Thread: Rent vs Buying

Originally Posted by thesmileyone

As an example, Plymouth, Devon UK, apartment costs £600k to buy, or £15600 per year to rent. Which means that you would have to live in it for 38 years for buy to > rent.

Its a lovely urbansplash swanky 3 bedroom apartment, but would you want to live in it for 38 years ?

Unfortunately, with property and the rent vs buy argument, each and every property needs to be looked at individually. Sometimes it works out better to buy, sometimes it works out better to rent, as long as you can do the maths you will be fine.

Bare in mind swell that the UK and the US markets are very different.

There's pros and cons for both, I'll try and run through a couple for you so you can try and make an informed decision for yourself.

Renting

Pros:
Flexibility- If you wish to, every 6-12 months you can change where you live, what kind of property you live in, how much rent you pay, etc etc.

Freedom- A mortgage will make al to of people feel trapped. Knowing you owe 25 years generally of large payments from your wage can put a lot of stress and pressure on you. If you're made redundant, If you're offered a great job in a different location, If your whole family moves away etc you will feel trapped.

Maintenance- You'll find that generally it is the Landlords responsibility to make sure the property is well maintained and kept in good working order. Water pipe bursts, heating system fails, roof caves in, it's not your pocket that's going to be hit.

Fees- When you buy a place there are so many fees involved, estate agents, solicitors, surveyors etc etc and these can add up quickly. If you rent, the fees will always be less unless you change your place every six months and keep paying.

Low deposit- 6 weeks rent will normally cover your deposit which is a lot easier to find than 10-15% of the purchase value.

Value- You won't spend every spare moment of your life watching news reports to see if house prices are going up and down.


Cons:
It'll never be yours- You can't paint the walls your wife's favourite colour, you can't re-do the kitchen if it's not to your taste, you can't build a loft conversion if you need more space etc etc.

Payments- Some people like to see it as you are effectively paying somebody else's mortgage off, which in a way is true, however, a months rent is normally a lot cheaper than staying in a similar sized hotel room if you want to justify it to yourself that way!

Security- Once you find that dream home to rent, the Landlord may decide to sell after your initial 12 months is up then it all starts again.

Frequent moving- If you're moving a lot, it sure does get tedious packing your stuff up every 6-12 months, it's not cheap either.


Buy

Pros:
It'll be yours, one day- Eventually, after 25 years or so of constant repayments, you will own the property. No mortgage or rent to pay will free up cash for more holidays, cars, etc etc.

Put your own stamp on it- If you buy, you're more than welcome to paint the walls pink, put a 100' plasma in the bathroom or install a mirror above your bed.

Snakes & Ladders- Everyone who buys a property, deep down hopes that it will increase in value. Which for the past generation or so that's definitely true. Is that going to keep happening? That's for you to decide my friend, there's no guarantees.

Security- If you own property in the UK you're far more likely to be accepted for credit if you wish to apply. You can use leverage to borrow more and more which is great, as long as you're borrowing more with the intention of making more not just 'wasting' it hookers, coke and champagne.

Cons:
Interest- Nobodys going to lend you £500k over 25 years without expecting that as well as a whole load more back are they? I would spend some time using mortgage calculators so you keep on eye on what you actually pay back. You'll be shocked.

Interest rates- Up or down will affect your life directly, even by a 0.1 move. Some people can't live with that.

Maintenance- If that boiler breaks, you better have insurance or it's going to cost you more £££.

Trapped- As I touched on in renting, having a mortgage can make you feel trapped.


So there you go, I've touch on some brief points for you to ponder over.

You have a great deal more reading to do first of all though my friend.

Good luck.

It has become less expensive to buy a home than to lease one in thirty-nine of the fifty largest U.S. cities - Cheaper to buy than to rent in many U.S. cities. That is the conclusion of Trulia's current Rent vs. Buy index released Wed. The study predicts a deepening slum in an already troubled real estate market. For prospective homeowners, whoever, it could possibly be welcome news. As for me, it would be measuring how long one would have to own a home in each of the cities to make it worth owning over renting.

I have never rented, always owned. I personally prefer living in my own property than deal with a landlord. There is times though where renting would be wiser, if you move around alot. The only downside of owning I see is if you plan to sell in short term. If you buy your home to live in it all your life, home prices are irrelevant to you.

Good points on renting. I know how life sucking a 30 year mortgage is. I think if you want to own a home it is best to pay it off within 5 years. 30 years is way too long to be tied down.

Renting may be cheaper in some cases (or the same) if you calculate insurance, yard maintenance and taxes.

there are few things in play

1. money sense - it makes more money sense to consider owning now. rental market is red hot as there are tons of people that foreclosed or short saled their homes. RE will be up, it's a matter of time. rent is sky high now but home prices are down.

2. living standard - you can rent a nice upscale home but those tend to be hard to come by. most rental units are older and a little run down. if you seek fine living in comfort, owning is your best bet.

3. mobility - if you move around a bit, rent is obviously more flexible. if you decide to get into RE for investment or tax purposes but move a lot, you can buy rental units as business or look into vacation home in states that are beneficial NV, Montana, Alaska.

If the crap hits the fan enough to need to leave the country, you simply leave and default on your mortgage. You have waaaay bigger problems at this point.

Originally Posted by Sir Robbins

i only stress renting for when the crap hits the fan and you wanna leave usa, it's easy. No home ownership behind, no losses.

this is true. None the less, I only rent but it is because I move alot. lived in 15 places and I'm only 22. Buying would be dumb for me

Originally Posted by surma884

Good points on renting. I know how life sucking a 30 year mortgage is. I think if you want to own a home it is best to pay it off within 5 years. 30 years is way too long to be tied down.

Renting may be cheaper in some cases (or the same) if you calculate insurance, yard maintenance and taxes.

If you can afford to pay off a mortgage in 5 years, you won't like the status of the neighborhood or the house. The houses are too cheap, for any income bracket.

Originally Posted by Sir Robbins

this is true. None the less, I only rent but it is because I move alot. lived in 15 places and I'm only 22. Buying would be dumb for me

If I moved around that much I would buy vacation homes for rent and hire a property management company. You have ownership of something that is tangible and you only need your blackberry wherever you go. Gives you flexibility to move to anywhere while still giving you something to settle in when times get tough.

Real Estate is a fun game to play.

Originally Posted by RockWell

If you can afford to pay off a mortgage in 5 years, you won't like the status of the neighborhood or the house. The houses are too cheap, for any income bracket.

If you and your wife together make 120k/year can you not pay off a house that is 300k in 5 years? Not sure about your location, maybe you are in Cali, but in NC you can get a nice house in a good neighborhood for 300k-400k.