How much do you pay for rent?

2 Bedroom Old-Style Flat; (with large rooms with wooden floors) in Brooklyn; Milnerton for R3560pm & I have a garage that adds R380pm to the mix so total of under R4k pm. Ground floor; balcony; easy access to washing lines etc.

Work is around 12km (combined) and all the places we visit/shop is no more than 12-13km radius; grateful for that.

I would like to consider a Bond once I have eroded my debt big time and have more certainty wrt (more) kid(s)...
 
Seriously sucks living in the city when I look at what some of you guys are paying for bigger places :(
 
chicken247 said:
I found this http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

It might help you.

Shall edit and delete it if not allowed to post link.
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I know the theory behind this and Old Mutual punted this in the mid 80's. It would not work well in this country as our economy is different.

Buying is still better than renting because landlords insist on charging you 1% a month (what a new bond payment would be) than charging what the place is worth.

Reason why we bought as even though our bond goes up with each interest rate increase, it at least has a ceiling, unlike rent that will increase for the rest of your life.
 
R 5500 for a 2 bedroom townhouse in a quite area. 1 bath, kitchen, lounge/living room, garage and own cute low maintenance garden.

Tygerdal - Cape Town
 
ambroseg1 said:
Only suckers rent LOL.

Seriaas though, take the plunge and try your best to buy. I struggled at first looking back, but best decision I have made.
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Not really. Investing difference between mortgage and rent + the water / tax / repair and earning 13% or more a year on it could easily outperform the property appreciation.
 
phiber said:
A good read about interest rates... For all the renters that want to buy, all home owners that have bonds...
Click to expand...

I'm expecting a bit of a interest rate cycle. It's kind of inevitable.
I'm banking on 200 to 300 basis points over the next 3 years but anything less is bonus.
 
Devill said:
Not really. Investing difference between mortgage and rent + the water / tax / repair and earning 13% or more a year on it could easily outperform the property appreciation.
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This. Plus when you are tired of your neighbours or fancy living on the other side of town - you can :p

Just requires some discipline though. Nothing big debit order can't enforce :D :( :cry:
 
Devill said:
Not really. Investing difference between mortgage and rent + the water / tax / repair and earning 13% or more a year on it could easily outperform the property appreciation.
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It's not so simple for a couple of reasons.
1. The difference between owning and renting isn't very big in a lot of cases and rent quickly overtakes bond repayments.
Here is a quick example where owning initially costs 51% more than renting a R800 000 apartment:

Year 1
Rent = R5000 + R800 for elec = R5800 per month
Bond = R7000 + R1800 (rates, taxes, water & elec) = R8800 per month

Year 2
Rent = R5800 + 8% increases = R6264 per month
Bond = R7000 + (R1800 + 8%) = R8944 per month

Year 3
Rent = R6264 + 8% increases = R6765 per month
Bond = R7000 + (R1944 + 8%) = R9099 per month

Year 4
Rent = R6765 + 8% increases = R7306 per month
Bond = R7000 + (R2099 + 8%) = R9267 per month

Year 5
Rent = R7306 + 8% increases = R7890 per month
Bond = R7000 + (R2267 + 8%) = R9448 per month

Year 6
Rent = R7890 + 8% increases = R8521 per month
Bond = R7000 + (R2448 + 8%) = R9644 per month

Year 7
Rent = R8521 + 8% increases = R9203 per month
Bond = R7000 + (R2644 + 8%) = R9856 per month

Year 8
Rent = R9203 + 8% increases = R9939 per month
Bond = R7000 + (R2856 + 8%) = R10084 per month

Year 9
Rent = R9939 + 8% increases = R10734 per month
Bond = R7000 + (R3084 + 8%) = R10331 per month

So after 9 years you're better off having purchased.

2. However you argue that you've been investing the difference for those 9 years.
Assuming 15% per annum growth on your investment over 9 years ...

Investment contributions:
Year 1: R3000
Year 2: 2680
Year 3: 2334
Year 4: 1961
Year 5: 1558
Year 6: 1123
Year 7: 653
Year 8: 145
Year 9: -403
Total capital including growth at the end of year 9 = R470 000

However the value of the house has also been increasing over those 9 years so you have an appreciating asset to weigh against an appreciating investment.
Now it starts to get really interesting after year 9.
After year 9 if you're renting you're starting to go backwards because you can no longer afford to invest.
The house owner however is now in a better financial position and can start investing because their bond hasn't been increasing every year.

The house owner invests what the renter can not:
Year 9: R402
Year 10: R995
Year 11: R1634
Year 12: R2325
Year 13: R3071
Year 14: R3876
Year 15: R4747
Year 16: R5686
Year 17: R6701
Year 18: R7797
Year 19: R8981
Year 20: R10260

Renter
At year 20 the renter's R470 000 investment has grown to R2,188,838
At year 20 the renter is now R10260 per month out of pocket with R2.5 million less assets than the home owner.
Total assets = R2,188,838

Owner
At year 20 the owner's 11 year investment has grown to R1,252,758
At year 20 the owner's house is now valued at R3,452,560
Total assets = R4.7 million
 
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Paul_S said:
snip
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Nice :)

But there are other factors to consider like the house limiting your career opportunities etc (same could be said about a wife and kids I suppose). And if you bought your house in the wrong place (Hilbrow 1970) in 20 years time it might not have appreciated as much as you have hoped (opposite is true as well I suppose)
 
Hamster said:
Nice :)

But there are other factors to consider like the house limiting your career opportunities etc (same could be said about a wife and kids I suppose). And if you bought your house in the wrong place (Hilbrow 1970) in 20 years time it might not have appreciated as much as you have hoped (opposite is true as well I suppose)
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You'd still have the extra cash to invest though. The house appreciating is just a bonus.
 
Hamster said:
Nice :)

But there are other factors to consider like the house limiting your career opportunities etc (same could be said about a wife and kids I suppose). And if you bought your house in the wrong place (Hilbrow 1970) in 20 years time it might not have appreciated as much as you have hoped (opposite is true as well I suppose)
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Agreed, it's a simplistic view not taking risk into account but one could use the same argument with regards to the renter investing.

Owner
The home owner may purchase in an area that goes bad and his house is valued at R0 at year 20. The house owner loses all his investment money on top of it.
Total assets: R0
Total expenses: Rates, taxes, elec + water.

Renter
The renter who is investing makes some bad investment decisions and also loses everything.
Total assets: R0
Total expenses: Rent + elec

Guess who's living expenses are the highest? :)
 
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Chevron said:
You'd still have the extra cash to invest though. The house appreciating is just a bonus.
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Yes but if your house didn't appreciate you won't be anywhere close to the guy that rented.
 
Paul_S said:
Agreed, it's a simplistic view not taking risk into account but one could use the same argument with regards to the renter investing.

Owner
The home owner may purchase in an area that goes bad and his house is valued at R0 at year R20. The house owner loses all his investment money on top of it.
Total assets: R0
Total expenses: Rates, taxes, elec + water.

Owner
The renter who is investing makes some bad investment decisions and also loses everything.
Total assets: R0
Total expenses: Rent + elec

Guess who's living expenses are the highest? :)
Click to expand...

Fair enough
 
Hamster said:
Yes but if your house didn't appreciate you won't be anywhere close to the guy that rented.
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Of course you would. Did you miss the previous posts?

Rent goes up every year, while your house payments remain more or less the same.

Every year you can invest more as the home owner, while the renter can afford to invest less and less.
 
Hamster said:
Nice :)

But there are other factors to consider like the house limiting your career opportunities ...
Click to expand...

Not so if you bought wisely. I know off people who rent out their houses when they need to move instead of selling them. They then buy new houses and this helps build their portfolio.

I've an opportunity to relocate in two years time and my house is not going to have any influence on my decision to do so or not. Actually it gives me a safety net if we want to return to South Africa.
 
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