Do you think renting is dead money?

Benny_Cake · 01-06-2011 07:49PM

Silentcorner wrote: »

And by the way you are not stuck in the one house, you can rent it out to someone willing to pay the mortgage for you, you can rent where ever you like and still in 20/30/40 years time you have an asset you can sell or live in.

People in other countries rent off someone as well, that doesn't make them smart does it?

We live in a predominantly rural country where we should expect to own a home, for security if nothing else. They will prove to be as reliable as any pension.

My point is, on the balance over a 20/30/40 year period you are better off buying....

It isn't as easy to rent out a place to someone as you might think, especially with a falling population. In some parts of the country it's downright impossible. Also, in a lot of European countries, properties are often owned by large institutions such as pension funds etc, which take more of a long-term view and value stability over simply trying to put the rent up every time the bank raises the interest rate. Makes renting look a lot more attractive that many of our "property investor" landlords do.

amacachi · 01-06-2011 07:50PM

Crasp wrote: »

The question isn't about buying a service or not, it's about buying Vs renting.. it's a sound investment where we are, I am certain they will make a profit on the apartment.

I have the use of the apartment for 5 years, at the end I have nothing. They have the use of the apartment for 5 years, at the end, they still have an apartment!

that's the difference... We bothe bought the same "service"

If you're certain of a profit then of course it would be stupid to not buy the place, which begs the question, why didn't you? Obviously you realise property prices only ever go up.

Big Nasty · 01-06-2011 07:50PM

I bought in 2005. I'm in negative equity now to the tune of €120k - well I'm not really because I have no intention of selling in the next 5 years.

Am I sorry? No! On paper it's not my place but in my head it is and I take pride in it. I can't see myself taking the same pride in a place I was renting. It's my home.

It will be paid off in 2040 and by then I will be 65, retired and 'rent' free!

gaeilgegrinds1 · 01-06-2011 07:51PM

I bought my house while very young, always rented it so each and every mortgage repayment until my OH moved in more than covered the mortgage. Now...no mortgage...so no dead money. You can own a house and be smart about it too!

Crasp · 01-06-2011 07:52PM

opinion guy wrote: »

:eek:
Where've you been ?
I hope you are not studying economics!

At no point did I say it was Ireland anyway!

amacachi wrote: »

Fair play to him/her for making a profit in these times. Also for being in a position to get a mortgage when in college. Out of interest, you do realise that after 5 years probably about 5%, if even, of the principal will have been paid back? Add fees etc. and selling the place at cost price means breaking even. Then again, we all know property values only ever go up!

yes and after 5 years, MY rent has paid for that 5%, and he sells the apartment to pay the remaining 95%.

Snakeblood · 01-06-2011 07:52PM

Crasp wrote: »

The question isn't about buying a service or not, it's about buying Vs renting.. it's a sound investment where we are, I am certain they will make a profit on the apartment.

I have the use of the apartment for 5 years, at the end I have nothing. They have the use of the apartment for 5 years, at the end, they still have an apartment!

that's the difference... We bothe bought the same "service"

No, you don't understand. He didn't buy a service, he became a service provider at a considerable risk. You became a service consumer. So you didn't 'lose' money, you spent it on a service.

You can be as certain as you like, and you can still be wrong.

01-06-2011 07:54PM

"Rent is dead money" - four words that played a huge part in the Irish property bubble.

Crasp · 01-06-2011 07:54PM

Snakeblood wrote: »

No, you don't understand. He didn't buy a service, he became a service provider at a considerable risk. You became a service consumer. So you didn't 'lose' money, you spent it on a service.

You can be as certain as you like, and you can still be wrong.

He bought the apartment for himself, he needed accommodation. and I'm essentially subsidising it. We are both paying, in different ways, for the same roof over our heads.

He didn't buy it for the purpose of renting it to me.

Kevin Bacon · 01-06-2011 07:55PM

Deleted User wrote: »

Rent on the other hand is spent with no chance of any return.

Your "return" so to speak is the use of the asset if your renting so you are getting a return on your money the fact that the return is intangible and exhausted at the end of the lease still doesn't mean is has no value. Your return on purchasing an asset, is the continued use and ownership of the asset less the risk of ownership which would be risk of loss on resale and risk of default if purchased with a mortgage which is applicable to nearly all cases.

amacachi · 01-06-2011 07:58PM

Crasp wrote: »

yes and after 5 years, MY rent has paid for that 5%, and he sells the apartment to pay the remaining 95%.

Again, since the profit is certain why didn't you take on the reponsibility? You and the other person's rent has paid that 5% which will likely be wiped out by early payment charges. So yes, fair play to him/her for getting a few years accomodation for free apart from the responsibility they took on, their relying on two housemates to pay the rent on time every month and not drop out and the certainty there'll be a profit at the end.

Once again, fair play to them for being in a position to get a mortgage when beginning 5 years of college...

Dudess · 01-06-2011 07:58PM

Silentcorner wrote: »

The people who are now the pro renters have become as obnoxious as the old "our property is now worth..." dimwits

I only started this thread to ask why people use the "dead money" expression btw, not because I view renting as better than buying. Neither is "better" than the other, only whichever suits the individual. Personally I can see the merits to both.
And yep, plenty of people who got a mortgage during the "boom" got a modest one and could afford it at the time, but have now run into hard times through no fault of their own - sickening when they get judged for what was a well-thought-out, workable plan at the time.

amacachi · 01-06-2011 07:59PM

Crasp wrote: »

He didn't buy it for the purpose of renting it to me.

I assume he intended to rent parts out? Hence he's providing a service.

Crasp · 01-06-2011 08:06PM

amacachi wrote: »

Again, since the profit is certain why didn't you take on the reponsibility? You and the other person's rent has paid that 5% which will likely be wiped out by early payment charges. So yes, fair play to him/her for getting a few years accomodation for free apart from the responsibility they took on, their relying on two housemates to pay the rent on time every month and not drop out and the certainty there'll be a profit at the end.

Once again, fair play to them for being in a position to get a mortgage when beginning 5 years of college...

I am entirely unsure what your tone is aiming to achieve? But I digress..

As I said, he bought the place for himself. He would have been paying a mortgage anyway, regardless of if anybody was renting or not. He bought his own home. Perhaps he then saw the oppotunity to rent out some space.

I was in no position to buy my own home.

amacachi wrote: »

I assume he intended to rent parts out? Hence he's providing a service.

I am not sure of his intentions, as I said he was buying the place anyway! but ya I can see where you're coming from

Snakeblood · 01-06-2011 08:09PM

Crasp wrote: »

He bought the apartment for himself, he needed accommodation. and I'm essentially subsidising it. We are both paying, in different ways, for the same roof over our heads.

He didn't buy it for the purpose of renting it to me.

You're not subsidising it. He could be using the money to pay for his coke habit. You're giving him money to live there, and you should divorce that in your head from what he does with the money.

Lawrence1895 · 01-06-2011 08:12PM

Micky Dolenz wrote: »

It's an old saying for old people.

We all need to live somewhere. I bought a house in 09 for a friction of what they wanted and my mortgage is still higher then if I was renting the exact same house. With renting is great freedom, no maintenance worries and you can feck off when you feel like it.

So my OH is 'old'? With 37 years of age?

Never mind...there is that saying in Germany, that you have to move with your job, so renting always was the one and only option for me.

And renting is much more convenient anyway, because of maintenance and stuff like that.

Crasp · 01-06-2011 08:12PM

Snakeblood wrote: »

You're not subsidising it. He could be using the money to pay for his coke habit. You're giving him money to live there, and you should divorce that in your head from what he does with the money.

I agree, that is one way of looking at it.

melekalikimaka · 01-06-2011 08:16PM

Dudess wrote: »

sickening when they get judged for what was a well-thought-out, workable plan at the time.

very poor judgement, greed more than anything else if you ask me

01-06-2011 08:18PM

Kevin Bacon wrote: »

Your "return" so to speak is the use of the asset if your renting so you are getting a return on your money the fact that the return is intangible and exhausted at the end of the lease still doesn't mean is has no value. Your return on purchasing an asset, is the continued use and ownership of the asset less the risk of ownership which would be risk of loss on resale and risk of default if purchased with a mortgage which is applicable to nearly all cases.

Yes, that's right, I was referring to the fact that your rent money has been spent, you have the use of the house but at the end of the rental period, that's it.

Kevin Bacon · 01-06-2011 08:20PM

Dudess wrote: »

I only started this thread to ask why people use the "dead money" expression btw, not because I view renting as better than buying. Neither is "better" than the other, only whichever suits the individual. Personally I can see the merits to both.

I would say the use of the phrase "dead money" is a confusion on what your putting your money towards. Renting is paying for a service where as buying a house would be better classified as an investment.

Obviously these are two distinctly different things.

Dudess · 01-06-2011 08:21PM

melekalikimaka wrote: »

very poor judgement, greed more than anything else if you ask me

A couple who wanted to start a family during the "boom" buying a modest three-bed semi-d in a "middle-of-the-road" area and both in permanent jobs, for instance? How is that greedy?

There's too much chucking people like the above into the same category as people who took the complete piss - it's not one bit fair.

Marguerite Tonery · 01-06-2011 08:24PM

Well, the banks aren't giving out mortgages, so dead money or not, alot of people are forced into the situation of having to rent instead of buying.

Benny_Cake · 01-06-2011 08:24PM

melekalikimaka wrote: »

very poor judgement, greed more than anything else if you ask me

I could only see it as being in any way greedy if they were just buying in order to flip it to someone the following year in order to make a quick buck. As Dudess said, there were a lot of people just wanting to have a home and borrowing what they thought was a reasonable amount. They may have shown some poor judgement but that property bubble lasted a very long time, and people do need places to live, especially if they have kids.

melekalikimaka · 01-06-2011 08:25PM

Dudess wrote: »

A couple who wanted to start a family during the "boom" buying a modest three-bed semi-d in a "middle-of-the-road" area and both in permanent jobs, for instance? How is that greedy?

There's too much chucking people like the above into the same category as people who took the complete piss - it's not one bit fair.

with the house prices clearly over inflated and mortgage offers many times more than feasable long term... greedy. houses during the 'boom' were over priced. Holding back was the smart thing to do until prices came down, it was a bubble, and it was going to burst, if I was going to take that risk I would have done my research, many didnt and are suffering now.

01-06-2011 08:26PM

Lars1916 wrote: »

Never mind...there is that saying in Germany, that you have to move with your job, so renting always was the one and only option for me.

And renting is much more convenient anyway, because of maintenance and stuff like that.

I suspect that many Germans save throughout their working lives and buy a house shortly before retiring.

One of the greatest errors of the Celtic tiger years has been the "morgagus Maximus" syndrome, where people are allowed to get the biggest possible mortgage for a basic house. This alone has restricted the ability of many to save for their retirement, we will soon see a lot of poorer pensioners stuck in oversized houses that they can't afford to heat etc.

amacachi · 01-06-2011 08:26PM

Dudess wrote: »

A couple who wanted to start a family during the "boom" buying a modest three-bed semi-d in a "middle-of-the-road" area and both in permanent jobs, for instance? How is that greedy?

There's too much chucking people like the above into the same category as people who took the complete piss - it's not one bit fair.

It was stupid in many cases. It may have been "middle of the road" but it was in the "middle of the road" in a bubble. Add to that the introductory rate mortgages, there was no sense in getting one of those unless you knew that you'd struggle with payments yet they were hugely popular.

KyussBishop · 01-06-2011 08:30PM

From my very surface-thin impression of the housing market in Ireland (please correct my, probably numerous, misperceptions), and the financial/legal system surrounding it etc., this seems a very difficult country to look for becoming a homeowner.

Houses are excessively expensive, mortgages seem extremely unfavorable, and those who are being raped by the banks through ill-chosen pre-recession mortgages/house-prices, are held at gunpoint by the banks because bankruptcy laws in this country would ruin them.

So yes, I can see why renting is a more manageable choice for many people, and that's fair enough, but some people don't have a choice in it, and I don't think it should be that way.
I think the hostile housing market here puts very unfair financial restrictions on people like that, leaving lots of people unable to do anything other than rent, and get stuck in a so-called 'poverty trap' (a bit of a dramatic phrase, but not all that far off), where they are forced to spend their money on rent rather than on actually buying a place.

Fair enough with people renting as a lifestyle choice, I can see the benefits people are mentioning and it makes sense at certain points in peoples lives, particularly for college and the like, but does it not make sense to move on to a mortgage or home-ownership eventually though?

I mean, sure you have to pay off a mortgage over 15-30 years, but you do own something in the end, and achieve some financial security from that in the form of a valuable asset (even though there are risks e.g. in needing to meet payments).
If you are renting for life though, won't you be spending more in the end, and also not achieve that level of financial security later on once you reach retirement? (you'd still be paying rent, and would need quite a sum of savings/pension-funds just to live on; and look at how peoples pensions today have been robbed/decimated, you can't depend on that)

Dudess · 01-06-2011 08:36PM

People were in full-time employment, they budgeted accordingly - there's always a bit of a gamble involved, no matter what the conditions. I just feel sympathy for people with mortgages who are in trouble now - don't see why they should only be deserving of scorn. Even ones who really took the piss deserve the heckling to come to an end at some point if they don't play the victim card like A.O.R. - they're more than paying for their mistake now.

Not right to point and laugh at those who have fallen on hard times - and it's always happened due to financial misjudgements, boom or no boom.

Micky Dolenz · 01-06-2011 08:39PM

Lars1916 wrote: »

So my OH is 'old'? With 37 years of age?

Hee hee, you sleep with an old person :P. Granny/Gran Dad lover :pac:

Tigger · 01-06-2011 08:43PM

Crasp wrote: »

Flatmate owns our college apartment. charges me and a 3rd flatmate 300 per month. (say 600 total).

So I lose 300 per month and at the end of the 5 years of college have lost 18,000. (I think? sounds like a lot).

my flatmate buys apartment, uses our rent to pay his mortgage installments.
at the end of the 5 years, sells the apartment (probably for a profit) and at worst breaks even. I'm down 18,000.

that's why rent is dead money!

He won't break even he will lose and probably more than 18 k

Duckjob · 01-06-2011 08:43PM

I suppose it made some some sense when the property prices were charging skyward, but the opposite is true now.

You can't really get more "dead money" than interest paid servicing a hefty mortgage on an asset that's rapidly declining in value.

Do you think renting is dead money?

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