Buy v Rent

[Sergeant Apone]

You can buy alot of Mr Kiplings cakes for £80.

On this sort of subject, from today's Daily Mail (it's a must read in the Colonial Marine Corps)...

I spend £1,370 a day. Can I live on £8 a day like an average pensioner?

By Threaded, Daily Mail 22:53pm 29th June 2006.

[ratewhore]

healthy debate - very good...

[janey]

No, they will take it all fank you very much. Unless you have nothing, then you can have it for free.

exactly... that was my point!!!

blimey

[Bagpuss]

Don't shoot yourself love, it could hurt!

PS Janey, is this you?

www.janeyweb.co.uk

[sasguru]

It's all about timing. Buy now at your own risk IMHO. US interest rates are rising and ours will follow as night follows day. People are now paying 42% of the take-home on mortgages - much too high. The signs are there for those who want to see them.

[IR35 Avoider]

Buying over the long term gives you a house and a large lump of equity at the end

I bought a flat in 1989 for £120,000. I sold it in 1998 for £120,000. At one point my interest payments (on a £120,000 mortgage) were over £1400 a month. I could have rented the flat beneath (which was better because it had a garden) for £850 a month and lived without several years of worry of being made bankrupt due to negative equity if I was ever without contract.

As it turned out, I spent most of the 1990s working for the same client, had it not been for the negative equity I could have moved to a flat 5 minutes from the client instead of spending more than two and a half hours a day for several years commuting from one side of London to the other at an average speed of 21 miles per hour.

Of course I was "unlucky" with the timing of my entry to the property market, but it just goes to show that, as with shares, there are times when you should just not buy property.

On the other hand, despite some nervousness a few years ago, I'm not really expecting a big crash now. And I have made a big gain since 1998. I think if I were out of the market now then the sensible thing to do would be to base decisions on short term cost, which would probably mean renting. The boom we have just had was due to a one-off shift to a low interest-rate environment, but is now over, and I don't think there are gains to be had in future.

[AtW]

Case in point - the house that I rented for over 3 years @ £600 per month was put on sale, annoying as I had to move few streets away, but guess the price that they want - £230k. Think about it - they were getting £7200 pa in rent (and they were lucky to have it fully occupied over long period of time, usually landlords can expect to lose 1 month a year) on asset worth 230,000, this gives yield of 3%, less than BoE rate! It was more beneficial from business point of view to sell house and put money into bank, something they finally arrived to.

Rents can't be pushed up in Brum - when I checked info during move I found that plenty of properties available and some have lower prices than before, not in exactly the best parts of Brum, but the point is that over last 6 years rents did not increase, more like fallen - a lot if you take into account inflation.

[The Master]

Your 3% calculation excludes the increase in the capital value of the property. In some ways the rental income is just a bonus on top of that.

[AtW]

House prices stopped increasing considerably couple of year ago, since there is no obvious change in that it seems to make sense get better yield on money by cashing in on increase in value and putting them elsewhere.

[TheMonkey]

I've got an alternative perspective.

1. Get fed up of working and have a nervous breakdown.
2. Get dead end job in McDonalds
3. Move your entire family in with your parents if they are still clinging on to life.
4. Get kicked out due to overcrowding after 9 months
5. Get a council flat
6. Transfer around until you get something strategically worth something (Islington / Angel area is a good investment)
7. Magically start your own contracting outfit and make lots of money
8. Excercise your right to buy.
9. Buy
10. Sell
11. Profit!
12. Move somewhere more economical and nice (i.e. Newark / Lincolnshire).
13. Live happily ever after.

Easiest way to reclaim tax that is.