Hi

Some friends of mine have just rented a flat up in Crookes on the newish development there.

You can see that there is another for rent:
http://lettings.saxtonmee.co.uk/property_details.asp?id=P2653

The rent on both is £650 per month

They noticed that not all of these flats have been sold.
You can still buy one here:
http://www.saxtonmee-cityliving.co.uk/newhomes/development_detail.asp?ID=98

It will cost you just under £180,000

If you do the sums then to borrow the 180,000 for a mortgage you will currently pay back about over £930 pounds a month, and thats before insurance, overheads, agents fees and all the other stuff.

Does this mean these flats are being sold for too much money, or does this mean my friend got a bargain rent? If the rents cheap then fill your boots as there are more for letting

Deepak

Hi

Some friends of mine have just rented a flat up in Crookes on the newish development there.

You can see that there is another for rent:
http://lettings.saxtonmee.co.uk/property_details.asp?id=P2653

The rent on both is £650 per month

They noticed that not all of these flats have been sold.
You can still buy one here:
http://www.saxtonmee-cityliving.co.uk/newhomes/development_detail.asp?ID=98

It will cost you just under £180,000

If you do the sums then to borrow the 180,000 for a mortgage you will currently pay back about over £930 pounds a month, and thats before insurance, overheads, agents fees and all the other stuff.

Does this mean these flats are being sold for too much money, or does this mean my friend got a bargain rent? If the rents cheap then fill your boots as there are more for letting

Deepak

theres a difference between paying a mortgage and renting.
that 930 a month is an investment whereas the 650 is an expense

Most people who buy-to-let have a decent deposit so wouldn't be borrowing the full £180,000.You can guarantee they will be making a reasonable profit a month on top of their mortgage repayments from your friends rent, so no...they aren't getting a bargain...especially as they are "losing" £650 a month whereas the landlord of the property still owns the flat when the tenants move out.

It depends, when you other costs a landlord would have to pay for: void periods, maintenance costs, estate agents fees etc. your friends may be renting for cheaper than a mortgage.

Some buy-to-lets are being bought with Interest Only mortgage which in effect is just paying rent to the bank in terms of interest. You have to pay the actual cost off in 25 years - you don't actually own the house.

Whether or not something is too much/little is the job of the market.

Most people who buy-to-let have a decent deposit so wouldn't be borrowing the full £180,000.You can guarantee they will be making a reasonable profit a month on top of their mortgage repayments from your friends rent, so no...they aren't getting a bargain...especially as they are "losing" £650 a month whereas the landlord of the property still owns the flat when the tenants move out.

Please try to do some math taking into account interest rate today!!!!!!! And then you understand that, instead of “making a reasonable profit a month on top of their mortgage repayments” the landlord, if he bought recently, actually are not recovering money he is paying on INTEREST ONLY, forget REPAYMENT! All you are saying is not relevant any more.

So, for the £1800000 to take BTL mortgage you need at least 20% deposit – you will take £144000 from the bank. Currently, on the best BTL product (LeedsBS) you will pay 658 per month INTEREST ONLY or 894 repayment mortgage! Moreover, you initially need to pay £1000 for this mortgage + stump duty (£1800) + solicitor fee + searches (£700?) etc (so at least £3500 initially the landlord will just through away). To add, you locked your 36000 which over wise on a saving account would bring you a nice £170 per month (£135 after tax). And, finally, this is a deal for 3 years so after 3 years your repayment option will be £1063 and interest only - £904!

The landlord does not owe the flat when the tenants move out, if he is paying the interest only mortgage, he still need to repay £144000 to actually own the flat!

And, very simply, if you have £180000 and, instead of being a sheep and to buy a “BTL investment” as everyone around is doing (especially if you know math on GCSE level) just put in a bank (ISISI has got the highest interest rate at the moment), you will get back guaranteed 848 (678 after tax deduction) per month without any headache! But it is only if you do not beleave that "property is always go up"!

Well, I do not argue, it was very profitable years ago but not any more!!!!! There is a time for everything and now it is definitely not the best time for recent BTL!

So, summarising:

Your friends ARE getting a bargain!!!!! As on the top of this money the landlord must pay all these insurances, maintenance money and, I think to buy furniture etc. Your friends are just paying money less that they would pay to a bank on interest only basis if they bought the flat and do not need to think about maintenance things!

Please try to do some math taking into account interest rate today!!!!!!! And then you understand that, instead of “making a reasonable profit a month on top of their mortgage repayments” the landlord, if he bought recently, actually are not recovering money he is paying on INTEREST ONLY, forget REPAYMENT! All you are saying is not relevant any more.

So, for the £1800000 to take BTL mortgage you need at least 20% deposit – you will take £144000 from the bank. Currently, on the best BTL product (LeedsBS) you will pay 658 per month INTEREST ONLY or 894 repayment mortgage! Moreover, you initially need to pay £1000 for this mortgage + stump duty (£1800) + solicitor fee + searches (£700?) etc (so at least £3500 initially the landlord will just through away). To add, you locked your 36000 which over wise on a saving account would bring you a nice £170 per month (£135 after tax). And, finally, this is a deal for 3 years so after 3 years your repayment option will be £1063 and interest only - £904!

The landlord does not owe the flat when the tenants move out, if he is paying the interest only mortgage, he still need to repay £144000 to actually own the flat!

And, very simply, if you have £180000 and, instead of being a sheep and to buy a “BTL investment” as everyone around is doing (especially if you know math on GCSE level) just put in a bank (ISISI has got the highest interest rate at the moment), you will get back guaranteed 848 (678 after tax deduction) per month without any headache! But it is only if you do not beleave that "property is always go up"!

Well, I do not argue, it was very profitable years ago but not any more!!!!! There is a time for everything and now it is definitely not the best time for recent BTL!

So, summarising:

Your friends ARE getting a bargain!!!!! As on the top of this money the landlord must pay all these insurances, maintenance money and, I think to buy furniture etc. Your friends are just paying money less that they would pay to a bank on interest only basis if they bought the flat and do not need to think about maintenance things!

if you paid 144000 on a 180000 property you would only have 36000 left to pay +interest

you are forgetting something in 25 yearsthe property may be worth approx 750000 give or take a few grand

you are forgetting something in 25 yearsthe property may be worth approx 750000 give or take a few grand

:) Also a loaf of bread will probably cost 10 quid....

if you paid 144000 on a 180000 property you would only have 36000 left to pay +interest

I wrote: you will take £144000 from the bank, which means that you paid 20% of £180000 or £36000

If these are, as you suggest, a new devel;opment, therefore a landlord would have had to have bought recently. As described, £650 a month rent is unlikely to cover costs.

It is clear that the the landlord has bought cash or with a very minimal mortgage. As such the rent will cover expenses with profit.

how you could ever start to compare a mortgage repayment with rent I do not know. Whilst these days renting will me 'cheaper' in the short term with a lower monthly cost and less responsibility for the building, the rent money you pay ios lining someone elses pocket, not paying off your own mortagae which when you come to sell again is essentially cash in your pocket in addition to having paid for the roof over your head.

:) Also a loaf of bread will probably cost 10 quid....

and we will all going to work on Virgin branded buses first and mainline will have been kicked out but the bus fare will be lets say £20 to town from anywhere on the outskirts

you are forgetting something in 25 yearsthe property may be worth approx 750000 give or take a few grand

May be - or may be not!

So do you all suggest that to subsidize students now to have a privilege to pay £144000 to a bank 25 years later is a good idea? you are paying you own real money which you could spend on yourself now but who knows where you will be after 25 years

You are forgetting, that simply put £180000 on a bank now and even at the current low interest rate you will have
£545000 after 25 years (I took taxes into account)! (but, as you no, probably the interest will go up considerebly). Plus, you do not have to do ANYTHING! Just seat, relax and enjoy!

So instead of doing assumptions can you mathematically prove for me with all calculations how the landlord we are currently discussing benefits TODAY from his £180000 "investment". Let's assume that he bought it this month as this is a new appartments. obviously, if he bought it 3 years ago, it could be very profitable, I agree.

May be - or may be not!

So do you all suggest that to subsidize students now to have a privilege to pay £144000 to a bank 25 years later is a good idea? you are paying you own real money which you could spend on yourself now but who knows where you will be after 25 years

You are forgetting, that simply put £180000 on a bank now and even at the current low interest rate you will have
£545000 after 25 years (I took taxes into account)! (but, as you no, probably the interest will go up considerebly). Plus, you do not have to do ANYTHING! Just seat, relax and enjoy!

So instead of doing assumptions can you mathematically prove for me with all calculations how the landlord we are currently discussing benefits TODAY from his £180000 "investment". Let's assume that he bought it this month as this is a new appartments. obviously, if he bought it 3 years ago, it could be very profitable, I agree.

I have to disagree intrest rates will very likely be lower in the years to come according to most money managers

I have to disagree intrest rates will very likely be lower in the years to come according to most money managers

When 49 out of 50 "money managers" got the last interest rate call wrong how can you say this. Interest rates are historically low. Nobody really knows what is going to happen.

Please try to do some math taking into account interest rate today!!!!!!! And then you understand that, instead of “making a reasonable profit a month on top of their mortgage repayments” the landlord, if he bought recently, actually are not recovering money he is paying on INTEREST ONLY, forget REPAYMENT! All you are saying is not relevant any more.




I did the "math" according to our experience with property in the same area and of the same value. We currently make £250 profit per month after costs and mortgage payments on our property (on a repayment mortgage) and whilst the tenants have been paying that mortgage for us (2.5 years, about the same as if we had bought one of the flats off-plan and for considerably less than the sale value today) our property has more than doubled in value, leaving us quids in if we decide to sell.

Thankfully we are making a monthly profit on our investment, and my partners maths degrees came in extremely handy when we worked out the cost implications of the purchase.

OK, so if someone was to pay a meagre £500pcm to rent a house. In the first year that would be £6000. If the rent went up by just 2.5% per year, by 25 years later, the annual rent would be somewhere around £10852. In total, during those 25 years, that person would have spent slightly over £200000 on rent.

If you take a bog standard mortgage that you end up paying £1.68 back for each pound you borrow (ie take a fixed rate mortgage, then never bother to search around for better rates when the fixed rate ends), then you could buy a house for around £120000, and would ahve paid for it by the end of 25 years with the money you would have hypothetically spent on rent. the chances are your house would also be worth rather more than £120000 by then, particularly if it is wasn't in norfolk.

just thought i'd mention that.

I did the "math" according to our experience with property in the same area and of the same value. We currently make £250 profit per month after costs and mortgage payments on our property (on a repayment mortgage) and whilst the tenants have been paying that mortgage for us (2.5 years, about the same as if we had bought one of the flats off-plan and for considerably less than the sale value today) our property has more than doubled in value, leaving us quids in if we decide to sell.

Thankfully we are making a monthly profit on our investment, and my partners maths degrees came in extremely handy when we worked out the cost implications of the purchase.

Well, I specially mentioned (if you read) that it was very profitable years ago, who can argue?
Try to do the same math now and to find any profit and show it to us

I did the "math" according to our experience with property in the same area and of the same value. We currently make £250 profit per month after costs and mortgage payments on our property (on a repayment mortgage) and whilst the tenants have been paying that mortgage for us (2.5 years, about the same as if we had bought one of the flats off-plan and for considerably less than the sale value today) our property has more than doubled in value, leaving us quids in if we decide to sell.

Thankfully we are making a monthly profit on our investment, and my partners maths degrees came in extremely handy when we worked out the cost implications of the purchase.

i think part of what ooops was suggesting, albeit not very clearly, is that if you sell a rental property, as it is not your first home, you have to pay capital gains tax on any profit you make (by which i mean the difference between what you paid for the house (less what you borrowed from the bank), and what you sell the house for (once you've paid the bank back). that's why landlords often don't pay for a capital reduction mortgage and stick only with paying hte interest - they lose less profit to tax that way.

(ie you buy for 50000, of which you pay 5000 deposit and borrow 45000. you pay for a capital reduction mortgage and pay back such that you owe the bank 30000. if you then sell for 150000, you would owe capital gains tax on 120000. If you had only paid to cover the interest payments, you would pay capital gains tax on 105000. given that capital gains tax may be applicable at 40%, you would have unnecessarily have paid the tax man an additional £6000).

If these are, as you suggest, a new devel;opment, therefore a landlord would have had to have bought recently. As described, £650 a month rent is unlikely to cover costs.

It is clear that the the landlord has bought cash or with a very minimal mortgage. As such the rent will cover expenses with profit.

how you could ever start to compare a mortgage repayment with rent I do not know. Whilst these days renting will me 'cheaper' in the short term with a lower monthly cost and less responsibility for the building, the rent money you pay ios lining someone elses pocket, not paying off your own mortagae which when you come to sell again is essentially cash in your pocket in addition to having paid for the roof over your head.

As I tried to explain earlier, even if the landlord put ALL cash than putting all cash in the bank currently would give him MORE profit per month. It is just as simple as this. The only profit he could get is the hypotetically increasing price of the flat (!) By the way, during the last 3 years when property prices are UP significantly, new build appartments are DOWN 0.9% . so, where is his money?


What is the difference between mortgage and the rent? For rent, you are paying for someone mortgae (or, as in example above, someone is subsidising you), but with interest only mortgage (as we calculated, the rent just cover interest only mortgage) you are paying to a fat bank. Personally I do not hate a landlord more than a bank. Repayment mortgage with CURRENT house prices, interest rate and a rent prices is not economically justified

:) Also a loaf of bread will probably cost 10 quid....

Look at the evidence. Of course there are highs and lows. I am sure that you will agree that properties in the UK have doubled approximately every 7-10 years.

I have only just joined your forum as I am thinking of moving up your way
Im not sure if to buy or rent
I have never had a mortgage before
That is why your post interested me
I have read all your points of view and something struck me
When you buy a house, you think of it as an investment. It is worth more than you paid for it
If you borrow the money, you have to pay back a lot of interest
Dose the interest you pay back over lets say 25 year out stretch the profit
Especially when you think of the maintenance costs
Has any of you ever done the math’s
I would be interested to know with out being too noise