Key Post Is rent "dead money"?

As an auctioneer I hear the term alot, but believe it or not I don't actually have to use it myself. It is usually the mum or dad of a 20something that is looking for their first home. It really is a cultural thing in my estimation and I don't envisage it changing anytime soon. Having said that I also know of alot of people from the countries that the OP referred to that have bought property here. I also don't think people use the term to sound intelligent, it is just a tired cliche that is used without great thought like all other tired cliches.
 
SPC100 said:
The shambolic Irish rental market contains little value for would be longer term renters, as they can be kicked out any anytime (with a small bit of notice) because a whimsical landlord changed their mind.
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I think you are misinformed. Tenancies are based on a 4 year cycle (6 months + 3.5years periods)
 
How many of you who reckon rent is not dead money own your own homes?
 
I think rent is dead money over the long term,just look at your parents who bought their houses say 30, yrs ago i think if you apply this sort of timescale to any property you're gonna come out on top. the thing with property is that it disciplines you to "save/ invest" over a long period which must be a good thing. buying a beer and drinking it could be thought of as dead money too ....you pay for it ..enjoy it ,then its gone as with renting a house, but if your paying a mortgage it will be one day yours.
 
While I agree that renting has some benifits with flexibility, lack on maintenance, being able to live in an area where you couldn't afford to buy etc, I think these benifits are short term.

I don't want to get to retirement and still have to fork out thousands each month on rent. I want to be able to close our own front door, secure in the knowledge that it is ours.
 
I think it depends how much rent you pay

I pay €450 per month. I share a two bed apartment with a friend. It's extremely central (roughly one or two minutes walk from Grafton Street).

It suits my needs so it is not dead money for me.

Long term I want to own. This has nothing to do with "dead money" but rather because I want my home to be mine. I don't feel I can decorate the apartment I am renting, and it's just not the same (for me anyway) knowing this is not my bed, this is not my fridge, etc.

However the idea of strapping myself into a 35 year mortgage is nuts. I just cannot understand how people do that do themselves. Honestly, and this will sound horrible, so I apologise, but I think they have missed the point of life.

In a few years I will have enough cash saved to buy a home abroad (it'll probably be France) outright. I'll be in my early thirties with no mortgage and no financial worries (I have a small side business and I live a fairly simple life.)

So for me, renting right now is not dead money. So I think it all depends on each individuals circumstances.
 
Yes I think in your situation renting is a good option for you , it really does depend on individual circumstances and aspirations.I think its not fair to say that people who sign up to 35 yr mortgages are missing the point to life . Your idea of the point to life may not be another's idea of the point to life.
 
I believe renting serves a temporary purpose and is not dead money while you see it as temporary. I don't believe renting is viable long term(longer than 10 years)

Average mortgage is 30 years- In my experience people overpay after the first few years bringing the actual term down to about 20 years.

After 20 years the mortgage is paid and the house is yours. You then only have to worry about paying your gas and electricity bill e.t.c. Say you take out a mortgage at 30 and pay it off at 50. You have 15 years of income without having to pay mortgage.

Rent goes up generally once per year. While you are working no problem paying the rent. What happens when you retire. Your pension (assuming you have one)will be eaten up paying rent. You will then either have to move to an area that is further out from town or to a dodgy area with lower rents.

Owning a property also gives you something to pass on to your children when you die. It has the benefit of giving them a leg up.
 
Using this Is Buying Better than Renting Calculator with the following assumptions:

Monthly rent: 1,500
Home price: 400,000
Downpayment: 10%
Mortgage rate: 5.0%
Annual property taxes: 0.5% (this roughly accounts for insurance/service charges in the Irish context)

Produces the following.

Column 1 - House price appreciation
Column 2 - Rent Increase
Column 3 - Buying better after

<=0% <=3% Never (within 30 years)
0% 4% 24 years
1% 4% 19 years
2% 4% 12 years
3% 4% 6 years
3% 5% 6 years
4% 5% 4 years

< here includes negative values for house price appreciation and rent.

Same table but with mortgage interest rate of 6%

<=0% <=3% Never (within 30 years)
0% 4% 29 years
1% 4% 25 years
2% 4% 18 years
3% 4% 10 years
3% 5% 9 years
4% 5% 5 years


Same table but with mortgage interest rate of 4%

<=0% <=3% Never (within 30 years)
0% 4% 19 years
1% 4% 13 years
2% 4% 7 years
3% 4% 4 years
3% 5% 4 years
4% 5% 3 years

It does appear to support the proposition that under relatively benign economic conditions buying is better than renting although I don't think it accounts for returns investing the difference between mortgage or rent. I suspect it's unlikely most people would have the discipline to invest this difference anyway.
 
To say that rent is dead money is probably the wrong way to look at it. After all, your rent is getting you something, namely the use of a property, so it's just a transaction at the end of the day. The point is, we all HAVE to live somewhere, so it is bound to make long term sense to buy as when the end of your mortage/life comes you will have a property that is yours and worth something. After a life of renting you have nothing.
 
Rent or Buy : A case in point ....
I was renting in the late 80's (£200 pm) while looking for a site to build a home.
Built a house in 1990 (Mortgage £ 350 - £400 pm)
I am now mortgage free.
If I had decided to continue renting I think I would be worse off now .......
 
Protocol said:
If it's true that rent is "dead money", then why do millions of Germans, Swiss, Dutch and Danish people all rent for many years?

Are they all mad?
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It's a cultural thing, combined with our history of dispossession.
If you are an Irish tenant in Ireland, you have an innate sense of distrust of the landlord.
However, as the Celtic Tiger has shown us, we become the monster we feared the most. We all want to become landlords, as soon as we have the money.
 
And one other thing...

Many of us that rent do so in a "houseshare" situation.
When we buy our own place, we no longer share with strangers.

Rent is dead money when it involves sharing with "****rary Wan" or "White Socks" or whoever.

Dead money and dead time with some of these people.
 
ClubMan said:
I would agree with this 110%.
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I would disagree with this 120% !!
It's nonsense talk.

There is the world of substance behind this 'tired cliche'.

And I'm particularly shocked that an auctioneer can't see that. (that's right MrMan - I'm referring to you !)

And the reason is as follows: (Listen closely people)

On average, over the long term,property has risen double-digits in Ireland per annum.
FACT !!

As a result,anyone who chooses to rent, misses out on this capital gain.

ClubMan said:
I think it's just a silly cliché. You may as well say that paying your busfare or for a sliced pan is "dead money" and that you should buy a bus or a bakery instead.
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Ah ... not quite I would think.
 
For of me it's pretty simple. From a purely economic viewpoint if the rental yield on a property is less than the current mortgage interest rate then a mortgage is "dead money" if it the rental yield is higher then renting is "dead money". At the moment paying a mortgage in Ireland is "dead money" in almost all circumstances.
 

The chances of increases of anything above inflation in the next ten years are slim to none IMO.
 
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