Why Long Term Lettings is Beneficial On Certain Occasion?

Just as there are two sides to any coin, there are pros and cons in both renting and owning a home. The impression that buying a home is a smart financial decision or homeownership is magical path to wealth may seem a marketing ploy.

Benefit of Owning a House

Quite often, buying a house makes sense for more non-financial reasons. It gives a sense of stability because you are not at the mercy of a landlord. There is freedom to do what you want. But financially, it need not make you feel high.

Buy or rent or checking the price-to-rent ratio (P/R ratio) is the yardstick for a decision to buy or rent. Deriving a P/R ratio is easy:

  • Just find two similar houses; Assume that one is for sale and the other for rent.
  • Now divide the sale price of one place by the annual rent of the other. The result will be the P/R ratio.

Assume that you have found a $200,000 house for sale in a nice neighborhood. A similar house might be renting for $1,000 per month. The rent works out to be $12,000 a year. Now divide $200,000 by $12,000, you get a P/R ratio of 16.7.

Significance of number

The New York Times columnist David Leonhardt says about it–a rent ratio above 20 will mean costs of ownership on a monthly basis will be higher than the cost of renting. It implies that higher the P/R ratio, better you rent. If the P/R is low then it good to buy.

The national P/R ratio came close to 20 and went above in some cities during the housing bubble in 2008. It showed that renting a house of $200,000 for $10,000 a year or over $800 is a good deal.

Normally, the range is 10 and 14 meaning that it would cost $1,200 and $1,600 to rent a $200,000 house.

Tips for Negotiating a Deal

Negotiating a Long Term Rentals Flats in London is both an art and science. You must be well-informed and know exactly what you want. In fact,Landlords encourage negotiating with long-term tenants.

Potentials tenants must do their research and ask the right questions to save hundreds of dollars in rent. Plan your action points to gain the negotiating power. Check out the rentals of all recently rented out units. When there are a large number of empty units, any landlord will be flexible in climb down in prices or go flexible on rental terms or amenities. Also go through the ads of comparable properties so that the landlord cannot take advantage of you.

Since you are going to be in the property for several months or years, ask for a discount. Get it in writing that the rate will be locked into the current rental rate for the whole span of the rental agreement. If you want a new carpet or fresh coat of paint, ask for it and see if they can accommodate that request.

Never feel pressurized into signing a contract. Locking yourself into something that you aren’t comfortable is bad in renting.