HOw to make money or at least not blooming lose it on property ?(32 Posts)
Our last two houses we've bought at the wrong time it would seem and sold at the wrong time but circumstances dictated.
So now we are under no pressure at all and can take our time to research areas, build our own, renovate what ever we need to do to boost our financial position. It feels a bit like our last chance as DH is 45 so I want a 20 year mortgage absolute max and less if possible.
What are your top tips please ?
Sorry, I just don't understand the 'renting is the more astute move' reasoning at all - maybe someone can explain? Our modest terraced house (in London) would cost £25,000 per year to rent - so if we sell it and rent something similar for 6 years then that's £150000 spent on rent - is it really realistic that the price of our house (worth c. £400,000) really fall by THAT much in six years ??? Eeeek
It depends so much where you are. London rents are so high at the moment and the property market is not falling here (not uniformly at least).
But I would never buy a house I was going to live in with a primary aim of making a profit - buy it because you love it and someone else will too.
It various massively by area - how you expect prices to rise or fall for the area you're interested in, plus the rent cost vs purchase cost.
With those figures I can't imagine someone would be better off renting. But £25k is an unusually high rent (relative to national norms). London's behaviour has been different this year to the rest of the country too
The calculation is pretty simple in my mind (at least ignoring compound effects as typing on a phone!).
Take the value of the house (based on recent sold prices), e.g. 400k and predict house price chances, e.g. down 1.5% next year. That gives you a figure of 6k.
Next look at the opportunity cost of buying, I.e. what would that 400k be earning elsewhere. My investments earn an average of ~3% net at the moment so that gives me a figure of 12k. (you might say that not many people can buy a 400k house outright and therefore have that money to invest elsewhere, but you have a similar calc to do for mortgage interest if that's the case)
Next the cost of owning vs renting. Owning carries a maintenance cost plus potentially service charges, say a total of 2k a year (this is low when you bear in mind that this needs to cover the ' big' infrequent costs too).
So...6k + 12k + 2k = 20k. If the rent was over 20k then you'd be better off buying.
Except it's slightly more complex as we have to add the one off fees for buying and selling. So that 400k house has cost say another 18k in solicitor fees, stamp duty and ea sale fees. If you work on a 6 year period then that's 3k a year meaning that the ' break even' point for rent vs buy jumps to 23k.
Of course my decisions are based on my area, local price changes, local rents, what I achieve on other investments etc. everyone's own set of calculations will be different, but the important thing is to consciously think about it rather than simply follow the ' renting is dead money' manta.
That's a lot of food for thought (and not boring at all!) - thank you!
For me clements prices are falling in our target area by 1.5% per month - which is about £1k-1.5k whereas rent would only cost £350-500 - comparable to a mortgage payment but without the capital loss. The local falls are a lot of money in a year. To me dead money isn't rent (that pays for a roof over our heads and someone else to deal with maintenance and pay for repairs) dead money is overpaying for a property in a falling market in the worst recession this country has seen since the Great Depression.
When you factor in the falling market we're saving just shy of a grand a month and preserving our capital by NOT buying just yet. We're trickling our deposit money from it's current home in premium bonds into the First Direct 8% regular saver - so our money is working for us too.
Also as we are chain free and proceedable it means we are best placed to pounce on any house we do like if we spot one. We only need to give our landlord 2 months notice - and lets face it any conveyancing etc is going to take longer than that and we are quite comfortable having a month or so paying rent and mortgage if needs be. We were lucky we sold high but I'm a house price nerd addicted to property bee, but m'eh it's the biggest purchase of your life so doing research makes sense.
If we could rent for that price, or even double that price yellow, we would rent too!
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