This blog follows the buy-to-let market in Ilkeston, Eastwood, Heanor and Belper. You'll find properties on here that may make decent investments. You'll also find tips, guidance, and analysis that relates specifically to these two towns. I operate Spruce Tree Lettings, opened since 2009, in all these towns, so if you're thinking of buying a property to let in either Ilkeston, Eastwood, Heanor or Belper, I'm happy to offer a second opinion.
Thursday, 12 February 2015
Rent vs buy in Eastwood – Which is best?
Recently, my article about why Eastwood twenty something’s
aren’t buying property anymore, caused a number of landlords to contact me. So
much so, I want to revisit the story for a second time as some landlords are still
concerned demand will dry up as people start to buy instead of rent with the
recent reductions in property values.
So .. Renting verses Buying in Eastwood – Which is best? An intriguing
question, yes? Or one which would appear patently obvious to answer? Surely we
are all in this to own our own property one day rather than paying out large
sums of what is essentially ‘dead’ money as some like to call it in rent. Or is
there a little more to it than that?
Let’s firstly look at a typical property sale. In Blackthorn Drive in Eastwood, there are a
number of two bedroom semis for sale at £85,000. Say a first time buyer bought
it for £82,000 working off a typical mortgage rate of 3.49%, with a 30 year
repayment plan and based on an initial deposit of £4,500, the monthly repayments
would be £348 per month. Turning my attention to the rental side and this
property would fetch approximately £495 per calendar month.
So, it’s cheaper to buy then rent, so it would appear as
though the answer is obvious. Buying must be the way to go. The sales market
must be booming, but yet in a lot of cases it is not, and the number of people
choosing to rent continues to grow. Besides the numbers, it’s clear that a
certain percentage of people still favour renting than buying. The National
Centre for Social Research Report backs this up pointing to a shift in
attitudes from previous generations when buying at the first opportunity was
the ‘done thing’.
Although in pure monetary terms, buying seems like the best
option, first time buyers are clearly also considering the risk associated with
owning their own property. The reasons for that reluctance to buy are many and
varied, but here are some of my thoughts.
Firstly, it’s a big financial commitment –first timers need
to be sure they can afford what they’re taking on. Also, when interest rates rise, repayments
will also go up . New homeowners also need to be sure they can afford
maintenance costs such as replacing a boiler if it packs up or fixing a leaky
roof. If you stretch yourself too much when you buy you may resent not having
money for meals out, holidays and entertainment.
You have less flexibility than when renting. For example, if
you want to move for work or personal reasons selling up and moving on is far
more expensive if you own as you’ll have all of the associated estate agency
and legal fees. Also bear in mind that it may not always be easy to sell your
home – (it was really tough to sell a property in Derbyshire in 2008 and 2009),
so it’ll be dependent on what’s happening in the market. Finally, if you’re
living with someone else and split up, the process of sorting out the property
will be far more complicated and expensive
Buying and owning your own home is certainly what the
majority of us continue to strive towards, and but now more than ever
‘Generation Rent’ continues to gather considerable momentum and shows no sign
of slowing down in the future. No doubt this will be welcomed news amongst Amber
Valley, Broxtowe and Erewash landlords and investors.