rental Rule of thumb

Discussion in 'UK Finance' started by SG, Mar 23, 2005.

  1. SG

    SG Guest

    I am thinking of renting in the private sector and was wondering what
    the rule or thumb might be as regards the amount to pay for rent
    monthly. I've heard some estimates that it should be a quarter of you
    income (i.e. one week) and others a third of your monthly income.
    Would this be just the rental factor or should you take into account
    community charge and bills?

    Thanks
    Sam
     
    SG, Mar 23, 2005
    #1
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  2. SG

    Lobster Guest

    SG wrote:
    > I am thinking of renting in the private sector and was wondering what
    > the rule or thumb might be as regards the amount to pay for rent
    > monthly. I've heard some estimates that it should be a quarter of you
    > income (i.e. one week) and others a third of your monthly income.
    > Would this be just the rental factor or should you take into account
    > community charge and bills?


    Eh? "Should be"? Rent is dead money, it's not like it's a savings plan
    or a mortgage. Pay whatever you want to or can afford to pay.

    David
     
    Lobster, Mar 23, 2005
    #2
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  3. SG

    Mark Blewett Guest

    On Wed, 23 Mar 2005 18:41:17 GMT, Lobster
    <> wrote:

    >SG wrote:
    >> I am thinking of renting in the private sector and was wondering what
    >> the rule or thumb might be as regards the amount to pay for rent
    >> monthly. I've heard some estimates that it should be a quarter of you
    >> income (i.e. one week) and others a third of your monthly income.
    >> Would this be just the rental factor or should you take into account
    >> community charge and bills?


    For the OP;

    Its depends on the rental market where you are... but personally I'd
    aim to split income after tax as follows;

    - 1/3 rent
    - 1/3 living (including bills)
    - 1/3 saving

    Depending on your live style you may want to adjust this.. but
    everyone should be aiming at saving 1/3 of income.. whether it be a
    deposit for a house, to redo the kitchen or want kids.

    >Eh? "Should be"? Rent is dead money, it's not like it's a savings plan


    I agree.. and hence my sugestion above.

    >or a mortgage.


    What about the interest paid on a mortgage? Surely thats "dead money"
    too?

    Given the doubling of house prices over the past few years, to me it
    currently makes more sense to rent.

    For example, is it better to pay rent to cover a £100k landlords
    interest only mortgage when they bought 5 years ago, or buy and pay
    interest to the bank for £200k?

    >Pay whatever you want to or can afford to pay.


    The first thing is look for somewhere you could stay and rent for
    awhile.. ask about the landlord (how mant properties, when did they
    buy etc)... and make sure you budget allows you to save.

    Regards
    Mark
     
    Mark Blewett, Mar 23, 2005
    #3
  4. SG

    Mr Power Guest

    > Eh? "Should be"? Rent is dead money, it's not like it's a savings plan
    > or a mortgage. Pay whatever you want to or can afford to pay.


    Rent paid is no more "dead" than interest paid
    (which is the cost of "renting money").
     
    Mr Power, Mar 24, 2005
    #4
  5. SG

    stephen Guest

    Seems to me that there is too much accommodation to rent these days. From
    what I see in South Wales the average rents seem to be dropping about
    5%-10%, maybe thats happening elsewhere as well. It might be worth haggling
    a bit on the asking price.


    "SG" <> wrote in message
    news:...
    >I am thinking of renting in the private sector and was wondering what
    > the rule or thumb might be as regards the amount to pay for rent
    > monthly. I've heard some estimates that it should be a quarter of you
    > income (i.e. one week) and others a third of your monthly income.
    > Would this be just the rental factor or should you take into account
    > community charge and bills?
    >
    > Thanks
    > Sam
     
    stephen, Mar 24, 2005
    #5
  6. SG

    SG Guest

    Thanks for your advice. I live and work in an expensive region where I
    just fall out of the house market in the areas I want I want to live.
    I believe that the house price to salary ratio might improve so I
    thought I could rent and save while the gap closes.
    It's a bit of a gamble but I think that house prices have reached
    their critical mass in this area.
     
    SG, Mar 24, 2005
    #6
  7. SG

    Tim Guest

    "Mark Blewett" wrote
    > ... everyone should be aiming at saving 1/3 of income...


    *Everyone*??

    "Mark Blewett" wrote
    > ... whether it be a deposit for a house, to redo the kitchen or want kids.


    What about people who have already bought a house, just re-done the kitchen,
    & don't want / can't have any more kids?

    "Mark Blewett" wrote
    > What about the interest paid on a mortgage?
    > Surely thats "dead money" too?


    Surely it depends whether the house is increasing in value at greater than
    or equal to the interest rate paid, or not?
     
    Tim, Mar 24, 2005
    #7
  8. SG

    Lobster Guest

    Mr Power wrote:
    >>Eh? "Should be"? Rent is dead money, it's not like it's a savings plan
    >>or a mortgage. Pay whatever you want to or can afford to pay.

    >
    >
    > Rent paid is no more "dead" than interest paid
    > (which is the cost of "renting money").


    But paying interest (and we're talking mortgages, aren't we) gets you on
    the property ladder, doesn't it? Personally, having paid a mortgage for
    about 18 years or so, and a hell of a lot of interest, has made my
    on-paper "wealth" a hell of a lot more than it would have been had I
    been renting all those years. That's why I'm saying rent money is "dead".

    David
     
    Lobster, Mar 24, 2005
    #8
  9. SG

    Mark Blewett Guest

    On Thu, 24 Mar 2005 10:00:43 +0000 (UTC), "Tim" <> wrote:

    >"Mark Blewett" wrote
    >> ... everyone should be aiming at saving 1/3 of income...

    >
    >*Everyone*??


    I believe so..

    >
    >"Mark Blewett" wrote
    >> ... whether it be a deposit for a house, to redo the kitchen or want kids.

    >
    >What about people who have already bought a house, just re-done the kitchen,
    >& don't want / can't have any more kids?


    I was using them as examples... how about a new car, saving for a
    holiday.. there are always costs which are not "day to day".. this is
    why I suggest saving.

    >
    >"Mark Blewett" wrote
    >> What about the interest paid on a mortgage?
    >> Surely thats "dead money" too?

    >
    >Surely it depends whether the house is increasing in value at greater than
    >or equal to the interest rate paid, or not?


    True, but with mortgages at a record times salary level, prices
    falling 6 months in a row, above inflation increases in bills, reduced
    high street spending and record levels of debt.... I wouldn't bet on
    capital increase in house prices for a few years!
     
    Mark Blewett, Mar 25, 2005
    #9
  10. SG

    Tim Guest

    > >"Mark Blewett" wrote
    > >> ... everyone should be aiming at saving 1/3 of income...

    > >

    > "Tim" wrote:
    > >*Everyone*??

    >

    "Mark Blewett" wrote
    > I believe so..


    Really? Bill Gates **needs** to save a third of his income?
    Why?? Whatever for??!

    > >"Mark Blewett" wrote
    > >> ... whether it be a deposit for a house, to redo the kitchen or want

    kids.
    > >

    > "Tim" wrote:
    > >What about people who have already bought a house, just
    > >re-done the kitchen, & don't want / can't have any more kids?

    >

    "Mark Blewett" wrote
    > I was using them as examples... how about a new car, ...


    .... paid for already out of income, on hire purchase / loan / lease ...

    "Mark Blewett" wrote
    > ... saving for a holiday...


    Some people don't go on holiday, for various reaons!!

    "Mark Blewett" wrote
    > ... there are always costs which are not
    > "day to day".. this is why I suggest saving.


    "Saving" is not necessarily a bad thing - but I seriously question why
    "everyone" should save exactly a *third* of their income, ignoring all the
    other factors which would affect this decision.
     
    Tim, Mar 25, 2005
    #10
  11. Tim wrote:

    > "Saving" is not necessarily a bad thing - but I seriously question why
    > "everyone" should save exactly a *third* of their income, ignoring all the
    > other factors which would affect this decision.


    For God's sake, man, you must learn not to take generalisations too
    literally. For "everyone" read "most people". The "exactly" was,
    IINM, your own invention, and should be taken as a rough ball-park
    figure.

    To buy (your example) a car on lease/HP/etc wastes a significant
    additional amount of income on other people's profit, and for
    most people it's not possible to pay for a new car out of income, it
    has to bought either on credit or from savings. The advantage with
    savings is that you save (groan) the difference between the high
    cost of borrowing from other people and the low cost of "borrowing"
    from yourself, with the twist that you "pay off" the "loan" from
    yourself before you even take it.

    All you'd be doing is diverting some of your income into a buffer,
    so that you can use the stored funds on medium/long term luxuries
    instead of short term ones. The exact proportions will and should
    vary to suit personal circumstances, but I don't see anything vastly
    wrong with a split of one third (of after-tax income) on essentials
    (housing and basic food), one third on everyday luxuries, and the
    rest on medium/long term savings.

    You also earn interest on your savings, which may not be a huge amount,
    butintegrated over the long term, buying stuff like cars or holidays
    or expensive toys from savings which have cost you 1/3 of your income,
    is bound to beat buying those same things on credit and paying off the
    loans well after the holiday's over, the toy's broken, the car written
    off, and taking up more than 1/3 of your income in loan repayments and
    interest.

    Don't think of it as saving 1/3 of your income. Think instead of
    "living within your means" meaning "don't spend more than 2/3 on
    immediates".
     
    Ronald Raygun, Mar 25, 2005
    #11
  12. SG

    Mark Blewett Guest

    On Fri, 25 Mar 2005 10:43:52 GMT, Ronald Raygun
    <> wrote:

    >Tim wrote:
    >
    >> "Saving" is not necessarily a bad thing - but I seriously question why
    >> "everyone" should save exactly a *third* of their income, ignoring all the
    >> other factors which would affect this decision.

    >
    >For God's sake, man, you must learn not to take generalisations too
    >literally. For "everyone" read "most people". The "exactly" was,
    >IINM, your own invention, and should be taken as a rough ball-park
    >figure.
    >
    >To buy (your example) a car on lease/HP/etc wastes a significant
    >additional amount of income on other people's profit, and for
    >most people it's not possible to pay for a new car out of income, it
    >has to bought either on credit or from savings. The advantage with
    >savings is that you save (groan) the difference between the high
    >cost of borrowing from other people and the low cost of "borrowing"
    >from yourself, with the twist that you "pay off" the "loan" from
    >yourself before you even take it.
    >
    >All you'd be doing is diverting some of your income into a buffer,
    >so that you can use the stored funds on medium/long term luxuries
    >instead of short term ones. The exact proportions will and should
    >vary to suit personal circumstances, but I don't see anything vastly
    >wrong with a split of one third (of after-tax income) on essentials
    >(housing and basic food), one third on everyday luxuries, and the
    >rest on medium/long term savings.
    >
    >You also earn interest on your savings, which may not be a huge amount,
    >butintegrated over the long term, buying stuff like cars or holidays
    >or expensive toys from savings which have cost you 1/3 of your income,
    >is bound to beat buying those same things on credit and paying off the
    >loans well after the holiday's over, the toy's broken, the car written
    >off, and taking up more than 1/3 of your income in loan repayments and
    >interest.
    >
    >Don't think of it as saving 1/3 of your income. Think instead of
    >"living within your means" meaning "don't spend more than 2/3 on
    >immediates".


    Thanks Ronald, I could not of put it any better.

    Regards
    Mark
     
    Mark Blewett, Mar 25, 2005
    #12
  13. SG

    Tim Guest

    > "Tim" wrote:
    > > ... I seriously question why "everyone" should
    > > save a *third* of their income, ignoring all the
    > > other factors which would affect this decision.

    >

    "Ronald Raygun" wrote
    > Don't think of it as saving 1/3 of your income.
    > Think instead of "living within your means" meaning
    > "don't spend more than 2/3 on immediates".


    So, the man with *zero* income but a large stash of gold/cash(etc), should
    spend no more than 2/3 of zero - ermm, nothing(!) - on "immediates"??!
    You are suggesting he should starve? :-((

    I'd say that if he used (say) 1% of his initial huge stash of gold&cash each
    year, that he would still be "living within his means" (unlikely to live
    much longer than another hundred years) - even though his income is zero and
    he is not saving a penny.
    From your comments above, you disagree? ;-)
     
    Tim, Mar 25, 2005
    #13
  14. Tim wrote:

    > So, the man with *zero* income but a large stash of gold/cash(etc), should
    > spend no more than 2/3 of zero - ermm, nothing(!) - on "immediates"??!
    > You are suggesting he should starve? :-((
    >
    > I'd say that if he used (say) 1% of his initial huge stash of gold&cash
    > each year, that he would still be "living within his means" (unlikely to
    > live much longer than another hundred years) - even though his income is
    > zero and he is not saving a penny.
    > From your comments above, you disagree? ;-)


    Very funny. I've already implied we have to apply the term "everyone"
    sensu lato, and for its present-purpose definition to make sense, it
    would clearly need to exclude people living off savings.

    For someone whose sources of income have dried to a trickle, it's
    just as well there *are* savings to live off. All the more reason
    to have built them.

    Oh no, the P word. Let's not go there.
     
    Ronald Raygun, Mar 25, 2005
    #14
  15. SG

    Tim Guest

    > "Tim" wrote:
    > > So, the man with *zero* income but a large stash of gold/ cash(etc),
    > > should spend no more than 2/3 of zero - ermm, nothing(!) -
    > > on "immediates"??! You are suggesting he should starve? :-((
    > >
    > > I'd say that if he used (say) 1% of his initial huge stash of gold&
    > >cash each year, that he would still be "living within his means"
    > > (unlikely to live much longer than another hundred years) -
    > > even though his income is zero and he is not saving a penny.
    > > From your comments above, you disagree? ;-)

    >

    "Ronald Raygun" wrote
    > Very funny. I've already implied we have to apply the term
    > "everyone" sensu lato, and for its present-purpose definition to make
    > sense, it would clearly need to exclude people living off savings.


    The question is, though, what *other* people does "everyone" also exclude?

    We both seem to agree that the person above, with zero income but high
    capital, is excluded.
    But there are many other types of people, whom some of us will agree should
    be excluded and others will disagree. Some of us will have the opinion that
    subset "X" should be excluded, others will believe that subset "Y" should be
    excluded - and so on.

    In other words, what (you seem to be suggesting) the other poster was really
    saying, is: "everyone should be aiming at saving 1/3 of income, except those
    that needn't" - and whether they needn't or not depends on who is deciding!
    So in other words, no-one really needs to save at all!!

    "Ronald Raygun" wrote
    > Oh no, the P word. Let's not go there.


    I'm not sure which "P"-word you mean - did you miss it out? :-(
     
    Tim, Mar 25, 2005
    #15
  16. Tim wrote:

    > The question is, though, what *other* people does "everyone" also exclude?
    >
    > We both seem to agree that the person above, with zero income but high
    > capital, is excluded.
    > But there are many other types of people, whom some of us will agree
    > should
    > be excluded and others will disagree. Some of us will have the opinion
    > that subset "X" should be excluded, others will believe that subset "Y"
    > should be excluded - and so on.


    Subsets? Cor, now we're getting into really heavy maths.

    Let's just say "everyone" has a variable meaning, which must be tuned
    in such a way to ensure the proposition remains true. :)

    > In other words, what (you seem to be suggesting) the other poster was
    > really saying, is: "everyone should be aiming at saving 1/3 of income,
    > except those that needn't" - and whether they needn't or not depends on
    > who is deciding! So in other words, no-one really needs to save at all!!


    Everyone has their own most appropriate savings ratio. Average them all
    out to find a "typical" figure. The other poster is merely suggesting
    that this typical figure is probably in the vicinity of 1/3.

    > I'm not sure which "P"-word you mean - did you miss it out? :-(


    Pensions. The result of saving part of 1/3 of your income. The other
    part you'll have saved separately, part of which you'll have spent on
    fripperies.
     
    Ronald Raygun, Mar 25, 2005
    #16
  17. SG

    Tim Guest

    > "Tim" wrote:
    > > The question is, though, what *other* people does "everyone" also

    exclude?
    > >
    > > We both seem to agree that the person above,
    > > with zero income but high capital, is excluded.
    > > But there are many other types of people, whom
    > > some of us will agree should be excluded and others
    > > will disagree. Some of us will have the opinion that
    > > subset "X" should be excluded, others will believe
    > > that subset "Y" should be excluded - and so on.

    >

    "Ronald Raygun" wrote
    > Subsets? Cor, now we're getting into really heavy maths.


    ;-)

    "Ronald Raygun" wrote
    > Let's just say "everyone" has a variable meaning, which must be
    > tuned in such a way to ensure the proposition remains true. :)


    If that were the case, then there would not be any point in making the
    proposition - because the meaning of the proposition would also vary with
    the definition of "everyone"!

    > "Tim" wrote:
    > > In other words, what (you seem to be suggesting) the other poster was
    > > really saying, is: "everyone should be aiming at saving 1/3 of income,
    > > except those that needn't" - and whether they needn't or not depends on
    > > who is deciding! So in other words, no-one really needs to save at all!!

    >

    "Ronald Raygun" wrote
    > Everyone has their own most appropriate savings ratio.


    Exactly! - and I'm just saying it needn't be "1/3".

    "Ronald Raygun" wrote
    > Average them all out to find a "typical" figure. The other poster is
    > merely suggesting that this typical figure is probably in the vicinity of

    1/3.

    .... but using language to suggest that he thinks everyone (or at least most
    people) should be *at* that average, rather than either side.
    [He said "everyone should be aiming at saving 1/3 of income".]

    It is like saying "everyone should be aiming at having two-and-a-half
    children" - which sounds quite absurd.
     
    Tim, Mar 25, 2005
    #17
  18. Tim wrote:

    > "Ronald Raygun" wrote
    >> Everyone has their own most appropriate savings ratio.

    >
    > Exactly! - and I'm just saying it needn't be "1/3".
    >
    > "Ronald Raygun" wrote
    >> Average them all out to find a "typical" figure. The other poster is
    >> merely suggesting that this typical figure is probably in the vicinity of
    >> 1/3.

    >
    > ... but using language to suggest that he thinks everyone (or at least
    > most people) should be *at* that average, rather than either side.
    > [He said "everyone should be aiming at saving 1/3 of income".]


    Nothing wrong with that, except slightly sloppy language. Everyone
    knows "everyone" doesn't really mean absolutly everyone, and "1/3"
    doesn't mean exactly a third. Just apply generous margins.

    If you "aim at" 1/3 you might not end up there, but if you end up
    near there, you probably won't go far wrong, provided you're
    typical enough. -- Must get me one of those typical-APR personal
    loans for which nobody ever qualifies...

    > It is like saying "everyone should be aiming at having two-and-a-half
    > children" - which sounds quite absurd.


    But it sounds absurd chiefly because you can't have fractions of children,
    not because it suggests you should aim for an existing average.
     
    Ronald Raygun, Mar 25, 2005
    #18
  19. SG

    Tim Guest

    "Ronald Raygun" wrote
    > If you "aim at" 1/3 you might not end up there, ...


    Of course, but for many people I'd suggest that they shouldn't even be
    *aiming* there!

    "Ronald Raygun" wrote
    > ... but if you end up near there, you probably won't
    > go far wrong, provided you're typical enough.


    That is the big point - you need to be "typical enough".
    I don't believe that any rational definition of "everyone" *only*
    encompasses the "typical". I'd say something more like "most people" -
    certainly not "everyone" - YMMV.

    > "Tim" wrote:
    > > It is like saying "everyone should be aiming at having
    > > two-and-a-half children" - which sounds quite absurd.

    >

    "Ronald Raygun" wrote
    > But it sounds absurd chiefly because you can't have fractions of
    > children, not because it suggests you should aim for an existing average.


    I disagree - I believe the thing that is absurd, is saying that *everyone*
    should aim for the average - because different people have different
    outlooks & expectations etc.

    I think that it's absurd to expect everyone to have the average number of
    children - and the fact that the average is fractional for this example just
    helps to show how absurd the notion of everyone being average really is!!
     
    Tim, Mar 25, 2005
    #19
  20. Tim wrote:

    > "Ronald Raygun" wrote
    >> ... but if you end up near there, you probably won't
    >> go far wrong, provided you're typical enough.

    >
    > That is the big point - you need to be "typical enough".


    But, typically, most people *are* typical. :)

    > I don't believe that any rational definition of "everyone" *only*
    > encompasses the "typical". I'd say something more like "most people" -
    > certainly not "everyone" - YMMV.


    You don't really think that "most people" doesn't qualify as a
    rational definition of "everyone", do you? Let's not analyse
    precisely what "rational" means, but surely in the sense that
    "everyone" is an exaggeration of "most people", "most people"
    is a rational definition of *that* "everyone". Generalisations,
    of course, as we all know, always involve exaggeration.

    > "Ronald Raygun" wrote
    >> But it sounds absurd chiefly because you can't have fractions of
    >> children, not because it suggests you should aim for an existing average.

    >
    > I disagree - I believe the thing that is absurd, is saying that *everyone*
    > should aim for the average - because different people have different
    > outlooks & expectations etc.


    Oh, indeed, I agree with that. It *is* absurd that people should
    aim to have the average number of children, even if it should happen
    to be exactly two. What I'm saying, though, is that saying "..."
    *sounds* absurd more as a result of the sheer impossibility of it
    than as a result of its undesirability. To me it seems to distract,
    and hence detract, from what you mean, not amplify it. But maybe
    that's because I'm not typical enough.

    No, dammit, it's because *you're* not typical enough.
     
    Ronald Raygun, Mar 25, 2005
    #20
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