Rent prices versus Buy prices

[RacerMDR]

right - so, i'm looking to move somewhere a bit closer to work. I'm looking at either Guildford or Farnham (as i like both places and have friends there)

Renting - I can get a really nice little house with a garage for about 1000pcm or indeed a swish Guildford flat (with underground parking) for around 1200pcm

So - i think - maybe i'll buy somewhere - prices are down, bit of an investment.

I whack in 300k.....which i'm thinking roughly equates to the rent i'm looking at......and what is available? NADA......stty ex council places or houses in the middle of nowhere and not town central

Either i've got my sums wrong - or something is confusing

thoughts?

[cs02rm0]

It's almost like buy prices have totally separated from reality. Oh wait...

[MitchT]

I'm currently comfortably renting a place which I would only be able afford to buy (based on the prices of comparable properties for sale) if my wage were about 90% higher!

[john_p]

RacerMDR said:

right - so, i'm looking to move somewhere a bit closer to work. I'm looking at either Guildford or Farnham (as i like both places and have friends there)

Renting - I can get a really nice little house with a garage for about 1000pcm or indeed a swish Guildford flat (with underground parking) for around 1200pcm

So - i think - maybe i'll buy somewhere - prices are down, bit of an investment.

I whack in 300k.....which i'm thinking roughly equates to the rent i'm looking at......and what is available? NADA......stty ex council places or houses in the middle of nowhere and not town central

Either i've got my sums wrong - or something is confusing

thoughts?

I'd have thought £1000pm equates to £200k on a 10% deposit, roughly? Which doesn't help you, I know. But I do sympathise, it's the same where I am.

[RacerMDR]

but surely that would be reflected in the cost of rent? Or am I just being too logical.......

I currently rent a massive 3 bedroom with a double garage, big garden and enough driveway space for a van and 3 cars.......its under 1200 PCM

(yes its a bit remote - 1.5 hours commute to the office in London)

but still - if I was to buy my house - I think it would cost about 450k! something doesn't add up!?

[john_p]

So your house is worth £450k now.. but when your landlord bought it, say it was 8 years ago, maybe it was £200k..and they put in a deposit.. so let's say his mortgage is £800/month.

You can see why they'd be happy to let it tick over at a lower rate.

I do think a £450k house for £1200/month is pretty unusual thoug - imagine a recent-BTL landlord, if they'd bought the house in 2007 for say £400k and 10% deposit, their mortgage would be much more per month ..

Edited by john_p on Wednesday 20th May 19:12

[Deva Link]

john_p said:

So your house is worth £450k now.. but when your landlord bought it, say it was 8 years ago, maybe it was £200k..and they put in a deposit.. so let's say his mortgage is £800/month.

You can see why they'd be happy to let it tick over at a lower rate.

I don't suppose they're "happy" about it, but if that's all it will rent for then not much they can do at the moment.

john_p said:

I do think a £450k house for £1200/month is pretty unusual thoug - imagine a recent-BTL landlord, if they'd bought the house in 2007 for say £400k and 10% deposit, their mortgage would be much more per month ..

That's the position my daughter's in with a house that came through her boyfriend's family a couple of years as "too good to miss". They're now basically paying someone £600/mth to live in it.

Edited by Deva Link on Wednesday 20th May 19:22

[NDA]

I have a a couple of houses near Guildford and these are the numbers - if it helps.

Property one owes me just over £700k from its original purchase price. Received an offer of £600k which I accepted, but it fell through. Next offer was £475k! So I'm renting it for £1350 a month and it has tenants in now. This is a 17th century detached cottage, quite beautiful.

Property two was valued at £1.5m but the crunch has taken that down to (probably) £1.1. I haven't even bothered to market it, I have tenants in at £2,400 a month for 2 years. This is a detached house with pool and a few acres.

A repayment mortgage for £500,000 over 25 years at 4.2% would cost £2,700 a month - so I think renting (at the moment) seems to get you a better property.

Hope this is moderately illuminating as it's based on real numbers.

[Deva Link]

The $64,000 question is, which is "wrong", the rental price or the house value.

If your £1.5M to £1.1M property is really worth £1.1M then it should be renting for about £6K/mth, shouldn't it?

Or, horrifyingly for those who own property, perhaps it's really only worth what it will rent for, ie something like £400K.

It surely ought to be more expensive to rent a property than to buy one on a mortgage?

Edited by Deva Link on Wednesday 20th May 21:05

[Neil_H]

I've always found, at least in the last few years, that you get more 'bang for buck' in renting than buying.

[Murph7355]

RacerMDR said:

...
thoughts?

If you want to live in that location, in those types of property, then you are going to be better at present renting. At least in terms of immediate monthly outlay.

Of course, those desirable areas/properties may never come on the market for 300k again if there are sufficient people wanting to buy similar properties. Depends what you're after. It's all about supply and demand one way or another

[SJobson]

NDA said:

I have a a couple of houses near Guildford and these are the numbers - if it helps.

Property one owes me just over £700k from its original purchase price. Received an offer of £600k which I accepted, but it fell through. Next offer was £475k! So I'm renting it for £1350 a month and it has tenants in now. This is a 17th century detached cottage, quite beautiful.

Property two was valued at £1.5m but the crunch has taken that down to (probably) £1.1. I haven't even bothered to market it, I have tenants in at £2,400 a month for 2 years. This is a detached house with pool and a few acres.

A repayment mortgage for £500,000 over 25 years at 4.2% would cost £2,700 a month - so I think renting (at the moment) seems to get you a better property.

Hope this is moderately illuminating as it's based on real numbers.

Ouch! The rent for the first one sounds low, though. Is it rented to a friend or something?

[RacerMDR]

thanks for the numbers. It does all stack up. You get more for your money in renting.........but its a short term gain.....as obviously i'm paying someone elses mortgage.

I do own a house - but its in Somerset - and since I bought my circumstances have changed so that I work in London.

I could sell my house - but frankly its dropped and not worth doing.

as for the rent - its costing me 150 quid a month even with someone renting it......so i'm getting shafted at both ends!!!!!!!!!

[bracken78]

I have just brought (well I hope so, goes thought tomorrow!) a house in Guildford. The problem for me was I need/wanted a house within walking distance of the station as parking is about 1,700 a year and be close ish to the centre of town, I also wanted to get rid of a car.

From my research I know I could have rented a better house for what the mortgage will cost me but I've been waiting for 3/4 years to buy something as prices where going to come down, which they did/are. I have now waited long enough and brought the a house for what the current owners paid for it in 2003.

The rub is that if I have kept the car and paid the crazy parking fees I could have had a bigger house, maybe with a garage is a not so good area but that’s not what I wanted now. Basically I think I'm saying rent if you can or buy if you want to.

[NDA]

SJobson said:

NDA said:

I have a a couple of houses near Guildford and these are the numbers - if it helps.

Property one owes me just over £700k from its original purchase price. Received an offer of £600k which I accepted, but it fell through. Next offer was £475k! So I'm renting it for £1350 a month and it has tenants in now. This is a 17th century detached cottage, quite beautiful.

Property two was valued at £1.5m but the crunch has taken that down to (probably) £1.1. I haven't even bothered to market it, I have tenants in at £2,400 a month for 2 years. This is a detached house with pool and a few acres.

A repayment mortgage for £500,000 over 25 years at 4.2% would cost £2,700 a month - so I think renting (at the moment) seems to get you a better property.

Hope this is moderately illuminating as it's based on real numbers.

Ouch! The rent for the first one sounds low, though. Is it rented to a friend or something?

I think it is quite low too - however there are more properties to rent than tenants at the moment, so I had to either hold out for a higher rent or take tenants now.

The £1.5m - maybe £1.1m house started out at £4,500 a month rent, this gradually reduced as there were no takers. I was worried that we might get tenants who could normally never afford this type of property and that they'd promptly trash it by having wild pool parties.

[SJobson]

Obviously purely on figures the more valuable house sounds underrented, but that's a rarified market so I can see why it's ~£2k a month. £1,350 a month within commuting distance of London sounds a bargain for someone.

[RacerMDR]

bracken78 said:

I have just brought (well I hope so, goes thought tomorrow!) a house in Guildford. The problem for me was I need/wanted a house within walking distance of the station as parking is about 1,700 a year and be close ish to the centre of town, I also wanted to get rid of a car.

From my research I know I could have rented a better house for what the mortgage will cost me but I've been waiting for 3/4 years to buy something as prices where going to come down, which they did/are. I have now waited long enough and brought the a house for what the current owners paid for it in 2003.

The rub is that if I have kept the car and paid the crazy parking fees I could have had a bigger house, maybe with a garage is a not so good area but that’s not what I wanted now. Basically I think I'm saying rent if you can or buy if you want to.

nice one Bracken78 - where about is it in Guildford is it? My choice is, pay 1200 for a massive house, double garage, big garden lots of space (1 van, and 3/4 cars out front) BUT i have to live 20 minutes (by car) South of Guildford...

OR

I rent a 2 bed flat in Guildford with one parking space........closer to Waterloo - although currently I can walk to station in ten minutes.....and its 1 hour 5 to Waterloo. Expensive though - so I drive.

Looking at the costs of mortgages........I 'think' its going to work out cheaper to rent whilst I save up enough to buy a house in cash (which the mortgage would cost extra in Interest)

It requires dicipline - but is achievable

[mechsympathy]

RacerMDR said:

as for the rent - its costing me 150 quid a month even with someone renting it......so i'm getting shafted at both ends!!!!!!!!!

I suspect whoever you're renting from is feeling similar pain.

[Merlot]

Neil_H said:

I've always found, at least in the last few years, that you get more 'bang for buck' in renting than buying.

Depends how you are comparing things.

I rent a flat for £735pcm. An interest only mortgage over 25 years for similar money would be £170,000. My flat is worth about £180k at current prices, so not too far off.

However, if you're comparing a repayment mortgage then the monthly mortgage cost will be higher, but you're obviously paying off a loan / into an asset.

A surprising number of people don't seem to understand this - the current question of the moment is why would I want to buy a property smaller than my own for £800pcm mortgage when I can rent my bigger property for £735. What they don't realise is that in 10 years time you'd still be in the same scenario with renting, but with buying will have paid nearly half the mortgage.

[Deva Link]

Merlot said:

but with buying will have paid nearly half the mortgage.

On a 25yr repayment mortgage you'd have paid off hardly any of the principal after 10yrs.