Originally posted by Bagpuss
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You are better off renting now
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Originally posted by Francko View PostYou can easily make this calculation. Assume I have 100k cash and want to buy a house for 400k which if I rented would cost me 1500 pounds a month. If had to get a mortgage on that for 25 years at 6.5 % it would cost me 2025.62 a month plus 100 pounds a month for maintenance plus 100 pounds a month for service charge and ground lease and all expenses that you only have as a owner. This would mean 725.62 pounds a month saved that if I invest for 25 years at a rate of 4% with the initial 100k that I didn't put down as a deposit would give me a final amount 644445.85. If your house 25 years later will be more than that then you made a profit.Comment
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Short-term it's better to rent, long-term it's better to buy... surely?
I think the point is when you're 50+ and don't want to work any more it's nice to have your house paid off coz you don't want to be paying rent at that stage.Don't ask Beaker. He's just another muppet.Comment
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Originally posted by TimberWolf View PostI haven’t run the numbers but I think a fatal flaw in that calculation is that it doesn’t take inflation into account, which may be a bit of an oversight considering that’s where some BTL’ers intend to gain in the looonngger term (rent stays the same in real terms, mortgage repayments decrease in real terms from day 1). [You could even start off making a loss initially, expecting a gain in the future, and a paid for house]. After the first year the house’s value has roughly kept up with inflation, as will the rent. But the interest payments, while maintaining the same value numerically as at the start, become less in real terms. For example that “725.62 pounds a month saved” you mention applies to the first month, after that inflation takes a bite, and thereafter-compound ‘interest’ chips away at the rest. I think it’s clear that at some point buying would (near enough) always be better than renting, it’s just a question of how in many years. If we all got excited enough about this it'd be a simple enough matter to run some numbers numerically.I've seen much of the rest of the world. It is brutal and cruel and dark, Rome is the light.Comment
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You’d also need to subtract the rate inflation off that 4%, and as mentioned the difference you plan to invest decreases in real terms from day 1. I think a numerical calculation would be necessary, or at least much easier to do, than an algebraic solution, since as we agree there are many variables to concider. Even agreeing on the rate of inflation could be tricky, since it’s dependent on what you take into account. I agree it isn’t a good time to invest now for short-term investment, but then I guess it rarely is except in the exceptional times we’ve witnessed recently.Comment
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Originally posted by TimberWolf View PostYou’d also need to subtract the rate inflation off that 4%, and as mentioned the difference you plan to invest decreases in real terms from day 1. I think a numerical calculation would be necessary, or at least much easier to do, than an algebraic solution, since as we agree there are many variables to concider. Even agreeing on the rate of inflation could be tricky, since it’s dependent on what you take into account. I agree it isn’t a good time to invest now for short-term investment, but then I guess it rarely is except in the exceptional times we’ve witnessed recently.I've seen much of the rest of the world. It is brutal and cruel and dark, Rome is the light.Comment
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So much talk. Basically my parents are theoretical millionaires because they bought a basic detached house in the right place at he right time.
So they are in a better position than most people in Europe who have rented all their lives.
End of story.Hard Brexit now!
#prayfornodealComment
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Your mistake in that calculation is that you are comparing yield of a no risk fixed rate investment to the yield of a high risk investment (property). Make the comparison between property and shares and the picture will change drastically.Comment
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Originally posted by Francko View PostNo, the inflation is the only factor that is not influential at all.
Run some numbers to convince me.Comment
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FFS the story is this: no one (I hope) just invests in one option. A diversified portfolio is the name of the game. Now, we all have to live somewhere. It is clearly better to buy, because after 25 years when you're old, you have somewhere to live, after maintenance. None of you has factored in, say, 15-20 years of retirement after paying off your mortgage. So buying means you stop paying during your non-income years. If you have also invested in the stock market, you will be quids in.Hard Brexit now!
#prayfornodealComment
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