Rent or Buy?

Generally I think to buy is preferable for the long term. If you rent you may have problems with the landlord i.e. repairs not being carried out / tenancy is not renewed. If you buy you can have the problems with loss of income. Also over the period the mortgage payments will decrease whereas the rent will increase. I think you have to stay what you feel comfortable with.

If you're reasonably good-looking and got nice t*ts, I've got a double bed for free. Irma

Mortgage interest is also throwing money away, just the same as renting.

Remember that when you rent, not all of the money goes on the landlords capital return on his investment. Some of it goes on things like buildings insurance, gas maintenance, structural repairs, ground rent, flat management charges and so on. He might not spend the money on these things when he is supposed to, but that isn't too much of a problem as you can just walk away from it and go elsewhere.

In my case, I am better off renting, and putting the money I save from doing so in a savings account, than I would be if I bought the place I live in.

Eventually, I will have a big enough deposit to make the mortgage interest plus expenses the landlord is currently paying cheaper than the rent I am paying less the interest I earn on my savings. At the moment, it looks like a 50% deposit is the break even point for me.

The usual reasons for buying are that there is a likelyhood for large capital growth and that, overall, it is cheaper.

ISTM that in the current market, neither of these are substantially true for most regions of the UK.

There is the other point that the other poster mentioned that landlords can be a pain. You have to consider this as well

It's not quite that simple, either you sign a fixed term and have to fulfill that term (or find someone to do it for you) or you risk the landlord giving you notice for no reason.

Historically it has been due to the above two points. Currently I would suggest that it is the other way around..

You said that you are young. You will be likely to have many things happen in the next years that will mean that in 30 years time you aren't still owing the 'bottom of the market' flat that you buy today.

I also don't believe that a small flat will help you up the ladder in the next few years.

I would suggest not. Such properties can be very very hard to sell if you should need to do so in a depressed market.

You would be much better off finding a co-buyer and sharing the purchase of a two bed flat if you can cope with living this way.

HTH

tim

"Tigger" wrote

Why not?

Let's put it this way - if you *hadn't* made the investment, what would you be living in? Rented? Then why couldn't you sell-up the investment and live in rented later?

"Jonathan Bryce" wrote

Not so. History has shown that mortgage interest rates have, over the long term, closely followed house price increases.

Suppose they both average 5% each year. Suppose you pay 100K this year for a place, using a 100% mortgage (interest-only for simplicity). You pay out 5K in mortgage interest over the year, then end up next year owning something worth 105K with a 100K mortgage outstanding. So you have

5K equity after having paid 5K in mortgage interest.

Effectively, the mortgage interest has

*not* been "thrown away", but rather it has been converted into equity!

Of course in some years mortgage interest may exceed house price increase (as for last year/this year?) and in others the house price increase may exceed mortgage interest (eg in 2001-2003). But over time, these issues average-out and (look at historical rates) you end up with both mortgage interest & price inflation being very similar (on average).

I'm looking to work with individuals interested in making money from properties in UK. We would set up a property syndicate each investing around £15K and would buy run down properties, renovate them and sell them on.

Kindly send me an email to discuss further. My email address is snipped-for-privacy@gmail.com.

Regards

Tim Anand

Not long term, because I don't have the data, but 1983 - Present Halifax NSA vs. Base Rate gives a 0.88 correlation.

http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIxIRx

I'm surprised as I would have thought in this non efficient market that house prices would be far more influenced by property shortages and sentiment.

Daytona

compact and bijoux eh?

One bedroom non-purpose built flats are a poor investment and have poor resale potential.... especially if they are not in some area like Chelsea.

I would pass on this one.

buying is also tying up money that could possibly be used elsewhere. For example anyone who bought (as an investment) rather than invested in shares over the last 3 years was throwing money away.

"davidof" wrote

Not if you buy with a 100% mortgage... ;-)

True, and when house prices are rising it is the ultimate leveraged investment.