Stop letting, start living: How to slash your living expenses and escape the rental trap

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The Independent Online

Rent is dead money, or so the saying goes. But despite falling property prices in 2010, with Halifax reporting an overall 1.6 per cent decline, it remains the only option for many aspiring first-time buyers struggling to save for the average £29,000 deposit required to buy a property of their own.

This year's predictions add to the gloom; 41 per cent of landlords are planning to increase rent, say buy-to-let mortgage specialist Paragon.

With the average rent already at £692 (and £992 in London), as stated in the latest buy-to-let index from LSL Property Services, the idea of having any money left over, let alone a substantial sum to set aside for a deposit, seems remote for the majority of renters. A recent poll carried by rental site Spareroom.co.uk found 87 per cent of tenants said they felt they wouldn't be able to ever afford their own home in today's climate, even though they wanted to.

A report published at the end of last year suggested it would take an average earner, on a salary of £25,900, just over 14 years to save a deposit to buy a property, while independent research organisation Resolution Foundation says it could take a low earner at least 45 years.

And with most mortgage lenders asking for a deposit of at least 15 per cent, home ownership feels out of reach for many.

"It's still very much the case that the bigger the deposit, the better the rates of interest and mortgage options available to buyers," says David Hollingworth of mortgage brokers London & Country. "If you had a 25 per cent deposit, you could get a much better rate of interest than if you put down a 10 per cent deposit."

But the idea of owning your own property doesn't have to be tenants' wishful thinking; there are ways to save for a deposit even if you're paying off someone else's mortgage each month. "I used to really resent paying my rent," says Alastair Higginbottom, a 26-year-old security manager from Northampton, who was paying £550 a month for a room in a terraced house until recently. "Every month I had nothing left to save or spend. I was always having to say no to going out or buying anything new, and always working overtime to earn more."

Determined to save for his own house, he became a property guardian. Property guardians are appointed by management companies, which look after vacant buildings on behalf of property developers unable to sell or owners who are overseas. In exchange for keeping an eye on the building, guardians benefit from a substantially discounted rent.

As a guardian, Higginbottom pays £63 a week, including bills, to live in a 25ft square room in Delapre Abbey, a stunning country estate. He plans on staying there for two years, by which point he aims to have saved enough for a deposit to buy his own home.

"The Abbey is glorious – there's landscaped gardens and woodland walks. To get to my room, you come up a grand staircase and pass stained-glass windows. There's a definite wow factor to living here, and by being here we're keeping the place free from squatters," explains Higginbottom. "But for me, the financial savings are most important. I'm saving at least £300 a month, which means I can lead a nice lifestyle and build up a small pot of money as a deposit. That was something I couldn't even think about before."

Camelot Property manages Delapre Abbey, and places property guardians across the country. It reports a 35 per cent increase in the number of people becoming guardians in the last 18 months.

"We are often approached by people who are sick of throwing away money on very high rent, which could be used to save for a deposit,' says John Mills, Camelot's UK director. "Many of our guardians are key workers who wouldn't ordinarily be able to afford high rental prices, let alone save for their own home."

Camelot says guardians pay an average of £200 a month in rent, including bills and council tax. Its website currently lists 64 properties in need of guardians, including warehouse apartments in the West Midlands and houses in Brighton.

Property company Ad Hoc says it has also seen huge interest from professionals signing up to be guardians. "When we ask them why, it's always because they are saving for a deposit on a house," says Doug Edwards, an Ad Hoc manager. "They want somewhere nice but affordable to live while trying to save." Edwards estimates London property guardians could save £8,000 over 18 months.

Meanwhile, tenants in the private rented sector could be forgiven for resigning themselves to paying extortionate rent, owing to the shortage of rental supply in contrast to demand. The latest housing market survey from the Royal Institution of Chartered Surveyors reports that 33 per cent of surveyors saw a rise in demand for rentals in 2010, the fastest increase since 2008.

But that doesn't necessarily leave every landlord with the upper hand. Nik Madan, lettings director at John D Wood & Co, says: "You can negotiate on rent, although you're more likely to be successful if you're starting a new rental, rather than renewing one. A powerful way to negotiate is to forgo the break contract which would otherwise give you the flexibility to give notice and move out early. Most landlords will be willing to reduce rent for someone prepared to commit to a long term contract of 12 or 18 months, who isn't going to leave."

Most landlords are prepared to reduce rent for tenants who can move in sooner than expected and it can be worth offering to take on the cost of repainting or fixing the premises, in exchange for money off. Madan says one of his clients has agreed to knock £200 off a tenant's monthly rent as a result of the tenant's offer to repaint and update the house.

A more substantial way to save is to rent only during the working week as a lodger. This is how Matt Parr, a 24-year-old PR consultant, saves over £300 every month, which he hopes will culminate in a tidy deposit.

Parr and his girlfriend had hoped to rent a flat, but discovered they couldn't afford the area. Instead, they each pay £25 weekly to lodge in a three-storey house in Pontyclun, Wales, returning to their parents' homes on weekends.

"It works out brilliantly," says Parr. "We have a bedroom, storeroom and landing which doubles up as my work area, and we share the rest of the house with the owner. It's informal and friendly; we get on well with the owner. On weekends, it's easy for us to go back to our parents' homes too."

Parr is confident the money he saves will get him on the property ladder. "I graduated in 2008, at the height of the financial crisis. Buying my own home isn't a reality yet, but it's more of a possibility because I'm not forking out £600 on rent."

Lodging can be up to 40 per cent cheaper than signing up to a full-time rental contract, according to MondaytoFriday.com, a website which advertises lodgings.

Judy Niner, the founder of MondaytoFriday.com, says: "It's do-able as long as you've got a base for weekends. It can become as long term as you want it to be; as you get to know your landlord, you can come to an arrangement. Plus you don't have nearly as many responsibilities as if you were a tenant – it's not up to you to get the plumbing fixed."

If all else fails, there's always the option of moving back in with your parents. Although it may not suit long-term renters used to independence, it is proving an attractive solution for some would-be first-time buyers, with Halifax reporting 10 per cent of them moving home to save. Carly Williams, an HR assistant, moved in with her mum in Cardiff last April, after struggling to meet the rent on a two-bedroom flat with her boyfriend. "Money was very tight. We were paying around £800 a month and we struggled – a lot," she says.

Since moving home, Williams, 22, says she's saving between £500 and £600 a month and doesn't feel like she's losing her independence. "I contribute £200 for bills, but the financial pressure is off. I've already saved a sufficient amount, and I'm confident that this time next year, I will be in a better position to realistically think about buying. I don't want to go back to renting again and in the meantime, I'm happy living with my mum."

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