Jump to content
Mabon

Do Renters Die Poor?

Recommended Posts

I think the answer is yes, Renter die poor, because the vast majority of people who reach retirement aim to have a non mortgaged roof over their heads. However most of the people who have past away over the last few decades were involved in the largest house price boom in history.

 

I think a better question is at what stage did people jump on the property ladder. I am sure there is a strong correlation between people who got on early and kept upgrading to bigger properties and their wealth on death.

 

But I would say for people who jumped on in the 2000-present era could well see themselves less wealthy than those who have rented and end up buying later.

Share this post


Link to post
Share on other sites
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???

 

I have visited and would agree with the nice pretty countryside

 

http://www.colnevalleypark.org.uk/map.html

 

Must admit I have never been to Burnley but Mabon is making some interesting arguments and it is good to see some positive vibes on GEI.

 

Am reminded of an online discussion on the maisonettes area of Hull from years back, a place which allegedly offered 30% returns before the market peak but with similary supposed dodgy residents.

Share this post


Link to post
Share on other sites
I have visited and would agree with the nice pretty countryside

 

http://www.colnevalleypark.org.uk/map.html

 

Tis pretty isn't it? Some lovely hills and dales around there.

 

Must admit I have never been to Burnley

 

I must of course say at this point that I am not considering buying a house in Burnley, to live in. In fact the closest I've ever got to Burnley was copping off with a girl from there.

 

Just that if I was in a position where I just wanted to buy a cheap house and I could work from anywhere, then I would look at those prices and feel that I could get them for even less.

 

Make a low offer and then buy a cheap house, outright for cash that is essentially devaluing in the bank.

 

I'm not looking to buy one of these to rent out either.

 

Although those prices vs rental yields (house 25k, rentable to 4k per year) are tempting.

 

And represent a much better 'investment' than many other asset current classes.

 

Of course the whole thing could turn to excrement double-quick. Who knows?

 

Depends upon which version of the en vogue doomsday scenario you (me?) currently subscribe to.

 

but Mabon is making some interesting arguments and it is good to see some positive vibes on GEI.

 

Thanks butty. I do feel that GEI currently is losing some of its objective 'what makes money and why' commentary.

 

This sort of thing goes in cycles. A lot of folk here have a horn on for gold.

 

Nowt wrong with that. I've made some nice paper gains on precious metals too (and am prepared to defend it to the death versus the zombie mutant bankers from hell....)

 

I want to look at all possibilities for enrichment as objectively as I can, equipped with as much choice info I can get my hands on.

 

Am reminded of an online discussion on the maisonettes area of Hull from years back, a place which allegedly offered 30% returns before the market peak but with similary supposed dodgy residents.

 

Zoiks! I'd always have to question a yield of 30%.

 

I have seen property that yields 15% net. In fact if you work out the yields on some of those Colne Valley properties, they are approaching those kind of figures - depending upon costs incurred obviously.

 

I wouldn't bank on any capital gains though - more likely capital losses.

Share this post


Link to post
Share on other sites

i'd say maybe, it really depends on your background and generation. In the uk at least, the expansion of what would be the consumer "middle class" in the 80's does seem to have been driven by right to buy schemes and this does seem to have driven some sort of enforced saving, the ones who carried on renting appear to still be poor.

 

I think my generation which has come afterwards has split in two, the side that has more access to information either via the expansion of former poly's to universities or the internet ( I can't imagine buying shares before online brokers) could still be ok and invested in other asset classes, then the otherside who didn't go to uni have either copied their parents by buying what ever they could afford expecting capital appreciation or given up and lived for today (blowing their full wage each month)

 

Infact thinking about it more I think 90% of people do stuff at certain points in their life i.e school then either uni or work and buy a house after having worked 2 - 3 years, then kids etc.. it does seem most don't think about cycles or markets and its down to luck where the housing cycle is when you hit your mid twenties and where the stock market cycle is when you hit your 60's as to if you'll die poor.

 

 

Share this post


Link to post
Share on other sites
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.

 

Make a low offer and then buy a cheap house, outright for cash. that is essentially devaluing in the bank

 

............

 

 

I wouldn't bank on any capital gains though - more likely capital losses.

 

Just the statement in bold is what I mean by a house can be considered as an asset.

Share this post


Link to post
Share on other sites
Just the statement in bold is what I mean by a house can be considered as an asset.

 

I see what you mean.

 

It's just the use of the word 'Asset' bothers me when used towards houses.

 

Certainly if you buy a rental property that 'washes its own face' (pays for itself plus good net yield) and it puts cash in your pocket, then yes, it's an asset.

 

As previously stated though. Just buying a house to live in (no matter how cheaply) cannot be considered an asset in itself.

 

Even if you buy a cheap house to live in, for cash, unless that house produces an income, then it provides you with no excess income until you sell it.

 

Asset = something that puts cash in your pocket after all costs.

Liability = something that takes cash out of your pocket in terms of property taxes, maintenance etc.

 

Good Luck.

 

 

Share this post


Link to post
Share on other sites
I see what you mean.

 

It's just the use of the word 'Asset' bothers me when used towards houses.

 

Certainly if you buy a rental property that 'washes its own face' (pays for itself plus good net yield) and it puts cash in your pocket, then yes, it's an asset.

 

As previously stated though. Just buying a house to live in (no matter how cheaply) cannot be considered an asset in itself.

 

Even if you buy a cheap house to live in, for cash, unless that house produces an income, then it provides you with no excess income until you sell it.

 

Asset = something that puts cash in your pocket after all costs.

Liability = something that takes cash out of your pocket in terms of property taxes, maintenance etc.

 

Good Luck.

 

 

Ultimately one has to own something to be called an asset. Not mortgaged/loaned/leased. If you own a house outright and you live in it, it is still an asset. Because you can still sell it off at some stage in the future. You could argue that 'cars' can be still considered an asset. But that is not the case, we are getting very technical and arguing just for the sake of arguing. Everything has a value and the value is determined by the person who is interested in possibly purchasing the asset. Not everyone needs a car, but possibly most need a house. Are shares assets? Are warrants liabilities? Just for the record do you consider gold as an assetor a liability?

Share this post


Link to post
Share on other sites
Ultimately one has to own something to be called an asset. Not mortgaged/loaned/leased.

 

Not true. I can 'own' a property with a mortgage that produces a rental income.

 

That is an asset because it produces an income, whether I own it absolutely outright or not, I can use leverage (other people's money) to control an asset that puts money in my pocket.

 

Anything that produces more income than it costs me to 'own' it, is an asset.

 

Are you an accountant? I hear your definition of an asset a lot from accountants.

 

They are not necessarily wrong (from their pov), just that it's not a definition that is true for anyone engaging in entrepreneurial activity.

 

If you own a house outright and you live in it, it is still an asset. Because you can still sell it off at some stage in the future. You could argue that 'cars' can be still considered an asset.

 

Hardly. If the house produces no cash now, it is not an asset, it's a liability that costs you money to insure and maintain.

 

It only becomes an asset when you sell it. Then the cash from it's sale can be an asset.

 

You hear the home as asset definition on property shows constantly. It's a nonsense and has gotten thousands of people into a delusional state...'My home is my greatest asset!!!' Noooooooo!

 

I'll stick with the entrepreneurial definitions.

 

Everything has a value and the value is determined by the person who is interested in possibly purchasing the asset. Not everyone needs a car, but possibly most need a house. Are shares assets? Are warrants liabilities?

 

Hmmm. Everything has a notional value based upon sentiment and supply and demand. Just like Gold.

 

Just for the record do you consider gold as an asset or a liability?

 

Neither. I consider it insurance.

 

It's only an asset when I either sell it or trade it for another thing.

 

It can also be a liability if I have to pay to protect and store it and incur charges for doing so.

 

Physically possessing it means I don't have to pay charges, but still gold only makes paper gains until I sell it or use it to purchase another thing.

Share this post


Link to post
Share on other sites

My 2p worth..........

 

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).

 

No - Disagree

 

Anyone from a rich or poor background can be taught the merits of saving, Preserving it to pass onto the following generation on the other hand is a different matter.

 

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.

 

Yes - Agree

 

Simple stuff really, as long as the home is owned outright the home owner will have a clear advantage over the renter. If health factors in the future become an issue in the "later years" (if they aare lucky enough to get a retirment) then the homeowner clearly has an "asset" that could possibly be cashed in to assist with living / medical /care home expenses

 

The Renter however, unless they have saved and invested well could possibly be at the mercy of the state.

 

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

 

Yes - as in my case.

 

Although the word "settled" is used, could it also mean "flexible" depending on the cards of life that we are all dealt and have a distinct advantage in "troubled times"

 

A home owner however will be well and truely "rooted"

 

 

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

 

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

 

No - I do not intend to die poor

 

IMO it's harder to make it from a poorer back ground then that of a wealthy one. Some have "silver spoons" & and some do not know what "Silver" is........ they may not know how to even use a spoon.

The last 10yrs have seen possibility the biggest change mankind has ever experienced. Talk that was once confined to a "Smokey drawing room" is now free to be viewed by anyone (I think/hope) as long as they look for it, now..... it's down to the individual.

 

SR

 

Share this post


Link to post
Share on other sites
Hardly. If the house produces no cash now, it is not an asset, it's a liability that costs you money to insure and maintain.

 

It only becomes an asset when you sell it. Then the cash from it's sale can be an asset.

 

That's also how I see it too but 'provision for shelter' is also on the liability side of my balance sheet.

 

I was lucky, if you wish to call it that, to make my first purchase when house prices were at a low in the 90's. The descision was made purely on a comparison with rental charges when a mortgage payment was less per annum than rent. We based affordability, just as we did when renting, on just one income (mine) and we did not choose to buy (on borrowed money) thinking to sell it for a profit. Today, and one move on with all the equity from the sale of our first house re-invested into our current property, my provision for 'shelter' out of my annual budget is a 50/60% of what rental provision I'd have to make for a similar property. The difference allows me extra annual capitol to invest. In addition, all being well, in 10 years or so time when the mortgage is paid off it will give me greater capitol to invest and will enable me to take more educated risks with the possibilty of greater returns. My home though will indeed still be a liabilty, just a lot less so than the alternatives.

 

I think to say 'Renters Die Poor' is perhaps too sweeping a statement. If the percentage of income they pay in rent affords them annual capitol to invest then I see no reason why they should die poor. If, however, you choose to pay a large percentage of your income in rent, choosing extravagance over prudence or even frugality, then yes, just as someone who has overstretched themselves on a mortgage in relation to income, is likely to die poorer.

 

My provision for shelter represents probably 12% of our household income.

 

e2a

 

Our initial descision to buy was also under persuasion from my wife. Her Father was in the armed forces and she spent most of her childhood moving from rented house in one town to rented house somewhere else. She wanted to buy as she argued that she never felt she had somewhere she called home except for her Godparents' farm in North Wales where she spent all her school holiday time and where we still visit every other year. She wanted to provide a firm root for our family tree, perhaps that's an maternal instinct ?

Share this post


Link to post
Share on other sites
I think the answer is yes, Renter die poor, because the vast majority of people who reach retirement aim to have a non mortgaged roof over their heads. However most of the people who have past away over the last few decades were involved in the largest house price boom in history.

 

I think a better question is at what stage did people jump on the property ladder. I am sure there is a strong correlation between people who got on early and kept upgrading to bigger properties and their wealth on death.

 

But I would say for people who jumped on in the 2000-present era could well see themselves less wealthy than those who have rented and end up buying later.

That sounds backwards to me.

I think you are saying: Those who can afford to, want to live in a fully-paid for property when they retire, so they will not be bushwacked by rent rises. Fair enough.

 

But you can build capital as a renter. The best-earning years of my life, where those years I was renting in London during a bull market in Junior miners. plowing all my cash and profits back into a rising market for Gold shares.

 

That profitable period allowed me to build enough equity to buy many properties

Share this post


Link to post
Share on other sites
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.

 

Apologies I didn't see your post. You have a point. I remember being offered a house in the eastern Valleys of south Wales for 577.89 pence (Yes I was curious what the 89 pence was for too).

 

Also a fella once asked me to swap his house for a night with my then girlfriend. I have been out with some stunners but....

 

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.

 

Two points:

 

1) If you were buying an already tenanted property for 25k or less asking price that yields 4k per annum, then that house is well worth buying as long as you keep your tenants or can get new ones. The yield is well into double figures.

 

2) If you just wanted a cheap house and could work from anywhere, then it would be worth offering way below asking price and buying one. In fact you could buy a few for dirt cheap and move your family and friends in if you wanted.

 

(A mate of mine bought a whole street in Troedegair (south Wales) in the early 1990s and moved a few of his family in). About 10 houses for 50k and the street, pavement, verges etc.

 

I agree with you that they are hardly salubrious and they (Burnley, Nelson and Colne) are cheaper than other Lancastrian towns in the same area, but not that much cheaper comparatively. There are a lot of houses in Accrington etc that are nearing those sort of prices.

 

From a personal POV the places I grew up were full of the problems you allude to above. So part of my mentality is that I can pretty much live anywhere and make it a success. (No I am not buying a house in Burnley etc).

 

Although admittedly I'd prefer to either live somewhere that I considered would have more of a future.

 

The future is, as we are aware, subject to change.

 

So will Burnley - as a town full of renters - die poor?

 

Good Luck.

Share this post


Link to post
Share on other sites
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.

 

 

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.

The third point I made above "buying for reasons other than monetary value" recognises we often buy a house which meets real ends in life [in contrast to money and monetray assets which are mere means]. This is akin to your point that a house can be a liability/ consumption more so than a monetary investment. Accordingly, not sure how you think my point incorrect.

 

Perhaps you think I'm incorrect in thinking buying a house to live in is not a good idea given that I think housing prices are declining. This is in a bit of a grey fuzzy area between thinking of a house as a place to live and thinking of a house in monetary terms and perhaps depends on your own personal circumstances. One can look at houses in quite different ways, and these can also overlap at times.

 

 

If a person is not so wealthy, and is forced to take on debt to pay for a house, then he will be forced to think of the house in monetary terms because there is a possibility he will lose all equity and ownership. It would be better to rent than buy.

 

If someone is more wealthy, he may buy a house he wants to live in and won't be too concerned about the monetary value of the house and buy. Then again he may not.... nothing wrong with renting. The last thing he should be motivated by, if rational, is by any social stigma attached to renting.

 

If someone sees a house at a bargain price, could easily afford it, and would consider living in it, then he'd consume some of his savings and buy it.

 

If someone sees a house at a bargain price, and wants to rent it to tenants, and thinks of it in terms of monetary value/ monetary asset, then he may buy it depending on his economic views.

Share this post


Link to post
Share on other sites
Two points:

 

1) If you were buying an already tenanted property for 25k or less asking price that yields 4k per annum, then that house is well worth buying as long as you keep your tenants or can get new ones. The yield is well into double figures.

 

2) If you just wanted a cheap house and could work from anywhere, then it would be worth offering way below asking price and buying one. In fact you could buy a few for dirt cheap and move your family and friends in if you wanted.

 

(A mate of mine bought a whole street in Troedegair (south Wales) in the early 1990s and moved a few of his family in). About 10 houses for 50k and the street, pavement, verges etc.

 

I agree with you that they are hardly salubrious and they (Burnley, Nelson and Colne) are cheaper than other Lancastrian towns in the same area, but not that much cheaper comparatively. There are a lot of houses in Accrington etc that are nearing those sort of prices.

 

From a personal POV the places I grew up were full of the problems you allude to above. So part of my mentality is that I can pretty much live anywhere and make it a success. (No I am not buying a house in Burnley etc).

 

Although admittedly I'd prefer to either live somewhere that I considered would have more of a future.

 

The future is, as we are aware, subject to change.

 

So will Burnley - as a town full of renters - die poor?

 

Good Luck.

 

So all people in Burnley are poor renters but not all renters are poor people who live in Burnley.

 

Some renters will die poor. Others won't. Same for home 'owners'.

 

I take it mabon, you don't have kids or don't mind about the environment they grow up in (re Concrete Jungle)?

 

Am fascinated by the story of your friend in Troedigair. What became of the houses and the street? Are they all still living there?

 

Interesting thread!

 

Here in Japan many have totally given up on the buying of property thus their main proud purchase is their car. Cars and property both depreciate here, you only have a chance if land values come back-and if you have a property on that land (rather than an apartment). For most people that option is even now, after 18 years of falls, too expensive to consider buying. (Talking Tokyo and similar places).

 

Share this post


Link to post
Share on other sites

Just out of interest, what do you class as Poor and Wealthy ?

 

What should be used as a comparision ?

 

 

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

Charles Dickens, David Copperfield, 1849

Share this post


Link to post
Share on other sites
Just out of interest, what do you class as Poor and Wealthy ?

 

What should be used as a comparision ?

 

 

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

Charles Dickens, David Copperfield, 1849

I assume we're talking about monetary wealth here, not wealth per se.

 

The way I define it is having a sufficient amount by which you can enjoy the conditions of a self-determined and abundant life.

 

 

But then that's taken me back to wealth per se; the islander living of the sea can enjoy this. :lol:

 

So I'll have to qualify it; having a sufficient amount by which you can enjoy the conditions of a self-determined and abundant life within a monetary culture/ developed economy.

Share this post


Link to post
Share on other sites
Apologies I didn't see your post. You have a point. I remember being offered a house in the eastern Valleys of south Wales for 577.89 pence (Yes I was curious what the 89 pence was for too).

 

Also a fella once asked me to swap his house for a night with my then girlfriend. I have been out with some stunners but....

 

 

 

Two points:

 

1) If you were buying an already tenanted property for 25k or less asking price that yields 4k per annum, then that house is well worth buying as long as you keep your tenants or can get new ones. The yield is well into double figures.

 

2) If you just wanted a cheap house and could work from anywhere, then it would be worth offering way below asking price and buying one. In fact you could buy a few for dirt cheap and move your family and friends in if you wanted.

 

(A mate of mine bought a whole street in Troedegair (south Wales) in the early 1990s and moved a few of his family in). About 10 houses for 50k and the street, pavement, verges etc.

 

I agree with you that they are hardly salubrious and they (Burnley, Nelson and Colne) are cheaper than other Lancastrian towns in the same area, but not that much cheaper comparatively. There are a lot of houses in Accrington etc that are nearing those sort of prices.

 

From a personal POV the places I grew up were full of the problems you allude to above. So part of my mentality is that I can pretty much live anywhere and make it a success. (No I am not buying a house in Burnley etc).

 

Although admittedly I'd prefer to either live somewhere that I considered would have more of a future.

 

The future is, as we are aware, subject to change.

 

So will Burnley - as a town full of renters - die poor?

 

Good Luck.

 

Probably worth considering ex-crimimals and ex-addicts if you are looking to rent these. Nobody else wants them and they are less likely to mess you about if you treat them right.

 

 

Share this post


Link to post
Share on other sites
The third point I made above "buying for reasons other than monetary value" recognises we often buy a house which meets real ends in life [in contrast to money and monetray assets which are mere means].

 

This is akin to your point that a house can be a liability/ consumption more so than a monetary investment. Accordingly, not sure how you think my point incorrect.

 

I recognise what you are saying. People buy houses for all different reasons.

 

Definitions of what is an asset from my POV.

 

1) A property you own or control that produces no income or produces less income than outgoings is a liability.

 

2) A property you own or control that produces income more than its outgoings (puts excess cash in your pocket) is an asset.

 

Of course the two are seperate things.

 

The first would probably be a family home that you buy to live in. You wouldn't buy it for it's income-producing potential.

 

The second is obviously a rental property.

 

You buy it on the proviso that it 'washes it's own face'.

 

By making you the owner (or the controller) more money than it costs to maintain/ upkeep/ service.

 

Perhaps you think I'm incorrect in thinking buying a house to live in is not a good idea given that I think housing prices are declining.

 

Not necessarily. Houses are getting cheaper. In some places they have now become so cheap, I am wondering how much cheaper they will become.

 

You feel that cash will become more valuable in the nearish future due to deflationary aspects.

 

I have no idea whether you are right or wrong and listen to your posts with interest.

 

My point though is about waiting for that cash to gain or lose value.

 

As I have no idea of the future...if someone offers me a house for say 20k that produces 4k of rental yield (house 2), then that is (currently) a better thing than holding onto cash that is (currently) devaluing against daily living costs (although strengthening against house prices etc).

 

Of course the 20k house could go to 3k in xx amount of years. The excrement could really hit the fan. Certain communities could severely contract, some could collapse.

 

However if I:

 

A) Offer less than the asking price for a rental property and get it and

 

B ) It produces enough of a yield to offset the capital loss and still makes a profit (House 2 makes double-figure yields), then the house in itself is a 'good deal'.

 

(Although a gamble - as is most things).

 

I would always say that buying a house to live in is a personal thing.

 

Preferably you buy them (to live in) when they are cheap compared to cash.

 

IF I wanted to buy a house right now to live in. And could basically live and work from anywhere. I'd seriously consider buying a house somewhere that fulfilled elements of what we often talk about on this site.

 

Namely the 'transition towns' type effect.

 

Potentially towns like Nelson, Burnley etc (and many others where property is cheap) could have some kind of future.

 

They are compact places. They have good infrastructure (Burnley is on at least 2 train lines), they are close to fertile land and lots of clean water.

 

The downside though is, they are to an extent (as Concrete Jungle put it) full of chavs, crime etc (Not all of it - my apologies to Burnleyites reading this).

 

If a person is not so wealthy, and is forced to take on debt to pay for a house, then he will be forced to think of the house in monetary terms because there is a possibility he will lose all equity and ownership. It would be better to rent than buy.

 

As of right now, this makes no sense in places like the Colne Valley if you are A) Working and earning at least minimum wage B) Intend to stay there

 

Clearly when houses are going for asking prices of 20 - 25k and you earn at least minimum wage of say 10.5k.

 

Then in comparison to your wages, the house is cheap.

 

It's only a maximum of about 2.4 times income. Offer less than the asking price and your multiples could be below 2 times earnings.

 

Why pay to rent one of these houses then for 4k per year?

 

The rent is a losing proposition. Your cash (which you yourself hold as going to become more valuable), will be frittered away paying rent.

 

Like I say, ideally you would buy the house you wanted to live infor cash, as opposed to a mortgage.

 

But even if you got a mortgage, you could just make a cheeky offer for said 20k house that was 33% or more under asking price. Someone will bite.

 

By paying below asking price you'd offset (most) potential interest rate rises. You'd have factored them into the equation.

 

Also you'd now 'own' a house in the community you intended to stay in.

 

Swings and Roundabouts, I know.

Share this post


Link to post
Share on other sites
As of right now, this makes no sense in places like the Colne Valley if you are A) Working and earning at least minimum wage B) Intend to stay there

 

Clearly when houses are going for asking prices of 20 - 25k and you earn at least minimum wage of say 10.5k.

 

Then in comparison to your wages, the house is cheap.

 

It's only a maximum of about 2.4 times income. Offer less than the asking price and your multiples could be below 2 times earnings.

 

Why pay to rent one of these houses then for 4k per year?

 

The rent is a losing proposition. Your cash (which you yourself hold as going to become more valuable), will be frittered away paying rent.

 

Like I say, ideally you would buy the house you wanted to live infor cash, as opposed to a mortgage.

 

But even if you got a mortgage, you could just make a cheeky offer for said 20k house that was 33% or more under asking price. Someone will bite.

 

By paying below asking price you'd offset (most) potential interest rate rises. You'd have factored them into the equation.

 

Also you'd now 'own' a house in the community you intended to stay in.

 

Swings and Roundabouts, I know.

Sure, and here you're talking about someone buying a place to live in. If someone could find a house for the right price, and somewhere they'd like to settle into for a few years, then it may make sense for them to buy.

 

But, quite a different story if you're wanting to buy in order to rent out. Even if you picked up a place for the "right price", you are now going to have to enter into all the hassle of being a landlord, collecting rents, or paying an agent to do it, maintenance yadeeyadeeya. It might suit some, but I reckon most just wouldn't find it worth the hassle.

 

There seems to be so many moving parts to what on the face of it looks a simple enough question of whether or to buy or not. I think this comes down to one's personal and idiosyncratic circumstances, chief among which would have to be whether one was looking to live in or rent out the place.

 

 

If you're chiefly concerned with the value of your cash [against consumables], why don't you spread the risk across a few currencies... dollars/ gold etc? A lot less hassle.

Share this post


Link to post
Share on other sites

For some reason :lol: the various negative comments towards Burnley remind me of this thread. I was going to reply to one negative comment but on balance that would be unfair, this could be to any of the above.

 

http://www.greenenergyinvestors.com/index....mp;#entry106447

 

I would say just beware of snobbery. Investigating an area in detail may uncover an area that is attractive.

 

+ I have a client in Hull who is a normal (I guess) housewife who rents some of the maisonettes I mentioned earlier. Says as long as you get a family who are working then you tend to do OK! Has been doing it for some time now.

 

+ Going back to Mabon's original question - will renters die poor - what it probably boils down to (IMHO_ even more than (luck in) timing of purchase is FAMILY BUDGETING. Now as you look around the population of the UK, tell me that the everage renter would (overall) be putting more funds aside than the average homeowner with a repayment mortgage. Of course you can tell me that some of those with homes might be using them as an ATM machine but overall I would bet on the buyers. As previously mentioned GEI is not representative of the average UK population!

 

+ I have heard it mentioned elsewhere (some LSE politician on a lecture podcast) that encouraging home ownership was an undercover way for the Gov to encourage the "poor" to provide for their old age.

Share this post


Link to post
Share on other sites
Sure, and here you're talking about someone buying a place to live in. If someone could find a house for the right price, and somewhere they'd like to settle into for a few years, then it may make sense for them to buy.

 

But, quite a different story if you're wanting to buy in order to rent out. Even if you picked up a place for the "right price", you are now going to have to enter into all the hassle of being a landlord, collecting rents, or paying an agent to do it, maintenance yadeeyadeeya. It might suit some, but I reckon most just wouldn't find it worth the hassle.

 

Previously when I have owned rental houses, I just got an good agent to sort everything for me. For 10% of rent.

 

If a rental property is making 4k (double-figures) (net), then it's well worth it (400 uk pounds per year agent's fees), as it produces a solid yield and there is no hassle factor.

 

The 20k house that produces 4k rent has a yield that is well into double-figures. Therefore potentially it's a worthwhile 'investment' - depending on the future (who knows what that is).

 

If you're chiefly concerned with the value of your cash [against consumables], why don't you spread the risk across a few currencies... dollars/ gold etc? A lot less hassle.

 

Gold (I own a bit) produces no income (paper gains only until I sell it or exchange it for something else).

 

Therefore by my definition gold is not an asset as it's not putting money in my pocket.

 

Gold though is my insurance (and could possibly be refered to as a source of wealth).

 

My Gold shares are also producing paper gains. No idea when I'll sell them for something else though.

 

I'm as interested in getting paid to allocate my capital. As in I like things that produce solid high yields relative to leaving cash in the bank.

 

(And NO I am not considering buying a house in Burnley!!! :lol: ).

 

Share this post


Link to post
Share on other sites
So all people in Burnley are poor renters but not all renters are poor people who live in Burnley.

 

:blink:

 

Some renters will die poor. Others won't. Same for home 'owners'.

 

I take it mabon, you don't have kids or don't mind about the environment they grow up in (re Concrete Jungle)?

 

I do have kids. As I would describe myself as Welsh bogtrotter stock, I tend to see places that are run down as having immense potential (I also accept they have a downside).

 

I grew up in places like the ones we are talking about, so I am essentially 'working-class' and therefore they always look like good simple houses to me. For someone who just wants a solid home in their local community, they are fine.

 

Also, as I've alluded to from a 'transition towns' POV. These communities have everything for a certain kind of future. Good transport, including rail, surrounded by fertile land and access to clean water etc.

 

Am fascinated by the story of your friend in Troedigair. What became of the houses and the street? Are they all still living there?

 

As far as I know the family still occupies the street - which they collectively own. I don't know what the arrangement is with the council, because potentially they could opt-out of paying for certain elements of their council tax. As they own the houses, street etc and are responsible for its upkeep, lighting etc.

 

I haven't seen my mate for a few years. He lives amongst the Welsh population in Patagonia, Argentina where he owns a farm near Trelew (bought with the profits from buying up cheap houses in the early to mid 1990s).

 

Here in Japan many have totally given up on the buying of property thus their main proud purchase is their car.

 

Cars and property both depreciate here, you only have a chance if land values come back-and if you have a property on that land (rather than an apartment). For most people that option is even now, after 18 years of falls, too expensive to consider buying. (Talking Tokyo and similar places).

 

Strewth!

 

Share this post


Link to post
Share on other sites
Gold (I own a bit) produces no income (paper gains only until I sell it or exchange it for something else).

 

Therefore by my definition gold is not an asset as it's not putting money in my pocket.

 

Gold though is my insurance (and could possibly be refered to as a source of wealth).

 

My Gold shares are also producing paper gains. No idea when I'll sell them for something else though.

 

I'm as interested in getting paid to allocate my capital. As in I like things that produce solid high yields relative to leaving cash in the bank.

 

(And NO I am not considering buying a house in Burnley!!! :lol: ).

That means I have zero assets... which I am happy enough with.

 

The logic of a period of contraction/ wealth destruction leads to being completely liquid on the sidelines in various currencies [the liquidity preference].

 

The idea of returns and investment goes out the window here. The idea is to be dis-invested.

 

Yet, there is a "return" of sorts, but not a nominal one. Rather, the idea is your money units will increase in value as assets prices deflate. This most rational of ideas has been lost to a large sector of the investor community thanks to monetarism, which states that rationality consists in expecting inflation. :lol:

 

Therefore by my definition gold is not an asset as it's not putting money in my pocket

Gaining extra units of currency might not entail you have actually gained more money. Not recognizing this may involve money illusion. :)

Share this post


Link to post
Share on other sites
That means I have zero assets... which I am happy enough with.

 

The logic of a period of contraction/ wealth destruction leads to being completely liquid on the sidelines in various currencies [the liquidity preference].

 

The idea of returns and investment goes out the window here. The idea is to be dis-invested.

 

If I held a 'deflationary' mindset then I would hold that view. Currently I have no idea whther you could be right or wrong.

 

Yet, there is a "return" of sorts, but not a nominal one. Rather, the idea is your money units will increase in value as assets prices deflate.

 

Your cash gains more value relative to the price of say houses. To an extent that is happening in many places now.

 

Gaining extra units of currency might not entail you have actually gained more money. Not recognizing this may involve money illusion. :)

 

Yes. The amount of money you earn could be increasing, but it's value - it's purchasing power - could be decreasing.

 

Doesn't that though undermine your idea that money is increading in value?

 

Surely if this is the case, then yield would be vitally important and Assets that produce income would be vital, because money becomes more valuable in a deflation.

 

I know I know, currencies deflating relative to others and all deflating relative to gold. Therefore gold gains value against all things etc.

 

Share this post


Link to post
Share on other sites
Yes. The amount of money you earn could be increasing, but it's value - it's purchasing power - could be decreasing.

 

Doesn't that though undermine your idea that money is increading in value?

 

Surely if this is the case, then yield would be vitally important and Assets that produce income would be vital, because money becomes more valuable in a deflation.

 

I know I know, currencies deflating relative to others and all deflating relative to gold. Therefore gold gains value against all things etc.

A distinction needs to be drawn here between currency and money to resolve the conundrum of "money" both increasing and decreasing in value:

 

You can earn more of a specific currency while at the same time that currency is decreasing in value against stronger currencies.

 

There is a relativity involved here; if I earned more pounds, yet at the same time pounds depreciated against dollars, then though it may seem I am getting ahead [in terms of pounds]... I am actually standing still in terms of dollars.

 

Moreover, if I earned more pounds, yet at the same time pounds depreciated even more against gold, then I would be going backwards in terms of gold.

 

Housing, which has been discussed as both a monetary and real asset on this thread, would be put in the upper tiers if a monetary asset. Following the drive to liquidity, Brit housing depreciates against the pound, which in trun depreciates against the dollar, which in turn depreciates against gold. The "investor" who sat in pounds would still do relatively well against housing [lower prioces] but if he wanted to maximize his opportunites, other stronger currencies would be better to sit in.

 

I'm convinced, and for practical reasons [minus the baggage], that gold should be the measure of monetary value now. Exter's triangle which I post often [i like the colours] illustrates this well. To internationalize it, you could put the pound in an upper tier above dollar.

 

 

Exetersinversepyramid.jpg

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×