Do Renters Die Poor?

[Mabon]

(This was a post in the Time Magazine Thread - It's an issue I'd love to explore a little with yourselves).

 

One of the reasons often cited for people to own their own homes, is that it encourages them to save (particularly if they have a repayment mortgage as opposed to an interest-only mortgage).

 

A big percentage of the homeowner's wealth is in their home. That wealth is produced by using leverage (other people's money) to increase their own wealth via the use of mortgages (particularly when they have 'traded up' a few times).

 

Typically (generalising) renters tend to die with little in the way of savings.

 

Whereas homeowners who have built equity in their properties throughout the years, tend to die with considerably more cash as savings and investments.

 

That may only be true in countries that have 'precarious' renters rights though. (?)

 

Whereas in a country with a much sttronger rental market and corresponding renters laws, the wealth of its renters may well be higher (comparatively).

 

If a renter feels secure in their tenancy, they will, surely, have a more 'settled' future view and therefore invest accordingly?

 

I wonder what savings and investing etc rates renters have in Germany and Switzerland as compared to the UK? (All things considered being equal)...

 

Are the two things - renters rights and savings/ investments - linked?

 

Or is renting everywhere undertaken mostly by people who will 'always be poor'?? (Comparatively).

 

Does renting then embue or manifest an 'impoverished mentality'?

 

(This is not a moral viewpoint, just one of curiousity).

 

I know that some folks on here have STR'd etc and so are renting. I will say though that GEI is not atypical of the population as such....

 

Good Luck.

[frizzers]

I would say, yes.

[drbubb]

Whereas homeowners who have built equity in their properties throughout the years, tend to die with considerably more cash as savings and investments.

That may only be true in countries that have 'precarious' renters rights though. (?)

I'd say it is true near the peak in a long bull market in housing, and will be much less true after a long correction.

 

It is certainly more true in the UK than in the US, which are at different points in their cycles.

 

Some in Japan (Jake?) should be asked to comment on this notion

[romans holiday]

First of, we all die poor... none of us can take it with us.

 

 

In a period of expansion, or a boom, it makes sense to buy. In a period of contraction, wealth destruction, it makes sense to rent. This from a rational/ investor perspective with monetary value in mind.

 

Many people will continue to "irrationally" buy, in periods of both expansion [over-extend] and contraction, depending purely on their ability to do so... apart from rational considerations.

 

Then others will buy for reasons which transcend considerations of mere monetary value.... serving real ends in life.

[Jake]

I'd say it is true near the peak in a long bull market in housing, and will be much less true after a long correction.

 

It is certainly more true in the UK than in the US, which are at different points in their cycles.

 

Some in Japan (Jake?) should be asked to comment on this notion

It all depends on the stage of the cycle, and at what point you die/see/rent.

 

It also depends on what you spend your money on ( )whilst you rent and how much your rent is/mortgage costs are.

 

Romans comments above are good IMO.

 

I rent for about 10,000 yen/month. (65 quid) (no, it is not a hut). Buying(for me) would ''transcend considerations of mere monetary value''.

 

Its all a bit different in Japan as only the LAND has monetary value (to Japanese people). There are many who buy apartments here. They must be stupid. But they do it not with thinking of capital appreciation in mind rather similar to buying an Audi-they want to swan around in glitzy wheels and they want to live in trendy 'mansions' near the shops. The nature of the beast is different to the UK. Having said that recently mortgage reapayments are advertised as the same as paying the rent. So why rent? It is tempting to buy..and so NOW would be a time to buy...unless you think they will be cheaper still or in saving in another medium like gold for eg, would work out the best way to buy.

 

Unlike most Japanese I would be happy to take on an old farmhouse (minka) with dead spirits, weeds, and 'old' fittings-so long as it ticks all my boxes. When you see these places touched up you really wouldn't want to live anywhere else-esp a city box.

 

Do renters die poor? How many in the UK will be reposessed and end up selling to the renters who have been saving for this rainy day?

[Mabon]

First of, we all die poor... none of us can take it with us.

 

Lol. There's always one....

 

In a period of expansion, or a boom, it makes sense to buy. In a period of contraction, wealth destruction, it makes sense to rent.

 

This from a rational/ investor perspective with monetary value in mind.

 

A rational/ investor mentality is not the norm by any stretch though.

 

For most folks buying a house is an emotional kick. Rationalisation comes after.

 

Surely the best time to buy a house is when they are cheap. Particularly when they are cheap in comparison to rents in your local area.

 

Example. Right now, if you just wanted somewhere to live. That you owned. You could buy a decent house in various places in the UK for 20 to 35k.

 

True it may not be salubrious. It may not be in an area that is necessarily thriving either. But the houses would are liveable.

 

And if you are living in that area. Say you are working. And you plan on remaining in that area, then why rent?

 

Then others will buy for reasons which transcend considerations of mere monetary value.... serving real ends in life.

 

Indeed. Surely then if you are a renter. You decide to stay in your local area. Houses in your local area are say 25k.

 

Then why pay say 75 quid rent per week (approx 300 per month, 3600 per year) for a 2 up 2 down terraced house, when you can buy it for the equivalent of 7 years rent (25, 200)?

 

I've had discussions with a few folks in this situation now.

 

Is renting then an embued mindset for a lot of people?

 

(not str'rs waiting for bargains or pricing houses in gold - for most people this is esoteric knowledge)

 

And if so, does this 'always be a renter' mentality go hand in hand with transcience towards all things?

 

(I know I know we are all transcient in matter...)

 

Again, does homeownership encourage you to save and invest?

[romans holiday]

Again, does homeownership encourage you to save and invest?

Then I'd say NO.

 

I don't think savings and investing can be so simply identified with home-ownership today. Look at the recent past. Many who were able to buy into the dream of owning their own home, went and pulled out a lot of the equity and consumed it. I'd add that this binge of consumption probably went even further up the chain to those who thought they were quite "comfortable". Home-ownership here promoted spending not saving. The hyper-inflation in easy credit/ asset prices fuelled consumption, which subverted the very idea of saving.

 

For most folks buying a house is an emotional kick. Rationalisation comes after.

I'd add, that many who couldn't really afford it geared themselves to the eyeballs [compliments of the bank] and panicked into buying a house after watching home prices relentlessly climb year on year. The emotional "kicker" here was anxiety.

[Jake]

Mabon,please show me 5 properties for 25k.

[romans holiday]

A rational/ investor mentality is not the norm by any stretch though.

I agree. As I said, "many [most] irrationally buy"....... motivated by fear or greed.

[Mabon]

Mabon,please show me 5 properties for 25k.

 

Why are you looking to buy?

 

I'm not an estate agent you know?

 

I could list hundreds, but to save time here's 5 just in The Colne Valley in Lancashire, North-West England.

 

25k - Burnley

http://www.zoopla.co.uk/for-sale/details/1...5a120c75e0d9672

 

25k - Nelson (Nice house by the looks of it - Maybe request details)

http://www.zoopla.co.uk/for-sale/details/1...5f2fc8f030d76b3

 

25k - Nelson (Same Street, Nice new kitchen, bit of damp though - easily solved)

http://www.zoopla.co.uk/for-sale/details/1...03a092cef3ea0cd

 

22k - Burnley (Needs a refurb, but hey they'd probably accept 12k for it)

http://www.zoopla.co.uk/for-sale/details/2...89e370c249dd435

 

20k - Burnley (This an auctioner. Might possibly makes it's asking price particularly as it is tenanted - see amounts below)

http://www.zoopla.co.uk/for-sale/details/1...e21ef5738862e36

 

(See how they state that the rent is 4k plus per year (property is tenanted)

 

At 20k you would be buying it for x5 year's income (Landlord's formula is pay no more than 8 year's rent for any property)

 

Even if you refurbed by 8k, you'd still be at only x7 year's rent.

 

Went to an auction recently. One house in North-East England went for 13k. Nice place too.

 

Other auctions going on, at which houses are selling for the price of a decent used car.

 

Like I say. If you were living in these areas and you were working, why would you not buy???

 

Unless of course you were waiting for cheaper prices (a distinct possibility).

 

Of course it could be a matter of available credit. But if you are working you get offered cash etc all the time (I do and my circumstances are not currently that high and mighty). Lack of a deposit? Plenty of people will loan you the cash, particularly feasible amounts.

 

At 25k, if you are working and want to saty in areas like the Colne Valley, why not just lend the 25k, buy it outright and then payback to relatives etc on a designated payback plan.

 

Therefore (the point of the thread) is, is renting (mainly) an embued mental process?

 

Do renters (generally) suffer from low self-esteem (genuine question)?

 

As in they don't own because they don't feel they are worthy of it??

 

What other reasons can you come up with?

[langtonbrow]

Why are you looking to buy?

 

I'm not an estate agent you know?

 

I could list hundreds, but to save time here's 5 just in The Colne Valley in Lancashire, North-West England.

 

25k - Burnley

http://www.zoopla.co.uk/for-sale/details/1...5a120c75e0d9672

 

25k - Nelson (Nice house by the looks of it - Maybe request details)

http://www.zoopla.co.uk/for-sale/details/1...5f2fc8f030d76b3

 

25k - Nelson (Same Street, Nice new kitchen, bit of damp though - easily solved)

http://www.zoopla.co.uk/for-sale/details/1...03a092cef3ea0cd

 

22k - Burnley (Needs a refurb, but hey they'd probably accept 12k for it)

http://www.zoopla.co.uk/for-sale/details/2...89e370c249dd435

 

20k - Burnley (This an auctioner. Might possibly makes it's asking price particularly as it is tenanted - see amounts below)

http://www.zoopla.co.uk/for-sale/details/1...e21ef5738862e36

 

(See how they state that the rent is 4k plus per year (property is tenanted)

 

At 20k you would be buying it for x5 year's income (Landlord's formula is pay no more than 8 year's rent for any property)

 

Even if you refurbed by 8k, you'd still be at only x7 year's rent.

 

Went to an auction recently. One house in North-East England went for 13k. Nice place too.

 

Other auctions going on, at which houses are selling for the price of a decent used car.

 

Like I say. If you were living in these areas and you were working, why would you not buy???

 

Unless of course you were waiting for cheaper prices (a distinct possibility).

 

Of course it could be a matter of available credit. But if you are working you get offered cash etc all the time (I do and my circumstances are not currently that high and mighty). Lack of a deposit? Plenty of people will loan you the cash, particularly feasible amounts.

 

At 25k, if you are working and want to saty in areas like the Colne Valley, why not just lend the 25k, buy it outright and then payback to relatives etc on a designated payback plan.

 

Therefore (the point of the thread) is, is renting (mainly) an embued mental process?

 

Do renters (generally) suffer from low self-esteem (genuine question)?

 

As in they don't own because they don't feel they are worthy of it??

 

What other reasons can you come up with?

 

Renting confers flexibility. Outright ownership provides the same. Anything in the middle (mortgaged) and you are at the bank's behest. A large outstanding debt, rate rise, economy weakens, not a good position to be in.

 

As to why people in Colne wouldn't buy outright, most jobs will be (on average) minimum wage and/or part time. If you are happy with this, you stay in Colne, if not you move out. I suspect it is not low self esteem, but low aspiration. And as many of the things that we have aspired to over the last 10 years turn out to be beyond our means, perhaps not a bad position to be in.

 

[Jake]

Why are you looking to buy?

 

I'm not an estate agent you know?

 

I could list hundreds, but to save time here's 5 just in The Colne Valley in Lancashire, North-West England.

 

25k - Burnley

http://www.zoopla.co.uk/for-sale/details/1...5a120c75e0d9672

 

25k - Nelson (Nice house by the looks of it - Maybe request details)

http://www.zoopla.co.uk/for-sale/details/1...5f2fc8f030d76b3

 

25k - Nelson (Same Street, Nice new kitchen, bit of damp though - easily solved)

http://www.zoopla.co.uk/for-sale/details/1...03a092cef3ea0cd

 

hi mabon! Well excuse me! I had no idea properties could be had so cheaply in the uk. What's the catch? Ghetto? They all look depressing as hell, but that is besides the point, I suppose.

If I was employed in that area and in that price bracket, currently renting, then I would buy... In 2 years time or so. Maybe 2-3k?

It's grim up north,eh?

(originally a northerner-a long time ago.)

 

 

 

22k - Burnley (Needs a refurb, but hey they'd probably accept 12k for it)

http://www.zoopla.co.uk/for-sale/details/2...89e370c249dd435

 

20k - Burnley (This an auctioner. Might possibly makes it's asking price particularly as it is tenanted - see amounts below)

http://www.zoopla.co.uk/for-sale/details/1...e21ef5738862e36

 

(See how they state that the rent is 4k plus per year (property is tenanted)

 

At 20k you would be buying it for x5 year's income (Landlord's formula is pay no more than 8 year's rent for any property)

 

Even if you refurbed by 8k, you'd still be at only x7 year's rent.

 

Went to an auction recently. One house in North-East England went for 13k. Nice place too.

 

Other auctions going on, at which houses are selling for the price of a decent used car.

 

Like I say. If you were living in these areas and you were working, why would you not buy???

 

Unless of course you were waiting for cheaper prices (a distinct possibility).

 

Of course it could be a matter of available credit. But if you are working you get offered cash etc all the time (I do and my circumstances are not currently that high and mighty). Lack of a deposit? Plenty of people will loan you the cash, particularly feasible amounts.

 

At 25k, if you are working and want to saty in areas like the Colne Valley, why not just lend the 25k, buy it outright and then payback to relatives etc on a designated payback plan.

 

Therefore (the point of the thread) is, is renting (mainly) an embued mental process?

 

Do renters (generally) suffer from low self-esteem (genuine question)?

 

As in they don't own because they don't feel they are worthy of it??

 

What other reasons can you come up with?

 

[Jake]

Sorry,mabon , I screwed up on the post but my reply is wedged in the middle there . On iPhone so excuse mistakes.

[Mabon]

Renting confers flexibility. Outright ownership provides the same. Anything in the middle (mortgaged) and you are at the bank's behest. A large outstanding debt, rate rise, economy weakens, not a good position to be in.

 

Renting also confers vulnerability as well as the stated flexibility.

 

Outright ownership provides a perceived peace of mind.

 

Mortgagees can suffer from a maelstrom of queziness under certain market conditions.

 

Property can be at times an illiquid liability or an illiquid asset.

 

If you can't get shot of a property with a mortgage in a rising interest environment then you get crucified by a combination of pay more and 'negative equity' (if you over-paid for it). That is if that property produes no income and is therefore a liability.

 

Ideally yes, if you want to buy, then buy outright for as low as price as you can get.

 

That's if you don't buy the argument that money itself will become more valuable due to deflationary aspects (which is RH's take on things).

 

As to why people in Colne wouldn't buy outright, most jobs will be (on average) minimum wage and/or part time. If you are happy with this, you stay in Colne, if not you move out

 

Minimum wage is what 10.5k? A house for 25k equals no more than 2.4 times your earnings. Admittedly if you felt your job situation was under pressure, then yes, you may think of staying a renter.

 

Surely though with some house prices that low, you'd have a crack. Why not offer 25% Below Asking Price and see who bites?

 

I guess this is going back to my main point. Why don't renters buy a property when they are that comparatively cheap to rents in their local area?

 

What are the reasons a working person wouldn't buy in their locale when prices were that cheap.

 

I suspect it is not low self esteem, but low aspiration. And as many of the things that we have aspired to over the last 10 years turn out to be beyond our means, perhaps not a bad position to be in.

 

Surely low self-esteem and low-aspiration are two batteries in the same bunny?

[Jake]

Maybe they just don't want to live there but have to？ I have never visited the area (and hopefully never will).Weren't there some riots there a while back?

[Concrete Jungle]

I'll tell you now and I'll tell you firmly

I don't never want to go to Burnley

What they do there don't concern me

Why would anybody make the journey?

 

 

[lupercal]

I'll tell you now and I'll tell you firmly

I don't never want to go to Burnley

What they do there don't concern me

Why would anybody make the journey?

 

 

Housing benefit is paid directly to tenants. Good luck

[Mabon]

Sorry,mabon , I screwed up on the post but my reply is wedged in the middle there . On iPhone so excuse mistakes.

 

Lol. Diminishing retuns of technology???

 

hi mabon! Well excuse me! I had no idea properties could be had so cheaply in the uk.

 

As I mentioned earlier - properties going at auction for the price of decent secondhand car.

 

I may go to a few more auctions and see what's going on, gauge true prices.

 

What's the catch? Ghetto?

 

Admittedly a lot of these places are under the cosh a bit.

 

However, if you were looking at smaller communities with reasonable transport links surrounded by productive land, places like the Colne Valley are the bomb.

 

They may of course fall to nothing. It mayhap that no-one wants to live there again. Perhaps the whole area will go back to being farmland.

 

I somehow doubt it though with regards to the cease to exist option. Pricewise who knows?

 

They all look depressing as hell, but that is besides the point, I suppose.

 

I always feel that with a lick of paint and a bit of TLC they make decent houses.

 

I used to own a three storey terrace a bit like these two ups and I loved living in it.

 

The garden was a probably a better size than these though, as they tend to have a yard only.

 

Prices drop enough, you could always buy the whole street and make a house/ farm....

 

If I was employed in that area and in that price bracket, currently renting, then I would buy... In 2 years time or so. Maybe 2-3k?

 

I have no idea what their prices will be in 2-3 yrs time. I'd say lower by maybe 30% as an average.

 

Still I always look at it all as a 'money in/ money out' routine. If my rent was costing me more than it costs to buy and prices represented less than 8 years rent per house, I'd always buy if I was set on staying there.

 

I'd buy it cash though. Even if I had to sell most of my possessions and borrow (with an agreed payback plan) from family, so I buy without an official mortgage.

 

I would be wary currently of buying with a mortgage. But I would consider it, if I could offset oncoming rate rises by offering at least 25% below current asking price. That way I would have factored in rate rise increases into my borrowing.

 

(Unless sausages go to 1000 quid a piece and the madmax zombie mutant bankers of death ravage the countryside....)

 

It's grim up north,eh? (originally a northerner-a long time ago.)

 

The countryside around the Colne Valley is very pretty (even if the towns are not). Some lovely hills and mountains nearby too. Plenty of water nearby and the land is very fertile.

 

Lol. Does that make me an optimist???

[Mabon]

I'll tell you now and I'll tell you firmly

I don't never want to go to Burnley

What they do there don't concern me

Why would anybody make the journey?

 

I'll tell you now and tell you S-L-O-W-L-Y

Houses in Burnley are priced real L-O-W-L-Y

They're cheap as chips for those who want 'em

The leap of faith ain't so Quantum ;p

 

Anyway, this thread is not about the feasibilities of living in Burnley.

 

Or ditties about houses there. Lol.

 

I asked the question 'Do Renters Die Poor?'.

 

So far only Frizzers has given a direct answer.

 

Some very interesting discussions though. Thank You All.

[Concrete Jungle]

In the last housing crash terraced property in the Blackburn / Burnley area could be purchased for a pint of mild, bag of pork scratchings and a couple of hundred pounds. Those properties today at £15 - 30k are not a bargain, there are many good reasons why they look so cheap compared to other towns in the local area. I did once flirt with the idea of buying one and living there, a quick flit down the M65 and I would be at work. The reason I didn't is because the area is TERRIBLE, wracked by ruin, unemployment, crime, chavs and drugs.

[Mabon]

Housing benefit is paid directly to tenants. Good luck

 

Government rules due to change Asap. Back to what it was. Payment direct to landlords.

 

I would think twice about owning a house occupied by Housing Benefit recipients due to the potentially tenuous income flow.

 

You could of course argue that under pressured economic conditions, all income flow becomes tenuous. Including yours.

[d2thdr]

I think Romans was quite correct. If we look at any house as an asset then you should look at purchasing it when the price is low, not when it is high. I am sure you have looked at it from a different paradigm. The house bought (whenever) has not really appreciated in price, the fiat has depreciated in its inherent value. Switched on renters do not die poor.

[drbubb]

Therefore (the point of the thread) is, is renting (mainly) an embued mental process?

 

Do renters (generally) suffer from low self-esteem (genuine question)?

 

As in they don't own because they don't feel they are worthy of it??

 

What other reasons can you come up with?

... I suppose I am falling for a challenge here...

 

I'm a contrarian, so when I read something that says:

 

"Renters (generally) suffer from low self-esteem", I think:

 

+ I dont give a damn what "others" think. I am comfortable making my own decisions

+ I'd better look into renting, because there are probably some weak-minded crowd-followers out there who will over pay in order to let others opinions add to their feelings of sell esteem

+ Even if I do buy, I should look at out-of-favor areas, since they may be bargains.

( I am happy to make money off the foolishness of others, it is a form of silent revenge.)

[Mabon]

I think Romans was quite correct. If we look at any house as an asset then you should look at purchasing it when the price is low, not when it is high.

 

Roman's point is incorrect, because a house you live in as a home is not an asset.

 

The only house that is an asset to you is one that puts money in your pocket.

 

Example, a house you own as a landlord and that tenants pay money to live in.

 

Otherwise all houses are a liability and take money out of your pocket.

 

Anyone who sees their house (they live in) as an asset is deluding themselves.

 

The only way a house you live in - that produces no income - becomes an asset, is when you sell it for a profit and buy something cheaper.

 

Then the excess capital is an asset that can keep producing income.

 

25k for a house is nothing. Even if you only earn 12.5k a year.

 

These houses are getting cheap and getting cheaper.

 

Clearly if you are living and working in these communities and wish to stay there, at what point does it become so obvious that owning a property is a much better deal than renting one?

 

(The rent does in fact become that oft used cliche of 'dead money')?

 

Switched on renters do not die poor.

 

You have encapsulated part of my point right there.

 

Are most renters 'switched on'?

 

Seemingly, for the majority of renters the evidence would say no.

 

Remember GEI is not atypical of the vast majority of people.

 

We are a special (needs) community with serious issues

[drbubb]

Remember GEI is not atypical of the vast majority of people.

 

We are a special (needs) community with serious issues

That's true.

Here's what I posted on HPC - to help wind them...

http://forums.moneysavingexpert.com/showthread.php?t=2739496

 

Calls herself a homeowner ...

owns half a a flat on IO and is in NE...

"homeowner"?

Does that mean she is asking for pity?

 

As in: "Pity the poor homeowners, for Renters shall inherit the Earth."