Reply to: You can't go wrong with property investments

[alreadypacked]

That's one big Fanny.

More like a large town

http://business.timesonline.co.uk/to...cle5134307.ece

"Fannie Mae alone has repossessed so many homes that it owns 67,519 dwellings – equivalent to a town the size of Dayton, Ohio. "

[Cyberman]

Don't mortgage interest rates run roughly parallel to inflation? If so, you could simplify the situation by ignoring interest payments, since house prices rise with inflation and nullify the interest payments. Rents presumably rise in parallel with inflation too, so remain the same in real terms, while historically house prices rise in real terms by a few percent a year. I think you need to run this through numerically year by year to be sure, taking everything into account. If you can rent cheap enough, renting may work out cheaper (especially when house prices are dropping off a cliff), but it's going to be dependent on a lot of variables and assumptions.

My mortgage is 250 quid a month but if we hit a zero tracker rate, I will be paying nothing, but if somebody was renting my 4-bed it would cost them at least 1,000 pounds a month. Plus, I have over 200K in equity.

Oh I wish I was renting !!!

[DimPrawn]

Tell this to Fanny Mae who have repossessed over 67000 homes they can't get rid of.

That's one big Fanny.

[alreadypacked]

Tell this to Fanny Mae who have repossessed over 67000 homes they can't get rid of.

[Platypus]

<snip smug comments>

And of course interest rates, which are too high anyway ....

[BrilloPad]

Remember the shares are pre dot-com crash. They went through the roof (geddit!)

http://news.bbc.co.uk/1/hi/business/7726389.stm

ahh yes . i c.

rather like those fund managers who advertised in November 1997 about their 10 year returns......

[TimberWolf]

Don't mortgage interest rates run roughly parallel to inflation? If so, you could simplify the situation by ignoring interest payments, since house prices rise with inflation and nullify the interest payments. Rents presumably rise in parallel with inflation too, so remain the same in real terms, while historically house prices rise in real terms by a few percent a year. I think you need to run this through numerically year by year to be sure, taking everything into account. If you can rent cheap enough, renting may work out cheaper (especially when house prices are dropping off a cliff), but it's going to be dependent on a lot of variables and assumptions.

[Cyberman]

Those figures are rubbish. 16,000 pounds in maintenance ? I've spent nothing like that in 21 years that I have been in my house.

The renter will carry on paying rent all of his life, which will increase while his pension reduces due to inflation, whereas the Buyer will probably live 20-30 years rent free once the mortgage has been paid off. Yet, they IGNORE this very salient point!!

.. and yes, the Buyer will have an extremely valuable asset, regardless of what the doomongers say. He will be able to release equity, whilst the renter has vitually nothing.

[Francko]

The point of the whole thread is that it is better to invest in booming markets rather than in the depressed ones. If someone still had doubts about that...

Maybe somebody can try to explain this to Atw?

[DimPrawn]

Assume Capital borrowed was £20k. Capital re-paid £15k. Capital left owing £5k.

House value £81k minus o/s capital = £76k

Ability to re-pay £5k now zero so £5k bundled up with a load of other toxic debt, wrapped in scented paper and flogged to some unsupecting punter for £4k and then run like hell. I have done the Investment Banker thing.

What about the £41K in interest they paid that could have been invested in a booming stock market and the £16K in maintaining the house for 20yrs?

You seem to have conveniently missed that bit in the buyers outgoings?

However, using their figures I calculate a gain of £5K not a loss of £15K.

[Alf W]

Assume Capital borrowed was £20k. Capital re-paid £15k. Capital left owing £5k.

House value £81k minus o/s capital = £76k

Ability to re-pay £5k now zero so £5k bundled up with a load of other toxic debt, wrapped in scented paper and flogged to some unsupecting punter for £4k and then run like hell. I have done the Investment Banker thing.

[TimberWolf]

Hey, I'm just reporting the "facts".

The conclusion is simple.

Sometimes it better to be a renter and sometimes it is better to have a mortgage and pay interest.

But I prefer to own property outright and pay neither.

It's better to be a renter if your rent is much less than a mortgage payment, in the short term. I have doubts about their figures and one day I might even write an app. to run through this numerically, taking inflation etc into account.

[DimPrawn]

Presumably their landlords did well during that period too? Renting is clearly a source of free money and we should base our whole economy on it.

Hey, I'm just reporting the "facts".

The conclusion is simple.

Sometimes it better to be a renter and sometimes it is better to have a mortgage and pay interest.

But I prefer to own property outright and pay neither.

[TimberWolf]

Time to stop laughing at renters!

Presumably their landlords did well during that period too? Renting is clearly a source of free money and we should base our whole economy on it.

[DimPrawn]

Time to start laughing at people duped by primary school level statistics.

It forgets that the Buyer has an asset worth £76k in that example.

Also, the Renter has turned their potential deposit (prob around £2k) into £100k in 20 years?? How so?

Utter tosh!

capital repaid £14,942

25 yr mortgage, 20 year (1980 - 2000) period hardly any capital is repaid, it's almost all interest paid.

You should get a job in investment banking!