...to wonder whether it’s best to invest in a career or home first?

[Ubertasha2]

Hi guys,

This might sound like a really daft question, so please be gentle! Also v, tired, as on 24/7 duty!

Basically, if you were late 30s, still not on the property ladder (I’ve lived and worked abroad on a off), and now decide to have a career change (when the current career really ain’t going anywhere fast!), what would you focus on first- property ladder or career?

I really sound naive and young (neither are true), but what is best: invest in a good career (dental hygienist for example or journalist training, then try to buy when established in said career?

Or: buy a home, then later retrain?

My current job is a live-in carer; a huge change of scene and pace after a very stressful decade as a teacher!

I am also unsure as to whether it’d be sensible to buy now, maybe a buy-to-let, staying in this current job for a while. Help! Clueless ftb here, buying on their own!!

Occupational Therapy perhaps? You can combine healthcare with creativity

Yes, in some parts of the country that may be true still, but in the SE I would argue the ship has sailed. Plus historically the returns might have been brilliant because of the financialisation of housing, but demographics, political winds and real incomes for new entrants mean an implosion is baked in the cake.

A house is all eggs in one basket. My ISA and pension savings can be liquidated with a few mouse clicks, and allocated however I like. With the pension I get tax relief in, can take out 25% tax free and withdraw at my marginal rate.

It absolutely crushes housing as a Security blanket if you know what you're doing. Buy to let and worse, making your primary residence your pension plan is financial illiteracy.

My dividend income alone could cover my rent.

But anyway, without wishing to get into the argument on housing, I don't think there's any contest between that and a career if you want security. Career all the way.

Thanks for these incredibly realistic yet helpful words of wisdom, particularly TaxCredits.

I don’t understand this British obsession with owning
It’s partly because renting costs more than buying. My monthly mortgage for a 3 bed is £150 less than my rent was for a 2 bed. And it’s partly because renting is so crap in the UK. You have no security and can be evicted at short notice, you have no control over repairs so if something needs doing you have to call the landlord and pester them, you can’t renovate or decorate to your own taste, you can’t do the garden or plant stuff, and you will forever have your privacy invaded by regular inspections.

I would argue that those of us with a house (and mortgage paid off) are more sorted than someone who has to pay rent throughout retirement. Renting quickly becomes tedious, so if you have the choice I'd go for the house purchase.

My ISA and pension savings can be liquidated with a few mouse clicks
You can’t live in your ISA though, nor have your mates round for a bbq in it.

My dividend income alone could cover my rent
So you’re 90 and still living in a house with someone else’s choice of cheap decor and being regularly pestered inspected. Then your landlord decides they want to sell and you have to move, even though you have cancer and really can’t be bothered. Not for me thanks, I like the security of making my own decisions about the roof over my head.

Completely disagree it's (renting) is more expensive.

1. people now need high five figure deposits just to come to the table to play in the south east at least. Yes you could use the grotesque help to buy to get an overpriced shoebox, but otherwise you're already dumping large parts of your net worth into an illiquid asset.

2. there is an opportunity cost to buying Vs putting that money to use elsewhere - your own business, or investing in other businesses or commodities etc which you can rebalance easily. The returns can be spectacular.

3. you don't pay for repairs. Friend who own are constantly shelling out for stuff - drains, heating, roofs, whatever.

It's horses for courses but there is a mental block in this country on investing in anything other than property and it's destroyed the place imho. It would have been far better if a home was a home, and not seen as an investment. The real economy would have benefited hugely.

My friends with homes and who aren't in final salary schemes are worried about retirement though. People have maxed out on one thing.

Me, you may mock but I'm damn certain my pension and savings - and skills whilst I can work - will keep me just fine regardless. That's worth a lot more than anything else to me.

At some point if I need a house I can get one, it's not a problem. But whilst I can put the money to use elsewhere I will. And I've never had any problems renting, thankfully.

I agree TaxCredits - and I don’t recognise the bleak picture of renting someone above has posted. I don’t really care what the house decor looks like as long as it’s safe and warm, my landlord has been round once in the year I’ve been here and given us carte Blanche to redecorate how we want. A mortgage would be double what I’m paying in rent and wipe out all my savings (in London).

Anyway, that’s beside the point. OP, do not do journalism training unless you’re thinking of the NCTJ diploma. Even then, you’d have to go in as a junior reporter given you haven’t got any experience besides blogging so you’d be looking at £18-22k max for that. Why not get a good portfolio together of the articles you’ve already written and apply for comms-type jobs that involve content writing?

I don’t really care what the house decor looks like as long as it’s safe and warm... given us carte Blanche to redecorate how we want
Most people do care. Are you happy to never have a nice kitchen, for example? To live with whatever cheap crap the landlord thinks is adequate? Why would you spend a single penny decorating or improving a house you don’t own?

Mortgage payment vs rent payment is a false calculation. You need to consider the cost of owning which is maintenance costs and buildings insurance. The costs are quite substantial and I too don't understand the rush to buy if you don't have a deposit or the ability to easily save for one.

My business is renting homes. It's work and I wholly disagree with this notion that it's passive income. Yes it's not a FT job but it is work and you have to make yourself available to deal with your tenants.

I've been able to get returns of 8-12% after expenses with my rental properties. The only reason for me doing this instead of investing in the S&P index is because by borrowing money I have leverage and never take an income or dividend (I have a career and work FT at it to increase my income) so my return on equity is about 45%. Very few people can never take an income. I've built my places or heavily renovated them. Most of my tenants are friends from home and I charge them a reasonable rent. They have no risk of being kicked out of their home for as long as their rent is paid on time and even then they know they can talk to me and I'll work with them. Basically they can live in the homes until they no longer wish to do so or pass away in their elder years. One family has a very disabled child. Basically the child can live there forever more. It's written in my will that the home can't be sold to a third party. The rent paid self funds the maintenance and there is no debt against the building plus it's written that my estate can't raise debt against it for any other reason than maintenance or rebuilding.

There are lots of LLs like me. You don't hear of them because there is never any drama. Something breaks, it's fixed quickly and quietly. Someone wants to move out, new tenant is found quickly and deposits returned. All you hear about are the awful LLs because it's a very short conversation when everyone is fulfilling their obligations.

Sputnik we haven’t decorated for that very reason. Well, I tell a lie, we found some paint in the cupboard under the sink and painted a square of wall before we got bored. Honestly, it really doesn’t bother me. As long as I’ve got a roof over my head and it’s warm and I have a comfortable bed, and I can afford it, there is a long list of things I’d rather spend/save money on than doing up a house. If I bought a house I probably wouldn’t even decorate or put a new kitchen/bathroom in unless it was unbearably disgusting or needed repairing. If I did buy I’d have no money left over for home improvements anyway once I’d paid the deposit so I wouldn’t have much of a choice!

Career. If you bought a house first, sod's law dictates that when you finally sorted your career, it would require you to sell up and move.

I'd strongly advise waiting to buy. Property market is very likely to implode in a similar fashion to the late 80s within the next couple of years.

You can only have a buy to let if you already own property I believe. If you wish to buy property, you will need income⁄job. I would update your CV and start applying for jobs. Start saving and if you can also pay into a pension

Both. They’re not mutually exclusive and you can’t just throw money at a career and get it

Why would anyone want to pay for someone else's retirement as LL on here have mentioned.

It's the first rung on the ladder that is the hardest. If you do research and take practical advice you can do it, and it is better when you have family to have stability.

I'm not against renting, there is a time and place when it's more practical to do this. But long term, owning is better. Maintenance and all.

I would focus on career as that wil then help to facilitate the other goal. But you do need to pick your career wisely and I agree that a journalism course won’t get you anywhere.

Occupational therapy, speech therapy even a child psychologist given your teaching background.

I can afford my £650 mortgage on my 3 bedroom house but not the rent for £1500 for the same house down here in the south. That's how crazy the housing market is.

I cannot understand how anyone can afford to rent in retirement. We don't have the same laws and protection other countries afford renters so comparing to attitudes abroad is difficult.

Surely having life's biggest expense removed from retirement is the best pension boost you could ever have??

There are lots of HA homes available for over 55s. Their prices are much more affordable. My friends parents are moving into one of these places because they are struggling to maintain their current home. My friend and I were shocked that their 2 bed apartment, with a balcony, close to the town center, local shops, has a parking spot and shared garden is only £155k. It's £250-350k for something similar on the open market. The monthly maintenance fee is very reasonable at £350 as the building has a bank of elevators. It's a high enough fee that you know there is money there for the bigger projects like replacing the roof.

bang When did you buy your home and what deposit did you put down?

As an example, a home purchased for £100k, you have a deposit of say £20k and borrow from the bank the rest. Your mortgage is for £80k. A LL charges rent on the whole £100k. So call it 5% for the mortgage rate, you pay £333 per month and the tenant pays £416 per month.

Ten years later, the same home is now worth £200k. You are still paying £333 per month. The tenant is paying 5% on £200k which is £833 per month.

Had you taken your £20k and invested it in an ISA in a tracker, most of which have returns of 10% over a long term period of 10 years, compounded you would have about £57k without adding another penny to it. Had you added to that £20k over the 10 year period you would have a lot more than £57k.

Right now I wouldn't be buying a home. We purchased last year and knowingly paid over what the house is worth because we really wanted that location and have a fixed mortgage which we will pay off early.

I've explained how you absolutely can afford to rent into retirement if you go down that route.

But for clarity.

Get your pension fund as big as possible, ideally close to the LTA to avoid extra tax. Drawdown at 2.5% pa to allow a very safe withdrawal rate, giving you 25k gross per year With an enormous buffer for extra expenditure if required. Much preferable to an annuity purchase, and has the possibility of further growth, plus is IHT free.

On top, have significant savings in ISAs.

If you don't want a home, just buy a motorhome and travel, go on cruises, backpack, move to a cheaper country - whatever. Especially if you don't have kids which the OP doesn't.

It's entirely possible and just requires a different mindset.