Updated: Jun 11, 2021
I saw this tweet a few weeks ago, which I have to say, gave me a different perspective on home ownership, and the wider subject of properties for investment. I think you'd need a heart of stone not to be in some way affected by it...
What she is apparently saying is that she has rented for all of her adult life, and that she views the rent she's paid as being lost. Or "dead money" as people tend to call it.
She's even more outraged by the fact that the £100,000 she says she has spent in rent is the approximate value of, I presume, a typical house in the area in which she lives.
I have to say, though, that this is rather an oversimplification of the situation - yes, £100,000 can buy you a home in many parts of the North West, but when I say that's probably about 10% of the story, then I don't think I'm too far wrong.
For instance, a £100,000 home requires a substantial deposit - £25k if you're an investor and you're obtaining a 75% Buy-To-Let mortgage. If the property was a wreck when the investor bought it, then they could indeed have bought it cheaper, but further money would have been spent on it to bring it up to scratch, and add value. (More on this in another article)
Compare that deposit requirement to that one required of the tenant, which is set in law at a maximum of five weeks rent. So assuming a rental of £700 a month (£100,000 over 144 months is just under £695 on average) probably £700-800 tops, considerably less than even a minimum 5% deposit an owner occupier would need.
The landlord is also responsible for obtaining safety certificates to guarantee that the gas and electric systems are in working order and safe to use. So each year, the landlord must pay for the gas engineer to visit, and the electrical engineer must go every three years, AND must pay to either upgrade or repair the systems if and when required. The tenant, on the other hand, doesn't pay for these items
Maintenance The tenant also doesn't have to pay for anything that breaks down in the property either. That's also the landlord's responsibility.
Insurance The landlord is also responsible for insuring the building
If the tenant has paid £700 a month, then a property worth £100,000 won't be paid off in 12 years if landlord has a mortgage on the property, which makes her claim of having "bought one for a rich person" slightly exaggerated. The interest the landlord pays will significantly slow down the repayment process, as naturally, you pay more overall.
Tie-ins Buying a property is a massive commitment of up to 25 years. If you decide you don't want the property any more, then you've got to sell it, which could take several months to complete, and in some cases you will need to take back possession, which again, could take some time to do. If the tenant wants to up sticks, on the other hand, they only have to give one month's notice.
Failure to keep up payments
If you fail to pay your mortgage, then the lender can fairly quickly and easily repossess the property from you. You being repossessed doesn't normally affect the tenant, however, as they have security of tenure under the Law of Property Act if you get repossessed. It's also arguably harder for a landlord to take possession back from a tenant than it is a lender from a landlord or owner occupier.
Now this article is not in any way trying to rip either that tweet, or the tenant's rights/responsibilities to bits. She's every right to feel that way. I'm simply trying to say that the arguments between buying and renting - and investing - are flawed, and this is simply because each party comes at the argument from completely different angles, with their own interests at heart.
Neil Robinson is an experienced estate agent, letting agent and property investor, and is the owner of Neil Robinson Estate Agents. www.neilrobinson.co.uk - 01695 355110