Rent vs Buy

[Char1y]

Dear gals (and guys if any),

I would very much appreciate opinions on this major decision we are about to make.
We are moving to Edinburgh in August (I already asked for your help with schools and we are applying to 5: GW, GH, EA, Clifton Hall and Erskine Stewart's Melville - thanks everyone).

Back to my topic. Being a geek I developed a spreadsheet comparing the costs of buying versus renting for our situation (around 200K house) under a variety of scenarios: inflation range (1% - 4%), rent-to-price ratio, APR (int. rate) on the mortgage, loan-to-value ratio. I have made some simplifying assumptions like: house price grows at the same inflation rate as the rent, the discount rate for all calculations is the same as the APR on the mortgage. But I have tried to be very realistic in all other respects by incorporating all fees, maintenance costs, insurance, taxes, etc., associated with buying property.

Overall, the results show that:
Buying is better than Renting if:
the rent-to-price ratio is above0.35% (i.e. £700 rent for a £200,000 house),
Inflation is more or around 2% and
APR is higher than 3.5% (it currently is 5% for fixed rate loans)

My first question is: What are rents and prices like in the city, not necessarily in the very centre, but in good neighbourhoods.
I did look at ESPC, but there are very few rent offers available and it is impossible to get a good idea what the rent-to-price ratio is for the same neighbourhood.

I would love for us to be in the city, but DH prefers rural environment and if we end up choosing Clifton Hall (outside the city), there will be too many factors against me. On top of that we are ourdoorsy people and tend to go on nature trips every weekend.

Question 2: What other arguments can you give me for living in the city, except the obvious one that Edinburgh is gorgeous.

Obviously for some borderline values of the driving variables in my spreadsheet the difference between renting and buying may be relatively small (eg. £5,000 in present value terms over a 25-year horizon) and in this case I would lean towards buying because I greatly dislike moving.

However, our jobs have taken us around the world every 5 -6 years and even though I am more excited to settle in Edinburgh than I have ever been before (even compared to when we moved to Montreal), I have to allow that a fantastic job offer may come along and move us across the Atlantic in a couple of years.

We have always rented wherever we have lived so far and in hindsight I am glad because it was easier to move, but I feel like finally settling down.

Questions 3: How do you all stand on renting vs buying?

Thank you in advance. I hope my post is not too technical.

Can i ask why you are looking at private schools? Hell of a commitment if you are worried about rent/ mortgage levels to such an extent?

There are some fabulous state primary and secondary schools. There is a very weird thing in Edinburgh where about a third of pupils go private, it is a cultural thing and not a reflection on the schools in the state sector. In fact it means there is plenty of funding for some very good state schools.

For example, Davidsons mains primary and royal high. You could find a house near your budet for that area

And remember your son's classmates would all be moving on with him

And if he were to go private there is a lot of new entry and even a new school campus and going co-ed (erskine's) for secondary so pretty much the same as moving schools

Not growing up in Edinburgh myself, I find it a bit alient this private shcool thing. Folk are prepared to go everything (including better housing) to get their kids into one of the merchant schools. Where I'm from if you went private you were mega rich and that came with the houses, cars and ponies but not so in Edinburgh.

Tell me to bog off here OP as I may be overstepping the mark but in your situation I'd be looking at moving to Colinton and making sure you're in the Bonaly catchement as it's arguably one of the best primaries in Edinburgh. You would have Firrhill as a secondary which has a good reputation only just behind Boroughmuir and Gillespies. Colinton really is lovely and all the folk I know there love it. Otherwise I'd be making sure I was in catchment for Corstorphine primary with Craigmount as the secondary.

I will address each post in order, thanks for the interest and good questions.
@lollystix, @Cristiane
First, thanks for the info on floors, I was looking mostly at top floors myself without having your arguments in mind, just for the view and more light.
On your very serious question why private, let me try to explain. I described our initial negative experience with the first school I picked for ds when we moved to the UK 3 years ago here:
www.mumsnet.com/Talk/local_edinburgh/1334258-schools-neighborhoods
I say there that ds's education is absolute priority for us, it is his whole life that will be shaped by how good education he gets.
The private schools we are applying to range between 7,000 - 10,000 per year, this we can afford without hesitation, but a 250,000 mortgage is a decision I need to weigh a lot more carefully. I don't need to mention that some of the other private schools have fees of 20K-30K and more, which is definitely outside of our consideration set. I guess if we had ponies, I would ask my bridge buddies for advice instead of posting here (attempted joke).
Dh and I have good careers, the salaries for what we do are more than double in the US relative to here, so as I mentioned in the op, it is possible that we may move back there in a few years. We can buy property then without hesitation. So, this "buying a house" thing cannot compare as a priority with ds's education.
Now, we can all get into a heated debate on whether paying for a private school gets you anything more than a good state school. I agree that this is not a guarantee. I just feel that going through the application process means more information on each school and how it fits with ds's personality and abilities. Overall, I feel by going this route I am minimising the chance of what happened 3 years ago happening again.
But again, I am trying to be open-minded and am putting down the names of state schools you have given me and who knows, once we visit all of them, we might end up in a state school after all.
Making sure we find the right school is so important, that I treat the 250 pounds we have paid in application fees so far as a sunk cost.
@Miomio
Thank you, Currie, Balerno, Juniper Green corridor going on the list :) and will check cityrentals to see if they have more listings.
@RunnerHasbeen
I hear what you are saying about keeping your property in Edinburgh and renting it out but renting somewhere else with lower rents. This might make sense when one already has a property in Edinburgh and apparently the rental market is very vibrant with all the students.
But what tinypony was suggesting to me before was not to buy in the midlands in order to cover the rent in Edinburgh, this is obviously impossible, the rents here are 650 for a spacious 3 bedroom house with a large garden in the neighbourhood with the top ranked schools, worth 135K currently. This gives you a 0.48% rent-to-price ratio, now compare this to Edinburgh - 1,000 rent for a 300K property, gives you a 0.33% ratio. This means it is a good idea to buy in the midlands (prices are low) and let - the rent more than covers the mortgage, eventually you sell, hopefully for more and pocket the capital gains.
You rent yourself in Edinburgh, without worrying about covering part of the rent with the other property, renting is simply cheaper than paying a mortgage on a 300K property. (there are other factors of course, hence the spreadsheet)
@RunnerHasbeen, @Cristiane
I understand that the moving situation between primary and high school is pretty similar whether in state or in private school.
@TheWicketKeeperIsDown
Sounds like a very painful situation you went through. Definitely will try to find out who the other residents are in case we like a tenement option.

char1y I could also afford to send my DDs privately, and I do not because I do not feel that at least the primary provision is any better. Some of the private schools you are looking at have class sizes the same as in the state sector. ALL my friends who are much wealthier than me who have not chosen private either.

I would also say that the opportunity for getting your DS into a great university are no higher from private than a good state school - particularly as universities will take into account that a child working hard and doing well from a state school is far more likely to be a self-starter and a success than someone from private school.

(I was educated privately from 12 upwards, by the way, in Edinburgh)

I also think that we ALL do the best for our children's education and you will not find someone that doesn't on here. Of course it is very important.

If you do look at state schools can I highlight

Davidsons Mains (very friendly, wonderful HT)
Blackhall (incredibly reputation)
Bonaly
St Peters RC

Your analysis of property market is very rigorous, but be aware that it is difficult to forecast property valuations. Rents are generally being squeezed up, Edinburgh prices are probably quite stable, there is a higher proportion of unemployment (losing jobs from public sector) in the Midlands so outlook is not so good there, but pockets may outperform and underperform. Remember the Economist also forecast $5 oil to eternity a few years ago... Current oil price is aournd $110.

Second what Cristiane says-there are some brilliant Edinburgh secondaries but it's a very personal choice obviously.

OP - have you got the Edinburgh schools guides which gives you all the results for the various schools (state and private)? It's really useful - if not I'm happy to post my copy to you if you pm me. I'm leaving Edinburgh so don't need it (I'm currently trying to do what you're doing the other side of the world on another thread)

@Cristiane
Oops, please don't misunderstand me, I never meant to imply that if someone does not send their child to private school it means he/she does not prioritize their education. Originally people asked me: "if you are so careful with the buying-renting decision, how come you have decided on a private school?" - so this is what I was addressing - how paying for private school is an easy decision, you don't even question it, as long as you believe it is good for your child. I see that given your experience, you do not believe that these particular private schools are better, and I may come to believe that too, but right now I need to go through the application process, see as many schools as I can and then I will make up my mind.
And given our previous bitter experience, I am just trying to do it better this time. If my previous post did come off as offensive, I sincerely apologize.
On the impossibility of predicting property values, oil prices, exchange rates, etc., I agree completely. I am not rushing to buy in the Midlands either, I was just explaining when it might make sense.

@lollystix
Thanks for offering, I will PM you about the school guide.

Oh just thought of another area in budget that would work if you want private. Ice lived there and loved it - Shandon - you could get a lower colony for your budget. Parks, canal and big community feel.

Absolutely, I understand

Just to give you some understanding, my friends include two doctors, one english professor, one photographer, one architect, one senior engineer, two journalists, three fund managers, two businessmen, two teachers (both who teach at private school but send their children to state) - who have all analysed the schools in detail and found the state sector offers them what they need.

You are completely right to investigate as far as you can, and visit as many schools as possible. Unfortunately unpleasant experiences can happen anywhere - two of my friends have removed her daughter from one of the schools on your list (and another from St George's, which is girls only) and placed them in state school.

I was bullied in a state primary school, and later very happy at one private school but unhappy at another private school. In my case I wouldn't tell my parents about the bullying at my primary school - I feared their reaction. I should have let the school try to sort it out. I'm hyper aware of bullying and am extremely comforted by the preventions and remedies put in place at my daughters school.

Will you be able to take your son round your shortlist of schools? Be good to see his reactions too.

@Cristiane
Ufff (relief), yes ds is coming on our trips and visiting all schools with us.
I see how if you had to go through a trauma like this in primary school you must be especially aware and try to make sure your kids have a better experience. So, I am taking your school recommendations very seriously.

It's not just students that can be hell in the tenements. We had some lovely student neighbours, but an awful couple who owned their own flat, and later had a baby - but this didn't stop the screaming rows at 2am, deliberate loud music to annoy other residents who'd complained, dog poo left outside peoples' doorways (oh except they didn't have a dog, maybe it wasn't a dog....)

If you rent a tenement you can just move again if you don't like it, but I'd never in a million years buy one again.

allpastyears how horrific!

Op, another place you could look is Greenbank Village if you don't mind new build. Lovely community and atmosphere. I catchment for Oxgangs primary which is lovely and new and has a strongly improving reputation. Also in catchment for st peters rc, and not out of possibility you could get into south morningside primary.

Follow on school is firrhill

I have to say I think the Davidsons Mains suggestion is a good one. I'm biased as we're in Blackhall, but specifically chose that area because of the state school catchment area. And if you are really keen on the private school route then Stu Mels is handy. They're coed at primary level and in S6 but single sex S1-S5, I think, so there would still be some shuffling round at the P7/S1 interface. Davidsons Mains Primary and the Royal High are good choices, though.

Sorry for resurrecting this thread but I found it very interesting. I haven't checked out the spreadsheet yet but will tomorrow.

The first question that occured to me though op was, if your ds' education is so important will you still consider a move in his secondary years? Stability is very important and I would have thought continuity in relation to a curriculum pretty essential too.

Maybe your spreadsheet covers this, but if you bought in a more expensive area to be near a good state school and overpaid your mortgage by using what you would have paid in fees, doesn't the interest saving tip the balance in favour of buying? I seem to remember calculating that 500pcm overpaid saved 30k in interest and knocked 10 years off the loan term - but that might have been when interest rates were higher.

Lollystix and anyone else southside who are still around - we are new to Edinburgh and rent in Blackhall, dc go to Erskines but are considering buying southside because we like the feel (although Blackhall is nice there is not the same vibe or energy, more secluded etc).

If girls were to stay at Erskines what would be some of the areas to consider south so that the commute would not be too difficult? From what you say, and although I know there are some nice flats around, I think we would prefer a house/villa.

The commute from the south side would be a real pita, I think. I work in Fife and when we moved from Marchmont to Blackhall my commute pretty much halfed, which is a much much bigger impact than distance alone would suggest. Edinburgh's not a big city, but it's pain in the tonsils to get around at times (the school run/rush hour being one of those times!)

Although, thinking about it, if you came the back road under the railway bridge leading to Murrayfield, that would take you nicely to Mary Erskine's and would open up Merchiston/Morningside/Greenbank/Buckstone. But that road is shut for the next 18 months, and it's still a fair drive at rush hour. And you'd be driving past Watsons.

Wicket, so if the works were not happening are you saying that the drive across town, even in rush hour, would not be too bad?

We would probably not be in new house before the new school year and then it would only be around another year of works. BUT the big presumption of course is that works would be complete AND there were not another set of works in the way!

It would be sad to be trekking past Watsons considering Watsons and Erskines are said to be much of a muchness. Uprooting girls again, having moved from the south last year, is not filling me with joy though.

I know someone who lives on southside (next to Meadows) and her DD is at St George's, which is not so far from Erskine's, right? It took her a while to get the journey right, but now she says she goes down Lothian Road and then the Western Approach and it takes 10mins if she times it right. Not sure of the exact route, but worth a look on the map?

I'll have a look at that but I'd be interested to know what her timings are (hopefully not departing home at 7am or somesuch)

St George's is just up from Murrayfield, between there and Craigleith. I'm pretty surprised she can do that in 10 minutes at rush hour - I think that must involve an early start.

The roadworks signs say the road there is going to be closed for about 18 months, so it won't be open for the new school year. Going that way, I can get from my house in Blackhall to my friend's in Buckstone in 20 minutes, but that is at non rush hour. I would expect to at least double that at rush hour.

@tricot39
I had not looked here for a few months and didn't realize people were posting again. On continuity, absolutely I would not move him unless I had to. So, the private school option gives me same school, same friends until 18.
On using the money saved from private school to pay one's mortgage sooner, it is not in the spreadsheet. First, not every mortgage allows prepayment and then it is much easier to calculate the Present value of all fees and then use this number as a guideline for the premium in property prices in good state schools catchment areas.

Sure - i could see it wasn't in there but thought it might be another scenario to consider. You looked to be doing a thorough analysis! How are your moving plans coming along and what did you decide to do?

Hey char1y!
I was reading this thread and I know it's been two years; but I am now where you were back then about the schools. We will be moving in July 2015 and are now sending application forms and starting the admissions process in GH, GW, CH and EA. My narrowed down choices are the same as yours minus Stewart's Melville, as you can see. Which school did you end up choosing? What do you think of it? Where did you end up living?
Any info is much appreciated!
Thanks.