Is rent dead money?

steo123

paying 500 per month for past few years feel like im wasting it in getting no younger still no place my own

blah

It depends on how you look at it. If you're renting you have the freedom to move easily. It's more likely that you can live where you want, in an area where you wouldn't have been able to afford if you bought.

Mr. Incognito

You are buying a roof over your head.

I just cannot understand our fascination with tying a millstone of a mortgage around your neck at such a young age. Wait till you have a family and you need a anchor.

janmc

Plus 500/month isn't that much to be honest... well depending on your location.

starky

janmc wrote: »

Plus 500/month isn't that much to be honest... well depending on your location.

Average hose price is what 350 400? In Dublin? Work out how much that would cost you over the space of 40 years! Way more then 500 in rent.

patrickolee

As previous posters said, 500 is not bad. Wouldn't consider it dead money. if you were paying 1200 a month, you might consider some of it 'dead'!

But as you indicated "getting no younger", this is true... if you're still in your 20s then dont worry about it... if you're in your 30s then it is starting to affect how long the term of any mortgage you get in the future can be. As a result its affecting how much you can afford to pay, so yes... but I suspect you're in your 20s, so don't bother your head. Enjoy yourself... and dont forget the sunscreen...

Homer J Simpson

SetantaL wrote: »

Wait till you have a family and you need a anchor.

Probably the best piece of advice I have read on the Internet so far..... and that's a lot of reading.

Running Bing

starky wrote: »

Average hose price is what 350 400? In Dublin? Work out how much that would cost you over the space of 40 years! Way more then 500 in rent.

How much would the apr be on a 400k mortgage for 40 years?

Raskolnikov

patrickolee wrote: »

As previous posters said, 500 is not bad. Wouldn't consider it dead money. if you were paying 1200 a month, you might consider some of it 'dead'!

I agree with that.

€500 a month won't even cover the interest payment of a mortgage.

If you're paying €1,200 a month for a standard apartment though, some of the portion of that would be dead money, as it wasn't going on interest.

DublinWriter

SetantaL wrote: »

Wait till you have a family and you need a anchor.

Wait till you're 60 and have feck all equity to show for 30 years of being a good tenant except a file full of rent receipts.

Rent = dead money. Those that will tell you otherwise are 20-somethings trying desperately to justify their hopeless position to themselves.

Over the average life of a mortgage (25/30 years) you won't lose out on your original investment.

chump

DublinWriter wrote: »

Wait till you're 60 and have feck all equity to show for 30 years of being a good tenant except a file full of rent receipts.

Rent = dead money. Those that will tell you otherwise are 20-somethings trying desperately to justify their hopeless position to themselves.

Over the average life of a mortgage (25/30 years) you won't lose out on your original investment.

You're dead wrong DublinWriter and if the simple logic that has been spouted out here week after week can't display to you that you are wrong - God bless.

OP rent is not dead money. It can be dead money. It can be bloody smart money too.

dudara

DublinWriter wrote: »

Rent = dead money. Those that will tell you otherwise are 20-somethings trying desperately to justify their hopeless position to themselves.

There's the problem in a nutshell. People feel that they HAVE to buy, otherwise they're failures.

It's up to you. Are you happy with your life at the moment? To be brutally honest here, make up your own mind as to whether or not buying a home is worth it.

punchestown

DublinWriter wrote: »

Wait till you're 60 and have feck all equity to show for 30 years of being a good tenant except a file full of rent receipts.

and a lovely tidy sum sitting in the bank. Ideally you would have bought about this time last year, lost around €50,000 in equity with the promise of further losses. But sure not to worry about that, you would have 40 years to pay that mortgage off!

Dead money in rent terms is paying €1500 per month as a couple when you could be renting with friends or strangers paying a couple of hundred a month and saving a nice four figured sum each month that a few years down the line will be paying off a nice chunk of a reduced mortgage meaning that in later years, you will not still be required to work past retirement age.

DublinWriter

chump wrote: »

You're dead wrong DublinWriter and if the simple logic that has been spouted out here week after week can't display to you that you are wrong - God bless.

OP rent is not dead money. It can be dead money. It can be bloody smart money too.

Yeah, sure, spend 30 years paying someone else's mortage off then tell me I'm stupid.

Meanwhile back to your Frappachinos, Panninis and group motivational meetings....

A Random Walk

This is a futile discussion, the math is simple but some people prefer to rely on equally simple mantras they can repeat while holding their hands over their ears. Frankly if they want to lose money who are we to try and stop them

regi

Where did he say 30 years? The implication is that buying at the moment, in a dropping market as opposed to waiting for a few years for the market to turnaround means you lose money in both capital depreciation AND interest whilst saving cash in excess of your rent and earning interest on it.

While your argument rings true in a rising market, your argument is 100% wrong in a falling market.

scruff321

dublinwriter i think what is been said here is that yes it is a waste of money paying rent over the long term plan is a bad commitment but when your young its ok because as has been said you arent exactly tied down, however imo i beleive if you are paying top dollar for renting a swanky appartment as opposed to owning your own property and you are in your late 20's think that is a waste of money

Victor

One needs to factor in that properties are currently overpriced and that if you spend €400,000 on a property that €100,000 might be dead money in the very short term that you will pay interest on for the duration.

chump

DublinWriter wrote: »

I'm stupid.

heh heh

the youf of today eh

*sip* *sip*

Pa ElGrande

When you pay rent you are making use of a service (shelter provided by another). In the same way you pay for use of electricity, internet access, mobile phone, petrol etc.

The ultimate example of dead money is stamp duty, you receive no benefit or service by paying this and likely have to borrow in the case of housing to pay this tax. It can also be argued that spending money on the lotto is 'dead money' indeed I would classify gambling as dead money also, since the bookie always wins.

For argument's sake you pay €500 in rent today, if you were to buy the place with a mortgage how much would it cost you - let's say €1200 a month for argument sake. That's €700 extra you have to find to rent the banks money for the same service you enjoy today with very limited risk.

House prices are still much too high, far beyond any historically known relationship to rents or salaries. Typical yearly rents are 3% of purchase price (varies with location). Mortgage rates are roughly 5.5%, so it costs 1.8 times as much to borrow money to buy a house than it does to rent the same thing. Worse, total owner costs including tax, service charges, maintenance, and insurance are higher, which would easily make three times the cost of renting. An average salary cannot cover a mortgage in most cases. Anyone who buys now will suffer losses immediately, and for the next several years at least, as prices keep falling.

OK, you say when I retire, I'll own the property outright and I'll be able to sell it to fund my retirement and move to Spain (whatever your goal is). But lets look at this another way, what do you do with that €700 today, are you investing it? What yield are you getting on it? What about compound interest?

Calina

It never fails to amaze me how simplistically some people look at things.

Rent is not dead money. It is payment for a service, pure and simple. It is appropriate for some people at certain points in their life. It is problematic in Ireland because tenancy regulation is relatively weak here.

No one I know who rents advocates only ever renting, yet most people I know who buy assume that buying is the only sensible thing to do. The truth is most people with sense will rent when it suits them and buy when it suits them. That means that a lot of people who feel that it is more beneficial to them to rent now will almost certainly buy at some point in the future, and that point may or may not be 30 years down the line.

Anyone who says rent is dead money clearly has no understanding of the nuances of what people need at different points in their lives. I'm 35 years old and what I need is a short commute to work. I rent because to buy I would have to have a 90 minute commute to work and I don't see how that would add to my quality of life. I attach a great deal more importance to quality of life than I do to owning a house or, in these enlightened times, a one bedroomed apartment costing the same amount as a house in the south of France.

What constitutes dead money in my opinion is the cover charge to a night club. At least with rent you get a roof over your head.

antoinolachtnai

Remember, that rents may go up too. If rents continue to rise in line with inflation, buying a house will definitely have been the right thing to do. Now we are into futurology. I think that in many areas, rents will probably stay steady. In some areas though, they will continue to rise slowly.

Another aspect is tenure. If you are renting, you basically have very limited rights to stay in the property, even if you like it and are happy there. Owning a house gives you some rights.

Colonel Sanders

DublinWriter wrote: »

Rent = dead money. Those that will tell you otherwise are 20-somethings trying desperately to justify their hopeless position to themselves.

I am a 20 something. I could get a mortgage tomorrow and buy for the sake of it in an area I don't want to live in, miles and miles from my workplace and in a market that still has at least some way to drop still IMO. I don't really want the hassle of owning a house yet (I might decide to f*ck off abroad for a year working in the sun) Instead I live in shared house paying f*ck all in rent (fair enough its not a palace but its fine, I like living here) I save a substantial amount every month into a high interest regular saver account. I am in a good job where wage inflation definately has the prospect of outstripping house price inflation over the short to medium term. Please tell me how this is a hopeless situation?

DublinWriter wrote: »

Yeah, sure, spend 30 years paying someone else's mortage off then tell me I'm stupid.

I don't plan to spend 30 years renting, I plan to enjoy myself for another while yet without the hassle of owning an overpriced property and the joys of negative equity (my opinion on the level of property prices obviously, feel free to disagree) and the freedom to up and leave at any time without leaving a property to manage.

DublinWriter wrote: »

Meanwhile back to your Frappachinos, Panninis and group motivational meetings....

I don't like coffee

Colonel Sanders

Calina wrote: »

No one I know who rents advocates only ever renting, yet most people I know who buy assume that buying is the only sensible thing to do. The truth is most people with sense will rent when it suits them and buy when it suits them. That means that a lot of people who feel that it is more beneficial to them to rent now will almost certainly buy at some point in the future, and that point may or may not be 30 years down the line.

Very sensibly put

is_that_so

"Dead money" IMO is just a twee mantra from the Irish psyche of a certain ilk -certainly my parents' generation had that whole "land is your only man" attitude. Mostly IMO it's just a manifestation of our obsession with property ownership. Purchasing new cars may also be seen as daft as well, seeing as you lose so much on it seconds after driving off the forecourt.

I rented for a good number of years abroad and probably would have continued to do so as rental was recognised as a perfectly normal way of life. As pointed out there's also a serious absence of regulation and legislation of the rental market here.

leeroybrown

As some posters have pointed out above it entirely depends on someone situation. I own a house (with a moderate mortgage) but I don't live in it. I probably won't ever even consider living where the house is. I live somewhere a suitable for my workplace and social life.

If I did live in Dublin I don't think I could bring myself to join the 60+ minute commute just to have a vastly overpriced three or four bed semi somewhere where mortgages were within reach. Forget dead money that would be a dead life.

someuser90

The property bubble is bursting

That ~€10,000 "dead" money spend on rent in 2007, prevented me losing > €30,000 in equity if I had of bought. I only began renting last year

Let the GAZUNDERING begin in 2009

johnnyskeleton

Rent is not dead money, so much as the money you'll have to pay back to the bank over the next 5 years if you take out a 100% mortgage you can't afford, are brought to court and the house is sold for several grand less than you bought it for.

You could find youself owing 5k legal costs, 10k arrears of interest and 20K+ for the pleasure of buying a house you can't afford, or even buying a house and suddenly finding yourself ill, unemployed, separated etc.

To be honest, I wouldn't buy a property unless I could easily afford it, easily get through a few lean months, and also have an exit strategy if it goes tits up. If you don't have enough for a deposit and fat, regular paycheck, then renting is far from dead money, it gets rid of all risk, and if house prices go down (which they look likely to do) you will be making a saving over the next few years.

OTK

Interest on a house loan is not dead money. It is a fee you pay to take a bet on the movement of your leveraged investment. You can win or lose big.

Regardless of the sums, renting is not a good option for long term living in Ireland. Your amateur landlord may interfere with your enjoyment of his property and even turf you out with the barest pretext and require you to live elsewhere, removing the incentive to nest and feel comfortable in a rented house. The bank will leave you alone so long as you make your payments.

Conclusion: rent for the short term, buy when you settle for the long term.

steo123

keep the posts coming guys-enthralling stuff

a lot of people i know are purchasing property and renting it,claiming they will be paying less then the 500 im forking out by renting room(s) out.

this is another factor to be considered when purchasing property

at least you can chose who you live with if you own the place

Calina

You can choose who you live with if you rent too. If you have to share when you buy then realistically you've lost one of the key advantages of buying ie not having to share.