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HOw to make money or at least not blooming lose it on property ?

(32 Posts)
Mosman Wed 02-Jan-13 01:10:48

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 ?

Goodwordguide Wed 09-Jan-13 07:54:18

If we could rent for that price, or even double that price yellow, we would rent too!

YellowWellies Tue 08-Jan-13 22:05:14

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.

thebellsofsaintclements Tue 08-Jan-13 21:47:34

That's a lot of food for thought (and not boring at all!) - thank you! smile

RCheshire Tue 08-Jan-13 00:01:23

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.

Bored yet? smile

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.

thebellsofsaintclements Mon 07-Jan-13 23:29:34

Yes, absolutely agree with that smile

Goodwordguide Mon 07-Jan-13 23:26:30

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.

thebellsofsaintclements Mon 07-Jan-13 23:04:37

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 confused??? Eeeek

RCheshire Sat 05-Jan-13 20:50:43

YellowWellies, yes, we've been renting for the last 18 months since selling our last place. I believe that renting will be the more financially astute move for the next x years (however long it takes for house price to reach a more sustainable relationship with earnings) and if you buy now you should be content with the possibility that you will see the house's value fall year on year.

We have two young children with the elder due to start school shortly. So we are willing to lose money by buying for the stability.

16052013 Sat 05-Jan-13 20:27:35

I've been in property for nearly two decades and my mother's been in the trade since 1978.

Some years you make money and some years you lose it. This is with VAT reclaims, trade prices, a big book of contacts and in-house trades.

Everyone thinks they can make it as interior designer or property developer. Those of us who do it day in, day out and still make mistakes would love to know the secret wink.

Samnella Sat 05-Jan-13 16:49:50

I think its almost impossible to make money now if you are not in the business and able to do some of the work yourselves or make the most of contacts. We are house hunting and can see most of the houses that have been done up are pretty much going for those that haven't done up plus the costs. It may depend on what you are looking at though

YellowWellies Sat 05-Jan-13 16:13:28

RCheshire our target market is falling about 2% a month now - we're renting for a few months and then buying back in but are certain that the house will fall further in value, sadly with a new baby we are looking for our forever family home (as landlords and children don't mix) but it's good to go into it with eyes open as you say. My view is if you want to make money - go to work. This isn't a market for making money.

Tyranasaurus Sat 05-Jan-13 07:24:01

Don't over develop. If you buy an ex council house on an estate you probably won't recoup the cost of granite worktops and solid wood floors etc.

The other thing I can thionk of that might sound a bit weird is to buy where you belong. E.g. if you're a family with young kids buy where families with young kids live, etc. That way any work/decorating you do will suit future buyers.

RCheshire Fri 04-Jan-13 22:45:06

Really, if I was hoping to make money on a house today I'd only be looking at repossessions or other forced sales in good locations as I completely agree with YellowWellies take on the market.

The simple rule of making money is 'buy low, sell high'. The problem is that house prices have been sitting at pretty much a record high (in relation to incomes) for years now. I'm looking to buy again (mainly for stability for schooling) and I'm going into it with my eyes wide open, i.e. I think there is a far greater chance of the house losing value over the next 5 years than increasing in value.

Mosman Fri 04-Jan-13 03:12:22

That's interesting, our house in the UK is a bungalow and whilst we are renting it out at the moment due to the dire market it's good to hear if we go back in 10 years time with that mortgage paid off we might (for bloody once) have got it right !

YellowWellies Thu 03-Jan-13 17:23:29

That said I'd buy a house that would appeal to downsizers (with more money than nous!) - think the sort of place that a wealthy pensioner might like. So living accommodation on one floor, wet room / accessible bathroom, new kitchen / bathroom but in traditional / simple styles, manageable garden, and this one amuses me - at least 3 beds (every downsizer who came to see our place couldn't handle anything less even if they were on their own!!!! spoilt much!). If you're buying to make money you might as well appeal to the richest demographic.

YellowWellies Thu 03-Jan-13 17:16:09

The long term prospects for property don't look too good when you consider the national debt, austerity, downsizing baby boomer demographic, impoverished young folks, current overpriced housing bubble (slowly deflating), credit restrictions, high unemployment. Seriously I'm not sure that property will be a good vehicle to make money out of over the time period you're thinking of? The downsizing boomer demographic trend will have a massive influence they have masses of property wealth and are looking for prices that the impoverished generations behind them just can't pay - they are also a massive generation, once they, errrr, start to leave this mortal coil - property will fall further IMHO.

The old 'you can't go wrong with bricks and mortar' gang have been proved wrong - the last decade was madness based on the banks lending to anyone who could fog a mirror and that mistake broke them.

I would just buy a home you like and that you will be happy in and maybe try to make some money by the old fashioned routes?

newgirl Wed 02-Jan-13 16:32:40

location location etc

good road, near good school (really near)

smart town centre

a wow factor - so avoid newbuilds and housing estates - got to have something unique about it

dont add conservatories, too many ensuites and spend so much that you could have bought on a nicer road

if not sure take a friend round who has great house (I did that and she was nooo it backs onto xyz which I hadn't noticed phew!)

RedHelenB Wed 02-Jan-13 13:05:52

TBH, if renting is cheaper I would be tempted to carry on & save the difference for old age. The only reason I bought was to have a home, not to make money and it is cheaper than renting.

Mosman Wed 02-Jan-13 12:56:34

I don't know :-( I thought the last one would be hence thevlaura Ashley tiles that nobody but me would notice or give a shit about

RedHelenB Wed 02-Jan-13 12:42:27

As you can take your time then that is exactly what I would do. Is the house you want to buy going to be your forever home?

Mosman Wed 02-Jan-13 10:47:33

I'd rather not send them to private school and if we stayed in the posh area there would be no chance whatsoever.
The school is fine in the posh part, but not getting the best results so I suppose it's a case of great location and small/crap house and not bad school or cheaper area with great schools and a decentish size, can spend money on it over 10 years house (and hope it goes up in value and they don't build a new motorway through the middle of it).

Oreocrumbs Wed 02-Jan-13 10:32:27

Would you be sending your DC to private school?

To find an up and coming area, you need to look at what developments are in the pipeline - where is having money ploughed into it?

Where are the developers going?

Also you can look at a village/town that has been developed and start circling out.

Mosman Wed 02-Jan-13 10:31:32

What puts me off the whole worst house best street house is the money we spent on the last one we will never recover, if we'd bought a "done" house I wouldn't have been so fussy about the finishes, wouldn't have had the stress and strain of managing everything - DH is shit at anything, can't even put a shelf up.
We spent a fortune on things you can't see, the roof, electrics that sort of thing so £70,000 and all it looks like we did is paint the place.

Mandy21 Wed 02-Jan-13 10:27:40

I agree that location is the key - well established areas with outstanding schools are always going to be popular and in demand imo.

Mosman Wed 02-Jan-13 10:27:29

No still in WA, the same rules should apply though I would have thought.

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