selling costs and moving costs and deposit etc.

He gets 14% growth every year.

So by 2010 that £96k pot is worth £210k.

He cashes in and pays the CGTax and ends up with about £185k.

The good news is that house prices in 2010 are the same as in 2007 at £255k.

So he decides to buy after 6 long years of renting.

BUT he has to pay stamp duty and other fees and the mortgage ends up being about £80k.

Which is the same debt he would have had if he had simply remortgaged in 2004.

He has to rely on getting 14% growth EVERY year on the total STR fund to break even by 2010.

(and has to pray for zero HPI as well...)

If house prices fall 20% by 2010 and the shares growth is 8% yoy (SM average) then the outcome is (about) the same.

So how does this plan hope to escape the debt trap? house prices would have to really plummet (recession?) and the person would have to invest quite wisely in the SM to safely make those gains necessary to make this worthwhile.

Can I suggest you ask for a refund on your financial wisdom course

... you can find plenty of people here to validate your daft decision?

We need people like you to let us live in your properties at a loss whilst we invest our money elsewhere so thanks

[Guest barebear]

Oh well the renting v buying argument will become irrelevant for more and more of our young people the more hpi keeps on rising and wages dont.

If your looking to buy property now as an investment, it wont be,so dont, save money and sleepless nights and rent instead until this madness stops.

[happily renting]

...Saving money and living in a nice house maintained by someone else and without having to take on a massive mortgage is about as good as it gets.

Pretty much says it all.

Our house in the SE is owned by a trust and professionally managed, so never a worry about repairs, and they're in it for the long term, giving reasonable security of tenure. We could never have a comparable quality of life (including spectacular views & exquisite privacy) if we were attempting to buy at today's prices.

[Guest barebear]

Look at it this way say you buy a place for £150000 with a £15000 deposit,repayment mortgage £850p/m.

Say the the place increases in value by 10% in 2007 to £165000 and you decide to sell it to realise your profit.

2% will go to EA =£3200

Mortgage payments =10200

solicitors fees when buying and selling =£2000

stamp duty @ 1%= £1500

Total cost =£16400 plus any money you've spent on the place.

Rent for same place = @£750p/m = £8000.

O.k. so by buying and selling you've lived virtually rent free but what if it were to drop by 10% or stagnate and you need to sell it the figures look nightmarish.

Want to take the risk when most would agree property is 30% over valued.

[grey shark]

You are making some heroic ASSUMPTIONS here and your thinking rather flawed. First of all how can you possibly assume my house was £220k ?? Actually we bought it in 1996 for £180k (4 bed detatched) and sold in 2004 for £342k. I took out a £150k mortgate but then remortgaged along the way plus took out a heap of credit cards etc. Anyway I was paying hefty interest charges so after selling I was totally debt free we bought a people carrier for the kids and I was left with £120k.

I now have my investments spread between UK equity income, cash, gold and silver. The house today is worth the same or there abouts (prices haven't moved at all)

What Capital appreciation ?? Thats already happened..the party's overand the hangover is coming. Rent is no more dead money than the interest payment on your mortgage. Thing is, for just about any property the rental is far less than the interest payment to service its capital value

I disagree . if you sell it now and invest it wisely you can rent a superioir house to the one you live in have positive cash flow and grow your nest egg ready to pounce when the market goes belly up

Excellent stuff m8 , i particularly like it were you use the word ASSUMPTIONS when refering to Without a paddles way of thinking towards STR'ers and those that rent , old creepshow just basically stereotypes them all under one group when in reality each case is differant .

[Without_a_Paddle]

You are making some heroic assumptions here and your thinking rather flawed. First of all how can you possibly assume my house was £220k ?? Actually we bought it in 1996 for £180k (4 bed detatched) and sold in 2004 for £342k. I took out a £150k mortgate but then remortgaged along the way plus took out a heap of credit cards etc. Anyway I was paying hefty interest charges so after selling I was totally debt free we bought a people carrier for the kids and I was left with £120k.

I now have my investments spread between UK equity income, cash, gold and silver. The house today is worth the same or there abouts (prices haven't moved at all)

Regarding kidding myself about being debt free are you serious. debts are real mate I know we had the,m and we don't any more. I wouldn;t dream of reentering the market now becasue (and read my words carefully PROPERTY IS WELL OVER PRICED. When prices return to normailty as they will I will buy back for cash and have no mortgage. I still have my endowments maturing in 7 years

I invested £50k (what I call the froth in the inflated property price) and invested in 10 separate equity income trusts. They are now worth £66k and my dividends are increasing year on year. These dividends are are re-invested. Plus which the surplus cash we now have every month is invested in a spread of assets (just not property) Your home isn't a pension; its a place to live, just like the one I am renting

Yes part of it would have been repaid by my endowments. I still have them so the same applies. its just my equity is in assets other than property. You guys need to realise that owning houses have an incredibly high maintenance cost (mortgage) or opportunity cost (equity that you cannot spend) They represent a huge risk. Just ask yourself how does my wealth look if property prices fall by 25% and interest rates rise by just 2% Do they still look a great bet. My portfolio covers inflation, deflation, stagnation, HPC

What Capital appreciation ?? Thats already happened..the party's overand the hangover is coming. Rent is no more dead money than the interest payment on your mortgage. Thing is, for just about any property the rental is far less than the interest payment to service its capital value

I disagree . if you sell it now and invest it wisely you can rent a superioir house to the one you live in have positive cash flow and grow your nest egg ready to pounce when the market goes belly up

Can I suggest you ask for a refund on your financial wisdom course

We need people like you to let us live in your properties at a loss whilst we invest our money elsewhere so thanks

hey, gimme a break here. I chose mortgage and equity figures that gave your strategy its best shot. If I put your real figures in and assume you rent a 4 bed detached then it gets FAR WORSE.

What you didn't tell me (or anyone else) was you have downsized from a 4 bed detached to a 3 bed semi.

Hence the low rent.

So what you are now saying is you have traded your standard of living to clear your credit cards and take a punt on the stock market and drive around in a people carrier. Suddenly that doesn't sound as rosy as your first post.

Also, why is it that STRs always live in areas where HPI is flat or negative?

Typically your 2004 £342k 4 bedder will be £390k today. (if it was 180k in 1996 it must be worth at LEAST £420k now or maybe you aren't so good at spotting the properties with potential, or did you pay too much for it?)

Why didn't you go the whole hog and rent a caravan to save even more money? then STRC (Sell 4 bed house To Rent Caravan) would have looked even better.

What Capital appreciation ?? Thats already happened..the party's overand the hangover is coming. Rent is no more dead money than the interest payment on your mortgage. Thing is, for just about any property the rental is far less than the interest payment to service its capital value

How can you seriously say that? if you had a £150k repayment loan in 1996 the interest on your 4 bed house would be about £480pm today.

That's £170pm LESS than you are paying rent on the 3 bed semi today.

Oh, hang on, you mentioned an endowment somewhere.

Was this wise? Endowments went belly up in 1999. Who was it who mentioned financial wisdom courses?

Edited November 30, 2006 by Without_a_Paddle

[Europa]

Renting is spiffing because...

I like cheap carpets and Ikea furniture

I love the insecurity of knowing I could be turfed out with four weeks' notice

I get a warm fuzzy glow from paying a complete stranger's mortgage

I like letting someone else make all my interior design decisions for me

I can snort derisively at the "sheeple" home owners who watch their properties increase in value every month, safe in the knowledge that when I leave, my land lord will sting me for £500 to cover the cost of a small stain on the carpet

[abaxas]

can snort derisively at the "sheeple" home owners who watch their properties increase in value every month, safe in the knowledge that when I leave, my land lord will sting me for £500 to cover the cost of a small stain on the carpet

If in doubt withold last month's / 6 weeks rent.

Make the LL suffer.

Also I forgot to say..

I like renting because my last LL gave me a new washing machine/kettle/toaster... It wasnt on the inventory so it's mine now (legally).

Edited November 30, 2006 by abaxas

[Guest Charlie The Tramp]

Can any of you bright sparks tell me what rent could be commanded on a £225K New Build 2 bed Flat with a ground rent charge of £50 per month and a service charge of £100 per month location desirable area Greater London ?

[Europa]

Can any of you bright sparks tell me what rent could be commanded on a £225K New Build 2 bed Flat with a ground rent charge of £50 per month and a service charge of £100 per month location desirable area Greater London ?

Rough guess, but 850 to 900 pcm?

[Guest Charlie The Tramp]

Rough guess, but 850 to 900 pcm?

Oh dear.

[Europa]

Oh dear.

Go on, spill the beans

[Guest d23]

If in doubt withold last month's / 6 weeks rent.

Make the LL suffer.

Also I forgot to say..

I like renting because my last LL gave me a new washing machine/kettle/toaster... It wasnt on the inventory so it's mine now (legally).

witholding rent really helps you when your next landlord asks for references............

[christhpc]

Renting is spiffing because...

I like cheap carpets and Ikea furnitureeir properties increase in value every month, safe in the knowledge that when I leave, my land lord will sting me for £500 to cover the cost of a small stain on the carpet

Europa, I don't think you give LLs enough credit. We've been lucky enough to have an excellent landlord. Any problems we have with the property are rectified immediately. Although from speaking to him, it sounds like the previous tenants were a complete nightmare (unpaid bills, skipped out without paying, trashed the place). So he probably treasures our tenancy - further enforced by the fact our rates haven't gone up the whole time we've been here. The only concern has been the remortgaging earlier this year, the first time we had to have a stranger viewing the property (survey). Probably just a good MEWing session.

[Guest Charlie The Tramp]

Go on, spill the beans

Would the ground rent and service charge be included in the quoted rent, or would that be an extra charge to the tenant ?

[Smarter than the average bear]

I like renting because my last LL gave me a new washing machine/kettle/toaster... It wasnt on the inventory so it's mine now (legally).

That's a coincidence — I like buying, because my new place came with ten grands worth of all-new Smeg appliances, installed and guaranteed, and "all mine (legally)"

Kettle, toaster, LOL!!

[Europa]

Europa, I don't think you give LLs enough credit. We've been lucky enough to have an excellent landlord. Any problems we have with the property are rectified immediately. Although from speaking to him, it sounds like the previous tenants were a complete nightmare (unpaid bills, skipped out without paying, trashed the place). So he probably treasures our tenancy - further enforced by the fact our rates haven't gone up the whole time we've been here. The only concern has been the remortgaging earlier this year, the first time we had to have a stranger viewing the property (survey). Probably just a good MEWing session.

Fair enough - I did have my tongue lodged in my cheek when I wrote that

[mikefluk]

hey, gimme a break here. I chose mortgage and equity figures that gave your strategy its best shot. If I put your real figures in and assume you rent a 4 bed detached then it gets FAR WORSE.

What you didn't tell me (or anyone else) was you have downsized from a 4 bed detached to a 3 bed semi.

Hence the low rent.

So what you are now saying is you have traded your standard of living to clear your credit cards and take a punt on the stock market and drive around in a people carrier. Suddenly that doesn't sound as rosy as your first post.

Also, why is it that STRs always live in areas where HPI is flat or negative?

Typically your 2004 £342k 4 bedder will be £390k today. (if it was 180k in 1996 it must be worth at LEAST £420k now or maybe you aren't so good at spotting the properties with potential, or did you pay too much for it?)

Why didn't you go the whole hog and rent a caravan to save even more money? then STRC (Sell 4 bed house To Rent Caravan) would have looked even better.

How can you seriously say that? if you had a £150k repayment loan in 1996 the interest on your 4 bed house would be about £480pm today.

That's £170pm LESS than you are paying rent on the 3 bed semi today.

Oh, hang on, you mentioned an endowment somewhere.

Was this wise? Endowments went belly up in 1999. Who was it who mentioned financial wisdom courses?

Oh dear you are all over the place. I trust your response is sincere and will respond accordingly

hey, gimme a break here.

Sorry...Rule number 1 - Never give a sucker an even break