Is it worth buying a flat to rent out?

[mattyg]

Codswallop - take me for example, the interest on my savings pay my rent and the actual principle itself is growing with respect to the asset I intend to buy with savings (ie house prices are stagnant/falling). Buying for me in this scenario would be stupid.

What??

I had the same chat with a mate who had savings.

7 years ago he was left £70k. But he liked seeing it in his bank account if he had bought our house 7 years ago he would have doubled his money.

 

[MBennett]

What??

I had the same chat with a mate who had savings.

7 years ago he was left £70k. But he liked seeing it in his bank account if he had bought our house 7 years ago he would have doubled his money.

So you know for a fact that your house has doubled in value? Have you actually sold it recently or is that a finger in the air guess? Whilst individual houses may have seen rises land registry data suggests that the average value of a house in England and Wales is not much more than it was in 2005:

http://www.landregistry.gov.uk/

2005 Jan - Ave price £155,150

2012 Jan - Ave price £161,545

http://www.landregistry.gov.uk/

So, if your friend was able gain enough interest on his savings to pay all or most of his rent then I would say he is actually in an overall better position than had he bought given the uncertainty in the housing market. Additionally he would not have been stung for any maintenance costs and could have the flexibility to move for work which would have been a great bonus post 2007/2008. For all I know maybe he bought £70k's worth of gold and has actually trebled his money.

This is not an attack on yourself, but rather a reasoned argument with the post that buying is always better than renting when clearly it is not.

/edit

Housepricecrash archive for land registry data says Q1 2005 Ave house - £183,486 anyone know why this is different to the one quoted above?
http://www.housepricecrash.co.uk/indices-land-registry-national-quarterly.php

 

[Jay794]

Some of you may know that I've just bought a house, in the final processes now, should be getting the keys before April (I hope)

House was on the market for £135,000, then reduced to £110,000, we bought it for £95,000, if we do everything we plan to do to it (double garage, attic bedroom, extra bedroom above the garage) then it's almost a certain that it will sell for a minimum of £120,000 - £150,000 when we come to sell it. Hell adding all this stuff to it is hardly going to make it cheaper is it?

 

[Zefan]

The way I see it is that although yes you'll be losing some money per month in maintenance/covering the mortgage, someone is essentially paying into a savings account for you. So yes you may become £150 or so per month lighter, however that's enabling you to pay off £200-300 of the house off because the rent does the rest.

Might be wrong, but that's how my simple brain makes sense of it at the moment.

I plan on doing the same pretty soon, it seems stupid not to take advantage of living in the block with next to no outgoings!

 

[Scam]

Shows how skewed the property 'market' in this country is when people are suggesting you get no return on renting out a property unless the rent you get is higher than your mortgage. Mental. That's never the way it was and it's never the way it should be. Take the physical property out of the equation.. you put in £20k to get a £100k loan. Boom, you have £100k to splurge. Someone pays that back for you for 20 years. 20 years later you've still got £100k after only putting in £20k at the start. And that's not even taking into account the prices going up.

*Yes thats a simplistic analogy but you get the idea