UK Landlord Forum / Life

Article on the BBC website - dated a few weeks back but somehow I didn't notice before:

http://news.bbc.co.uk/1/hi/business/7029832.stm

Did it get a mention here?

If not, any thoughts?


V

Yeah, I think I posted a similar article. Regardless, I remember reading that article.

Renting maybe cheaper, but it's lost money as far as I'm concerned. I'd rather struggle a little and pay a mortgage, knowing I'm building equity.

A house is a longterm investment, and is a saftey net for the future- that's something renting will never provide.

Your thoughts, V?

I think you have to do the maths on a case by case basis. Interest on a mortgage is also "lost money", so if your monthly interest charge exceeds what you would be paying to rent a space of the same size and quality then it might not be such a good deal. I'm not convinced the purchase of my flat has worked in my favour financially, but its not really left me out of pocket either so far and at least this way I can do decoration and rennovation work that will improve the state of the place to a level where the rent would've been higher than my interest currently is. That's never an option in a rented place.

Not sure I'd buy to let right now though, not by the time you take into account the return you will be losing on the capital you'll need to put in to keep interest charges below the amount of rent you can viably charge.


V

Well, if you BTL, you're not personally paying the interest. That's the way I look at it anyways. If you Let for 20 years, I'm sure you'll make a substantial amount.

I agree, though. It should be based per case.

Do you have an Interest only mortgage?

In a btl you may not be paying the interest but if the interest exceeds the rent you can charge, its not going to make a profit. My point is that the equation is different because a) you don't have the "but I'd be wasting it on rent anyway" factors that you do with your own home (because you wouldn't) and b) you are likely to have to invest capital to make the deal stack, and you must take into account the opportunity cost of doing that.

You won't make it if the numbers don't add up, no matter how good a deal everyone says btl is.

Currently my mortgage is interest only but I'm making overpayments to get some equity into the place and it reverts to repayment in a couple of years.


V

Hmmm...

If you buy a 150k property, and put down a 15k deposit, and have a mortgage at 6%

Your monthly interest would be £675. On a 150k propery, you should be able to get £750pcm (if you find a decent enough property- which is possible).

If the rate increases to 8%, interest would be £900pcm. Basing it on that (a bad situation of high interest rates), you'll pay roughly £150 each month out of your pocket.

Over 20 years, you'll end up paying  £36,000 out of your own pocket. Over 20 years, your property would have more than doubled in value (going by past trends). So let's assume it's worth £300k.

Your inirial investment of 15k, and your investment of 36k over 20 years totals to 51k.

Your personal profit would be approximately 250k over 20 years! And I took into consideration worst possible scenerios.

In the longterm, you should end up on top. In the short term, it's more often than not, cheaper to rent.