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Author Topic: Cost of rent in the private rented sector.  (Read 17434 times)

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tunnie

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Re: Cost of rent in the private rented sector.
« Reply #105 on: 14 September 2018, 10:16:08 »

It's very valid about sacrifices though, lady in marketing I know who just moved into rented 1 bed flat we got talking about buying. She said it would take her another 4-5 years to save, for the deposit, she is similar age to me.

I mentioned I lived at home for a couple of years to save, but even though her parents live close enough, sub 1hr30 to the office for a commute. She "does not do mornings" and "must" live within 30 mins of the office.

So if she got up a little earlier, maybe went for drinks after work less like I did, you could save up far, far quicker.
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TheBoy

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Re: Cost of rent in the private rented sector.
« Reply #106 on: 15 September 2018, 10:36:52 »

If you're coming towards the end of your mortgage, and you surely are, then the monthly interest can't be that much anyway? Ours is about £9 a day.
I think mine has been about £0.00 a year for several years ;D
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TheBoy

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Re: Cost of rent in the private rented sector.
« Reply #107 on: 15 September 2018, 10:40:53 »

Have to say, I buck the trend generally in my team, most others just rent or do room shares.
Look at the area you work - IT and Media, a particularly "special" combo, both individually are, by its nature, live for today and sod tomorrow.  So (younger) people who work in it are generally of a certain mentality.  If you have any coffin dodgers in the team, which I know would be untrendy, you'll likely find they are sorted, not due to age/easier time etc, but a different mentality.
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TheBoy

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Re: Cost of rent in the private rented sector.
« Reply #108 on: 15 September 2018, 10:45:17 »

She "does not do mornings" and "must" live within 30 mins of the office.
A few years ago, the average commute was 1hr each way (and I was the wrong side of that :(), I believe it is now 1hr30 (and last year, when I worked at Harry Potter Land, I was beyond that too :().

Since 1996, I've always come off bad on commuting ;D, a real shock from spending my entire career up to that point being 5mins from work ;D.


I'm now lucky, as I can now start/finish earlier, halving my journey time :y
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Grumpy old man

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Re: Cost of rent in the private rented sector.
« Reply #109 on: 15 September 2018, 18:46:37 »

In Barnsley, you can get a very decent house for £150000. If you have a 10% deposit, i.e. £15000, your mortgage repayment at, say, 3%, would be around £640 a month. Much better than renting.

The couple that rent out the BTL that we own, pay £675 a month for a 3 bed ex-council house in a nice part of Crosby -about 2 miles from the beach and 2 miles from the M57/M58 close to good schools both primary and secondary.

It's worth about £150K.  Why don't they buy?

a) They haven't been together long.
b) He has a child (a teenager) with his ex-wife and pays maintenance.
c) They haven't yet saved a deposit

The interesting thing about your post is that we are paying exactly £640 a month - £180 interest and the rest off the debt, which should pay off on my 64th Birthday (plus or minus a year).  This means that for the next 13 years we are actually have a negative cash flow, because tax and insurance take it over £675 a month.

Looking at the house next door but one as a second BTL tomorrow.  Again an Ex-Council 3 bed.

My Current spreadsheet says that the Investment we are going to make should result in a 10% return on OUR investment. It should pay off in 17 years,  but what about the risks ?  Interest rate will be fixed for 5 years and we don't use a letting agent, but do have professional vetting. Rents might go down, because brexit, but none of the people who inquired about the first house were anything other than UK citizens, and we could have rented it out to 10 people.  I think the rent is a little low, but hey...

The idea is that if and when we pay off both loans then at current rents that's worth £1400 a month. 

Which as pensioners, will be a bonus.

Interestingly my daughter and her boyfriend have just applied to rent a flat next to the Anglican Cathedral (technically Toxteth...as in Toxic DEATH) £650 a month, because she has the deposit for a property, he doesn't, and she doesn't know where she will be working in 10 months time (Pre-reg pharmacist, could end up anywhere)


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Re: Cost of rent in the private rented sector.
« Reply #110 on: 15 September 2018, 18:56:20 »

She "does not do mornings" and "must" live within 30 mins of the office.
A few years ago, the average commute was 1hr each way (and I was the wrong side of that :(), I believe it is now 1hr30 (and last year, when I worked at Harry Potter Land, I was beyond that too :().

Since 1996, I've always come off bad on commuting ;D, a real shock from spending my entire career up to that point being 5mins from work ;D.


I'm now lucky, as I can now start/finish earlier, halving my journey time :y

My current commute is 95 miles.  I could do it in the morning in 1:45 but in the evening anything from 2 to 3 hours in the evening.  Guess what.....I'm in 'digs' during the week.  There are 70 people from Liverpool, traveling to wolverhampton in the same place. Most of them came with the machines, when they closed the factory 10 years ago. I'm just an Itinerant Freelancer so when this gig starts to piss me off I'll find something else. If there was anything in the Northwest paying anything like what I can get in the midlands, I'd chase it. But so far in 9 years - nothing. 
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LC0112G

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Re: Cost of rent in the private rented sector.
« Reply #111 on: 15 September 2018, 20:49:10 »

Looking at the house next door but one as a second BTL tomorrow.  Again an Ex-Council 3 bed.

So 6% SDLT.

The idea is that if and when we pay off both loans then at current rents that's worth £1400 a month. 

Less tax at 20/40% = £1120/£840 p/m

Which as pensioners, will be a bonus.

And when you come to sell, CGT at (currently) 28% on most of the increase in value.

I admire your commitment to paying tax.
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aaronjb

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Re: Cost of rent in the private rented sector.
« Reply #112 on: 17 September 2018, 08:50:44 »

I admire your commitment to paying tax.

Unless you're extremely rich or extremely bent, I don't think tax can be avoided ;D
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aaronjb

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Re: Cost of rent in the private rented sector.
« Reply #113 on: 17 September 2018, 09:18:03 »

[edit but I can't edit] Not implying that you personally are rich or bent, LCOG - reading that back it comes across rather harsh. I mean, you might be rich, for all I know, but I don't assume the latter ;)

I was thinking about my last visit to a financial advisor, though, whose advice was (slight paraphrasing): "You're a PAYE employee, so you're screwed. Pay up, serf."
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LC0112G

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Re: Cost of rent in the private rented sector.
« Reply #114 on: 17 September 2018, 10:20:43 »

[edit but I can't edit] Not implying that you personally are rich or bent, LCOG - reading that back it comes across rather harsh. I mean, you might be rich, for all I know, but I don't assume the latter ;)

I was thinking about my last visit to a financial advisor, though, whose advice was (slight paraphrasing): "You're a PAYE employee, so you're screwed. Pay up, serf."

My point was that BTL has a 6% buy in tax, and a 28% sell up tax on any gain. If the house/flat is bought for (say) £150K, then you'll have to pay £9K SDLT  now. In 10 years time you sell up for (say) 250K (which is 5.25% HPI) then the CGT bill could be £28K. So from your initial £159K you've made £63K profit, and paid £37K in tax. That's an effective return of 3.5% APR, and does not include any allowance for inflation either. If CPI is 2%, then the effective rate of return is 1.5% + 2%CPI.

Then there is the income from the BTL, which is taxed at your marginal rate. If you've got a normal job, or pension income, then the BTL income could be taxed at 40%. POD has already said he's at best breaking even on the rent, and possibly losing money. Most would aim for between 5% and 10% yield, so on a £150K house the income 'profit' should be at least £7K.

So he's invested in an asset where his only gain comes from HPI, yet the asset has been taxed on the way in, and any HPI is taxed on the way out. You can't sell parts of the asset over several years to spread the CGT liability over multiple years and hence use up your £11.7K CGT allowance efficiently.

Alternatively, buy £159K's worth of balanced assets, and Bed & ISA £20K p/a for 10 years. No tax on the way in, no tax on the way out, and if you're careful no tax on the income whilst you bed and ISA. If the investments return the long term average of 5% + 2%CPI then £159K grows to £312K in 10 years - a tax free profit of £153K. And no aggro from tenants, management agencies, councils, etc.   

Your problem is too much income, which I agree is a difficult one to mitigate. POD appears to be either buying using savings (already taxed money), or perhaps a BTL Mortgage.
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Field Marshal Dr. Opti

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Re: Cost of rent in the private rented sector.
« Reply #115 on: 17 September 2018, 12:29:05 »

I currently have something of a mortgage dilemma to ponder.

On the 30th September  my 5 year fixed deal of 3.75% comes to an end. This means if I do nothing my mortgage will return to the SVR of 4.84%. :-\

The best my lender will offer me is 2.6% for 2years.

Here's the thing. My mortgage is currently around £820 PCM and finishes in May 2026. However, I've had a rummage down the back of the sofa and I'm fortunate to have enough spare cash to pay this particular mortgage off completely........freeing up £820 extra spending money each month in the process.

My question is would this be a good use of my money?

I have a share portfolio which is hit and miss. Money in the bank and building society which  earn SFA. Savings in the Wellesley went 'tits up' and I lost a significant portion of my capital.

I have several other high risk investments which are looking decidedly shaky. :-\



« Last Edit: 17 September 2018, 12:33:54 by Field Marshal Dr. Opti »
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STEMO

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Re: Cost of rent in the private rented sector.
« Reply #116 on: 17 September 2018, 12:42:46 »

May 2026 is eight years away. Your covered for the first two years at 2.6%, so if you can find an investment that pays more than this (after any tax deductions) then you should invest you money and make a profit. That leaves six years on your mortgage and, I should imagine, you'll be getting to the point where most of your payments will be going towards the capital, as the interest part should be well down by then. Of course, no one knows what's going to happen again after that dreaded brexit thingy.
I, personally, would pay it off and rest easy. But, then again, I have no idea about the rest of your finances. Put it this way...I wish I could afford to pay off my mortgage, which started two years ago as a 15 year term. I will probably have it paid in 11-12 years, so about 9 to go. The £850 a month we pay would, as you say, come in very handy.
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STEMO

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Re: Cost of rent in the private rented sector.
« Reply #117 on: 17 September 2018, 12:45:41 »

Don't know about your particular deal but, if we pay more than 10% of the remaining balance in overpayments in any year (during the fixed rate period), we incur a charge.



Ours is fixed at 3.96% until 2021 btw.
« Last Edit: 17 September 2018, 12:47:40 by STEMO »
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Field Marshal Dr. Opti

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Re: Cost of rent in the private rented sector.
« Reply #118 on: 17 September 2018, 12:50:59 »

May 2026 is eight years away. Your covered for the first two years at 2.6%, so if you can find an investment that pays more than this (after any tax deductions) then you should invest you money and make a profit. That leaves six years on your mortgage and, I should imagine, you'll be getting to the point where most of your payments will be going towards the capital, as the interest part should be well down by then. Of course, no one knows what's going to happen again after that dreaded brexit thingy.
I, personally, would pay it off and rest easy. But, then again, I have no idea about the rest of your finances. Put it this way...I wish I could afford to pay off my mortgage, which started two years ago as a 15 year term. I will probably have it paid in 11-12 years, so about 9 to go. The £850 a month we pay would, as you say, come in very handy.

I've been overpaying the bastard by 10% each year for quite some time now, which helps.

You're correct about the capital to interest ratio. It's starting to snowball as the years pass. Interest is roughly abut £200 PCM and dropping.

If I pay it there is an additional administration fee of £195. :-X 

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Field Marshal Dr. Opti

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Re: Cost of rent in the private rented sector.
« Reply #119 on: 17 September 2018, 12:52:49 »

Don't know about your particular deal but, if we pay more than 10% of the remaining balance in overpayments in any year (during the fixed rate period), we incur a charge.



Ours is fixed at 3.96% until 2021 btw.


This would have been the case should I pay off the mortgage before the end of the fixed rate period. From the 30th September this no longer applies. :y
« Last Edit: 17 September 2018, 12:54:20 by Field Marshal Dr. Opti »
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