|Own your own home. It's the best
buy-to-let investment you'll ever make.
You've got to live somewhere. So, to look at the economics of buying
your own home, start with the assumption that you are renting it.
Now, would buying it (instead of renting) be a good idea?
If your bought your house you would save the rental
payments (in exchange for a mortgage).
Rentals are set by market forces. Rentals must compensate
a landlord for:
- financing costs, offset by expected capital
- repairs and upkeep,
- management fees,
- dead letting periods,
- landlord's own management time and expenses,
- legal and other expenses relating to disputes
- investment risk premium (no need to understand
If you buy your own house you become a landlord with the most marvellous
tenant:- yourself! Compared with an independent landlord:-
- Your financing costs net of capital appreciation
will be the same or lower.
- Repairs and upkeep will be the same or lower
(you will make sure they are done properly, with an owner's care
and foresight; and you may do them yourself at zero cost or even
as an enjoyable recreation).
- There will be no management fees.
- There will be no dead letting periods.
- There will be no landlord's management time
- what's to manage?
- There will be no disputes with the tenant.
- No investment risk premium will be required
(still no need to understand this!).
Not only that, your 'profit' (the difference
between the rental you would have paid and the costs of ownership)
will be untaxed, as will any capital gain on sale of the property.
Can you think of a better investment? If you
can, by all means make it and good luck to you.
Don't let's get ahead of ourselves. This is just
quite difficult mechanics. Ignore it for now. Or take a peek at
Mortgage?, if you must.