Keep for investment or use money now?

[SundayGirlB]

We're uming and ahing about this. We own half a flat in London. To sell would give us around 200k. We live in a lovely but small 3 bed semi outside London. Have a baby and plan to have another, the house would be a bit of a squeeze with 2 kids and all their stuff. Would you:

a. live for the now and sell, extending current house or buying new plus getting a smaller morgage. Give us more money to go on holidays, me more flexibility with work.
b. keep investment for the longer term - possible place for kids to live/inheritence etc, security for us.

Any thoughts l? I can see he merits on both sides. We don't currently struggle so don't need to sell really but seems like it would be a nicer life. Though investment feels like the sensible option.

I think there's probably a middle ground between splurging the cash on 'living for the now' and purely investing it. Being a landlord is a big hassle and not guaranteed to be a good investment (depends on lots of factors inc. house price growth), so I probably wouldn't go for keeping the flat unless it's in a very high growth area- how come you only own half (inheritance?) and who owns the other half - if there is any likelihood of complexity there then selling up and having the cash to invest purely under your own control would be better.

£200k is a substantial sum of money, so I would probably look at splitting it (not necessarily 50:50 but maybe 75:25 or 65:35) between improving current living situation and long term investment. Might be a good idea to see a financial adviser about the best way to invest anything you choose to keep for the longer term.

Have you costed up what you would want to do in terms of extension, and whether that would pay for itself in terms of value added to the house and effectively be an investment in itself? This can be a bit variable, simply adding more space doesn't always add more value but if you could get an extra bedroom for instance by doing a loft conversion that could add a lot of value. Equally if moving to a bigger property/nicer area and/or paying down the mortgage would both improve your quality of life now and later on mean a bigger inheritance for DC then that seems a perfectly sensible way to spend the money. Just don't go mad with the holidays and cutting hours at work etc. and remember to keep saving so as to always have some ready cash, both in case of a rainy day and in the longer term to help out DC...

I think a balance would be good. The flat was bought with a family member who may not wish to sell so that's an added factor. I come from a family of Londoners who bought their houses cheap and saw them rocket in value so worry we'll be missing out a long-term if we sold, however I think those days are gone and it is an in area which is already considered nice so I don't think there's much room for it to grow in value.

In terms of work etc it would just make being part time with the children easier and mean we could perhaps have a holiday every year instead of once every three years as we currently do.

I'll get some advice about the extension in my area and how it would affect the value of the house. I have been worried about ploughing money in and not getting a return in the future so wonder whether we should just move but an estate agent should be able to advise. We are short on usable living space which may not change the value of the house if we extended like a loft conversion would.

Good to know I'm not mad for wanting to sell. We really can't be bothered with the whole tenant management, tax returns every year andq now there's a problem with a neighbour claiming land etc etc. We have enough trouble with the house we live in!

Residential property isn’t a great investment these days. With the tax regime etc it doesn’t work for many people.

I agree that your main home could be an investment in itself. You just need to be smart about what property you buy or make sure you see a good return on extending your current home. If you have smaller mortgage payments, that could also free more money to put into pensions, for example. When your children are older, you could always help them when you downsize or get a pension lump sum.