How YOU can help achieve affordable rent

Rents are too high. A single person over the age of 21 on minimum wage of £6.50 an hour will earn around £1000 a month, less deductions. Even with the lowest rent prices, half of that will go on rent leaving around £120 a week for everything else.

Here’s a painless way to get rent down. It just needs some visionary people with a little capital to decide to do something about it.

Here is an example:
£60,000 invested in a building society or bank will be doing well to make 3% interest (although a ‘help to buy’ ISA can give 4%) e.g http://www.halifax.co.uk/savings/?WT.ac=SNCA1012

Therefore a good (4%) return on that £60,000 is £2400 a year, or £200 a month.
If we are happy with a 4% return on our savings, then why not but a property and rent it out at the same return?

The cheapest (1 bedroom) property available today is £395 a month. http://www.rightmove.co.uk/property-to-rent/property-56267795.html

There is a flat for sale in Rugby for £60,000. (http://www.rightmove.co.uk/property-for-sale/property-54091703.html?premiumA=true )

Using the £60,000 to buy the property, we could charge a very fair rent of (say) £250 a month, offering a low rental price and getting a very good return on the investment. (£250 instead of £200 to include an allowance for maintenance and fees)..

This represents a saving of a third on the lowest rental cost, and would give someone on low income the chance of an improved standard of living, and maybe even the chance to save enough to put down a deposit on a house of their own.

And all of this giving the same (or better) return that we get from the building society. Maybe there is a little more risk – but there is the benefit of doing something personally to help the current difficult situation for the poor in our town.

If enough of us do this, then it might even cut the overall rental market price (supply and demand!) with wider benefits.  I know that not everyone can help in this way, but some can, and it makes a difference to each person who is helped.

If you are interested and want to take it further, I’m happy to share my experience so far (I have made use of a legacy from when my mother died to do this). Please get in touch privately.

rent

About Minimalist Christian

Phil Hemsley is a graduate of the University of Cambridge, and a Fellow of the Institution of Mechanical Engineers in the UK. He works for a multinational company in the power industry, has presented technical papers at international conferences and holds many patents. He has published two books, the most recent is "The Big Picture, an Honest Examination of God Science and Purpose". He has lived on both sides of the faith fence. He is married, with two daughters.
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6 Responses to How YOU can help achieve affordable rent

  1. unkleE says:

    Hi Phil, this is quite interesting, perhaps even amazing! Your UK prices and costs will be very different to ours, but no doubt your maths is correct and your idea is great.

    I’d be interested to hear more of your experience. Were you deluged with renters wanting a bargain? Do people who pay less value what they get less? Have you had any problems along the way, or has it all worked out exactly as you might think?

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    • I’d be interested to know how rent in Australia compares with a mortgage the same property.

      We used a letting agent who decided not to charge a finding fee. They had several applicants including one well off person who was irate that he wasn’t allowed to rent the flat! In the end they found two people who were very needy and we had the difficult choice of which to help.

      I hope that people who realise that this is not just a landlord out to make as much money as he can, and so will respect the property, but I have to be willing for this not to be the case. Only just got the tenant in and I’m hopeful.

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      • unkleE says:

        I haven’t looked into the figures, but I know one property that for many years earned less in rent than the repayments on the loan, but for the last couple of years with interest rates so low has actually earned more in rent than repayments. (But I’m not sure how long such repayments will take to pay it off.)

        Googling this matter gave me an average figure of 3.4% for rental yield in Sydney, but when expenses are taken into account, the yield was 2.4%, which compares to 2.55% return for a one year term deposit. Those figures both look low to me, especially as an ordinary high interest bank account can earn more than 2.55% I think. But this source gives similar figures.

        A key factor here is the very high price of purchasing housing, which has led to a boom which analysts say is set to burst. But on the other hand, capital gains are a factor that isn’t included in the figures.

        Overall, I think it may be more difficult to follow your scheme in Sydney at present, but I love the idea.

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        • Of course, another way to look at this is that instead of giving money to a homeless charity, we give the money in terms of lost interest on investment. i.e. we use our capital to buy a house and then simply let it out at a low rent and ignore how the income compares to bank interest… “This money could sit in my bank account, or it could provide a home for someone”

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