Grown up decisions.. Advice please!

[CompletelyIncompetent]

I would be grateful for advice from those with more "life experience" than me. I'm sorry for the long post but it's a but of a complicated situation.

Dp and I live in London. I have a (hopefully!) stable job earning just over 30k per year. Dp was previously in a well paid job but has chronic heath problems and has had to stop working. It is uncertain whether he will be able to work again in the future and I am basing my assumptions on the worst case scenario which is that he won't be able to get another job. He does have a pension which kicks in at 65 I think.

We are both in our 30s and want to have children in the future. We are currently renting for an extortionate cost.

His savings and payout total just over £1m. Mine are more like 20k! Our families are not rich.

We are considering buying a house for around £600k (cash) . I'm guessing repairs, furnishings, taxes etc will add another £30k at least (?), then ongoing maintenance.. I don't really want to continue working full time when we have children but I accept that I'll have to. The house would be bought primarily as a home rather than an investment as Dp's heath problems get much worse with stress so we don't want to move house again really.

Anyway, my question is: are we being totally ridiculous and unrealistic? Should we be keeping a far greater proportion of the savings to spend at a later date rather than sinking them into property? I'm getting very carried away with house hunting but every now and again get "the fear" that we are making a rash decision and will end up skint. Neither of us is very "grown up" iyswim and it is all a bit scary!

Any words of advice from wise mumsneters would be very much appreciated. Tough love is also fine

Thank you!

There will be many many options and hopefully this thread will give you food for thought over that.

Have you thought about purchasing two properties? Possibly one in London and another about an hour - hour and a half commute on a train line in either north east west direction.

Buy both properties that you like and would live in and then rent the commutable property out - this way is you want to move out of London in the future then you will have the option of swapping the properties over or not if you never want to.

Thanks Ivy. Buying two properties might just drive us over the edge tbh!

I think what I really want to know is whether we will be OK long term with an income of only 30k, and "only" around £350k left in the bank...

If I understand correctly you have cash of £1million. Your partner although not well will have no income not even disability until retirement age at +65.
You have a stable job but want children and would like not to work when they arrive but you have to find an income so will still work.
You propose to spend 65% of your capital on a family home keeping 35% as a rainy day fund. (RDF)
My only question is why this split. Can you not find a cheaper home? Frankly the more cash you have in your RDF the better your plan has of working.

Hi I may be able to help a bit here.

We were in a very similar situation to you a few years ago, my husband was injured at work and his payouts and insurance totalled approx £900k lump sum bug he also has a guaranteed monthly income for life. He's wheelchair bound and received full dla at the highest level and I receive carers. We spoke to a financial advisor to come up with a plan of action.

Our first step was to buy a property to rent out in order to provide us with a consistent income and to make up my carers allowance to a full wage. In the area we are in (south west) we were able to buy a brand new 4 bed house for £250k cash which we rent out for just over £1k a month.

Next we needed to buy somewhere for us to live, we decided on a budget of £450k cash and struggled to find somewhere-we needed enough space for the house to be fully adapted with lift etc each floor completely level, bathrooms big enough for dh to get into independently etc plus space for 2 children eventually after viewing over 100 properties we found our house. We bought for around £420k and spent £80k adapting it and extending it to meet his needs for life. We love our home now and have no desire to move.

One thing to really bear in mind is the cost of running a big house-if you're thinking of spending £600k on a property, as lovely and spacious it may be, the running and maintenance costs will be huge. Our house is now a large 5bed and our household bills total around £1.3k a month and that's with council tax discounts etc I am frugal with heating, electricity and water but if still adds up. We have a fund put aside for maintenance as there's no way we could afford to fix the roof should it need it or repoint walls.
The best thing we did though is buy a buy to let property as this provides an income as I'm unable to work due to caring. Our tenants have been in 4.5yrs and although they are moving this month I don't have to worry too much as I've been able to buffer a bit.

Thanks for the replies.

Gfplux - that is exactly it. And you may have a point. Then again, why live somewhere smaller and in a less nice area (£600k in London gets you a 3 bedder in an ok area at best) when we have the cash to live somewhere we actually like? I'm not saying you're wrong, just thinking out loud iyswim.

Happyhetty that is really helpful. It sounds like it was a really tough time for you and it's great hearing you sound so positive about how you dealt with it.

Buy to let definitely sounds like a consideration re investing the rest of the cash. I've discussed it with dp a bit but he reckons that yields are now only about 4.5% (i think?) also I think he's concerned about investing all the money in property in case there's a crash. Will raise it again though.

We definitely need to think more about the costs of running a house and maintenance etc. We have always lived in rented flats so have never had to deal with those things. The houses we've looked haven't all been huge, but I have a weakness for victorian houses which I suspect need a lot of maintenance.

Thanks again. A lot to think about!

Ours is a Victorian double fronted and yes requires a lot of maintenance! Our buy to let is a pretty solid investment as rents didn't really fall here in fact they've gone up. So our cash purchase has made us approx £50,000 in rental income in 4 years and although the value hasn't increased significantly due to it being a new build, it hasn't decreased either.
It's too easy to get overexcited when you're suddenly faced with a huge amount of cash that you've never had before but try to think long term and you'll be fine!

I think the best advice is to go and pay someone for advice, a professional who can look at all your assets and what you want. Someone who is paid by you to do things for you not someone who gives free advice but tries to well you a product.

Eg if you want to be at home for a couple of years when your children are young do you want to do that in London? With London prices would you want to get a buy to let you can pass on to your children when they are older so they can live near you?

I think you also need to look in to things like benefits for your dh, he may be entitled to some and that can have a knock on effect, eg if you have to build a downstairs bathroom you don't pay CT on it.

Also check his pension, mine was supposed to pay out at 60, I initially tried to claim an ill health pension and it was turned down, after 10 years I contacted them again after 10 years and they agreed to pay out, it's not huge but it is there every month.

Ok. So how do you propose to 'store' your remainder £350k?

I agree with a poster above. Your looking to buy to close to london. You should and could commute to a max of an hour. This includes great areas of Essex and kent.

You could save it in isas. You can use government bonds and shares. You can use property. You can use things like wine. Isas are good as tax free but returns aren't great. Shares? Well if he's scared of property he will shit himself at these surely as what if the financial market tanks again?

Wine etc works but you will need to pay a knowledgeable person to help you.

Imo you will gain greater income and security from property. You would also be able to buy near where to where you actually live. I'm in Essex for example. You could be in streets close by quite easily. It can be managed by an estate agent or the council long term. Both formats work well.

Bricks don't break. Buy a good one in a good area and you can ride out any property crashes knowing people are living in it. Your salary is partially augmented.

I think your right to reflect a bit. I'm not sure your idea makes as great long term sense. But someone may well contradict me. Best of luck

Is your job one you can only do in London? Are your family there? If not, maybe now is the time to move somewhere cheaper, where you'd be happy to raise children. You could then buy a much cheaper forever house and have a lot more left to invest elsewhere.

I think you need to find a 'forever' house: one that will suit your DP's needs and your DCs' education for the next 20 years. Take your time finding the right location/house.
The rest of the money can be invested long-term so you don't need to worry too much about short-term fluctuations in stock/property prices. But it's a lot of money to be invested over a long period - GET PROFESSIONAL ADVICE FROM AN INDEPENDENT FINANCIAL ADVISER and re-visit your plan every few years to make sure that it is still relevant.

Neither of us is very "grown up" iyswim and it is all a bit scary!
It's going through things like this that make you grow up. Good luck.

And consider whether a DP should become a DH because there are lots of legal implications.

Would you expect your DP to be well enough to be a SAHD?

If so, then your £30k doesn't need to cover either housing or childcare, which are two of the biggest costs for most people, particularly in London. When you hear people talking about how much they need to live on, bear that in mind.

Thanks so much everyone.

Yes, I think that a move out of London is something that we have to consider at least (although there are many reasons why it would be my first choice).

The big message here seems to be that we should get independent financial advise. Will definitely do that.

I'm hopefully that dp could be a sahd at least part of the time. My mum is also happy to help out (as she keeps reminding me!) and lives not too far away so that will help.

I think what I really want is, as senua said, to find a "forever home" so that we can settle down and live off a fairly small income without too many worries.. That's the dream anyway.

Thanks again

*Advice