Why did the speaker choose to rent instead of buy this London apartment?

The speaker couldn't afford to buy the apartment at around £1.8 million due to mortgage requirements and the need to reinvest capital into his business. Renting provided flexibility and autonomy to experience living in Central London.

What are the main factors influencing the high rent for this London apartment?

The rent is high primarily due to the prime central London location, offering excellent transport links and convenience. The niceness of the building and its amenities (gym, spa, co-working space, cinema) also contribute significantly to the cost.

Is it financially better to buy or rent a property like this in London?

Financially, buying might yield a better long-term return (around 10% on the down payment) compared to renting (estimated 3% 'cost' of rent relative to potential investment return). However, renting offers more flexibility and lower upfront capital requirements.

What is the speaker's opinion on the value of the apartment's amenities?

The speaker believes the amenities like the gym, spa, and cinema are less valuable than initially thought, especially since he spends most of his time at his studio. He questions whether the extra cost for these amenities is worth it given his lifestyle.

How does the speaker approach his morning routine in this apartment?

He starts his morning on the balcony to get sunlight in his eyes, following advice from Andrew Huberman to set the circadian rhythm. He also emphasizes placing his phone away from the bed to ensure he gets up to turn off his alarm.

What financial mindset does the speaker employ regarding his income?

The speaker prioritizes reinvesting most of his business income back into the business for growth rather than taking a large personal salary. This impacts his ability to afford major purchases like property.

Key Moments

My $2.4m London Apartment Tour

Ali Abdaal

Education5 min read32 min video

May 4, 2022|1,866,148 views|33,186|1,897

Ali Abdaal Ali abdal real estate London London Apartment London Apartment Tour house tour 2022 real estate investing for beginners should i rent in london should I rent in a city?should I buy in a city should I buy in London

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Key Moments

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TL;DR

Ali Abdaal tours his $2.4M London apartment, discussing its features and the cost of renting vs. buying.

Key Insights

The apartment is richly decorated with Harry Potter merchandise, reflecting the owner's personal interests.

Central London living is expensive, with rent significantly higher than in other areas like Cambridge.

Renting offers flexibility and autonomy, allowing for experimentation with location without long-term commitment.

The high cost of the London apartment is largely due to its prime location and building amenities, which the owner finds less valuable than anticipated.

Buying property in Central London is financially challenging due to high initial costs and mortgage requirements, making renting a more accessible option for many.

The decision between buying and renting involves weighing financial returns against the value of freedom and flexibility.

KITCHEN AND DINING AREA: FUNCTIONALITY AND HARRY POTTER THEME

The kitchen tour begins by showcasing a strong theme of Harry Potter merchandise, including Le Creuset cookware. Practical items like a wok and a mug cupboard filled with themed mugs are featured. The space also highlights coffee-making equipment, varying from a Chemex to instant coffee, with a mention of future upgrades. A unique, rarely used Herrod's Knightsbridge tea set is also present. The sink area notes the use of environmentally friendly washing-up liquid. A wine cooler, repurposed for soft drinks and protein shakes, and organized cupboards for grains and spices, are also present. Paper plates are available for easy cleanup during hosting.

LIVING SPACE: WORK, LEISURE, AND ENTERTAINMENT OPTIONS

The living area includes a balcony, utilized for morning routines to set circadian rhythms, referencing Andrew Huberman. The space doubles as a recording area for the 'Not Overthinking' podcast, with equipment conveniently stored. A bookshelf displays a variety of books, including philosophical and cookbook titles. A Martin mini guitar serves as a relaxation tool. The TV area is minimally used, with a focus on board games like Catan and a PlayStation 5 for occasional gaming. An Amazon Echo is available for music playback.

BALCONY AND ENTRANCE HALL: PRACTICALITY AND MORNING ROUTINES

The tour briefly revisits the balcony, emphasizing its role in the morning routine for light exposure, aligning with practices suggested by Andrew Huberman for circadian rhythm regulation. The entrance hall area is functional, serving as storage for camera gear and a shoe collection. It features a 'cloakroom' for coats and houses the washing machine and dryer, a significant upgrade from previous living situations. This area highlights the practical organization of everyday essentials.

BEDROOM AND ENSUITE: PERSONAL COMFORT AND ORGANIZATION

The bedroom tour starts with the ensuite bathroom, featuring a laundry basket, towels, and distinctive scrub bottoms used as pajamas since medical school. The shower area uses specific hair care products like Curlsmith and SX Men. The sink area includes a pink toothbrush, hand wash, and skincare products, along with aligners. A storage area is dedicated to clothing, including a large t-shirt collection, gym wear, and notable fan-gifted Pakistani cricket merchandise. A set of Harry Potter mugs intended as a gift and luggage, including Away suitcases and ski gear, are also stored here.

DESK SETUP AND READING HABITS IN THE BEDROOM

The bedroom workspace features a cramped desk setup, a consequence of London apartment size, with a Herman Miller Aeron chair and a Heyes chair. An older laptop is used for journaling and writing, benefiting from a laptop stand for posture. Books like 'How to Live' by Gabiro Yoshino are present. A Belkin wireless charger facilitates charging for an Apple Watch, phone, and AirPods, strategically placing the phone away from the bed to encourage waking up. Sharpies and A3 pads are used for brainstorming ideas for the author's book.

FINANCIAL BREAKDOWN: RENT VERSUS BUY IN CENTRAL LONDON

The apartment, if purchased, would cost approximately £1.8 million ($2.4 million). The author chose to rent due to affordability and the desire for flexibility. The monthly rent for the two-bedroom flat is £4,100 (£50,000 annually), shared with a housemate. Utility bills add approximately £459 per month. This rent is significantly higher than his previous Cambridge flat, representing a threefold increase. The high cost is attributed to the prime central London location and the building's extensive amenities.

VALUE OF AMENITIES AND LOCATION: A PERSONAL ASSESSMENT

The author acknowledges the prime location offers excellent transport links and convenience for hosting friends. However, he questions the value of the building's amenities, such as the gym, spa, sauna, steam room, hot tub, co-working space, cinema, and games room. While he uses the gym, he finds most other amenities to be novelties or underutilized, especially since he has a dedicated studio space. He realizes he values location more than the luxury amenities, questioning if the extra cost for the latter is justified for his lifestyle.

BUY VERSUS RENT ECONOMICS AND OPPORTUNITY COST

The financial discussion delves into the buy-versus-rent ratio, noting that in Central London, buying is disproportionately more expensive than renting. To buy the £1.8 million apartment with a 10% down payment, an annual income of £400,000 would be required for a mortgage. Renting, at £4,100/month, is feasible with a significantly lower income. Mortgage repayments (£6,500/month), ground rent, and maintenance (£600/month) for buying far exceed rent. The opportunity cost of the down payment, if invested, is also considered, potentially yielding a 7% annual return.

FREEDOM AND AUTONOMY: THE NON-FINANCIAL BENEFITS OF RENTING

Beyond financial calculations, the author highlights the non-financial advantages of renting, emphasizing freedom and autonomy. Renting provides flexibility to move or change plans without the significant logistical and financial burden associated with selling property. This choice allowed him to experience living in Central London as an experiment. He contrasts this with the idea of 'setting down roots' when buying, framing renting as having 'wings' and offering optionality, which was a primary driver for his decision, overriding purely financial considerations.

DEFINING 'WORTH IT': SUBJECTIVITY IN VALUE ASSESSMENT

The video concludes by pondering the subjective nature of determining if the apartment is 'worth it.' Objectively, for the author, the high rent might not be justified given his lifestyle and existing studio space. However, 'worth it' is also tied to disposable income; for someone with a substantially higher income, the cost would represent a smaller percentage and might be deemed worthwhile. The author suggests his decision prioritizes reinvesting in his business and investments over maximizing luxury living expenses. He also points to another video detailing his income streams as a YouTuber.

Mentioned in This Episode

●Products

●Companies

●Organizations

●Books

●Concepts

●People Referenced

London Apartment Costs: Buy vs. Rent Comparison

Data extracted from this episode

Metric	Buy Scenario	Rent Scenario
Estimated Purchase Price	£1.8 million ($2.4 million)	-
Estimated Rent	-	£4,100/month (£50,000/year)
Down Payment (10%) / Mortgage	£180,000 / £1.6 million	-
Estimated Monthly Mortgage Repayments (1.7% interest)	£6,500	-
Estimated Ground Rent & Maintenance	£600/month	-
Total Monthly Cost (Buy)	£7,100	-
Difference vs. Rent	£3,100 more per month	-
Monthly Interest Payment (Money Down the Drain)	£2,200	-
Total Monthly 'Money Down the Drain' (Buy: Interest + Fees)	£2,800	-
Monthly 'Money Down the Drain' (Rent)	-	Estimated £5,400 (calculated as 3% of down payment)

Common Questions

The speaker and his housemate pay a total of £4,100 per month to rent the two-bedroom apartment, which amounts to £50,000 per year. This cost does not include bills.

Topics

Cost Of Living Lifestyle Choices Apartment Tour London Living Rent Vs Buy Calculation Home Setup Financial Decision Making

Mentioned in this video

Media

World of Warcraft

A massively multiplayer online role-playing game, used as a comparison to clarify that 'Method' is not a guild from this game.

Horizon Forbidden West

A video game the speaker has not yet purchased to avoid excessive playtime.

Harry Potter

A popular fictional universe, extensively referenced through merchandise in the kitchen and bedroom.

Products

PlayStation 5

A gaming console owned by the speaker.

Apple Watch

Smartwatch used with the Bellin wireless charger.

Oura Ring

A wearable device used for monitoring sleep stats.

AirPods

Wireless earbuds charged using the Bellin wireless charger.

Studies & Research

Method Study

Brand of environmentally sustainable washing-up liquid.

Companies

Herman Miller

A furniture company that provided a chair for a video shoot and with whom the speaker has an ambassador relationship.

Cuts Clothing

A clothing brand, a significant portion of the speaker's t-shirts are from this company.

Tesla

Manufacturer of the car whose key card is kept by the speaker.

IKEA

Furniture retailer, mentioned for the fake potted plant on the desk.

Nike

Sportswear brand, mentioned in relation to the speaker's gym clothing.

Gymshark

Fitness apparel brand, mentioned in relation to the speaker's gym clothing.

Dyson

Brand the speaker wishes to upgrade their hair dryer to, and whose fan they own.

Altruist

Brand of dermatologist-recommended SPF 50 face fluid and moisturizer.

Harrods

A luxury department store in London where a fancy, though aesthetically disliked, tea set came with the apartment.

Locations

New York

City mentioned in comparison to London for its high property costs (Manhattan).

London

The city where the apartment is located, and a major focus of the financial discussion.

Books

How to Live

Book by Gaburo Yoshino.

finance

S&P 500

An index fund used as a benchmark for investment returns, with an average annual return of 7%.

People

Andrew Huberman

Host of the Huberman Lab podcast, whose advice on morning sunlight for circadian rhythm is mentioned.

James Hoffmann

A coffee expert the speaker discussed coffee setup with on a podcast.

Peter Singer

A philosopher mentioned for his book 'The Life You Can Save'.

J.K. Rowling

Author associated with the Harry Potter universe, for whom merchandise is displayed.

Software & Apps

Elden Ring