Live in an (almost) perfect rented house or try to save enough to buy a bigger house?

[threeisthemagicnumber]

We own a small 3 bed semi in a good area in the SE. I'm planning to go back to work after almost 6 years of being a SAHM and the income I bring in will be extra money on top of what we're used to having and living reasonably comfortably on. Here is our dilemma:

1. Stay put for the 5-6 years it would take us to save to buy the next house up in the nice area where we currently live. Probably still wouldn't be our forever house and we would only be able to afford something that needed work and our mortgage would have to increase too. But we could settle, do up the house to suit us - once we could afford it!

1. Rent our house out and rent something really nice in a great area with the extra income. We'll keep paying our mortgage off (plus a bit more probably) and would make sure we had a bit of contingency money in the bank to cover empty periods etc. We would also have a bit more freedom of area and could move easily again in 4 years to the catchment area of an excellent secondary.

WWYD?

Rent. Buying is a mug's game for the next 2-3 years.

We already own Kenobi and I don't think selling is on the agenda for us right now.

But you give renting as an option. kenobi answered your question.

You're right. She did answer part of my question - Thanks for the clarification Portofino.

So with option 2) you would be relying on the rental income on your current house to cover your mortgage on that house and you would also be paying the rent on the house you move to? It seems like a very risky position to put yourself in. I do know of a friend who has done this but they are paying out a lot in rent, and the rent on their owned flat doesn't always cover the mortgage + maintenance costs, so sometimes they have to subsidise that as well. They only did it because they needed to move and couldn't sell their flat. I wouldn't even consider option 2) if you don't have to.

Personally, I think you should either a) stay put and save or b) sell and then rent something instead. Depending really on whether you think house prices in your area are going to a) rise or b) fall.

There are not so many properties for rent in the SE at the moment so it could be a good bet. It depends do you need the extra space? If not I'm not sure I'd spend the money and have the hassle otherwise.

On the other hand in my old job I used to see people moving 'up to the next house' all of the time. Then I would see old people who's DC's had left home and were rattling around in a house that was far too big for them, they were busy selling up and moving somewhere smaller. You could move about for a few years as you need and then move 'home' when you wanted. Your only debt would be for your current house so if it all went wrong you could move back in (especially if you ended up on a perpetual tenancy as you could leave with a months notice).

Yes, I can see my answer wasn't clear. My answer is that option no. 2 would be the better one in the SE I think.

Though minipie is right to worry about overextending, the rental market is great at the moment. See here: www.guardian.co.uk/money/2011/nov/08/rental-properties-snapped-up-record-time
And as agent says, if you make sure both of your contracts (as landlord and tenant) have break clauses you should be able to return should things change.

To be honest, this fear that we have in the UK about renting is unneccessary. (says the woman who owns two properties with her DH!)

I agree the rental market is great at the moment kenobi but that means that the OP would also be paying a lot in rent for whatever she moves into (and would be subject to potential rent increases etc). And, mortgage rates are likely to go up over the medium term, so even if she can get a great rent for her owned property, it might not cover the mortgage in a couple of years' time. (unless she gets a long term fixed mortgage, but they are quite expensive).

Option (2) sounds attractive but are you sure on the finances? Have you taken into account:

• The tax you'll need to pay on your rental income (you can offset some costs for wear and tear or repairs, and for mortgage interest, but likely still pay tax on it)
• What you'll need to spend on your house to get it looking right again before selling down the line. Houses that have been rented out a while tend to get shabby pretty easily.

The other question is how much you are outgrowing your current house. If it is a huge squash just now, I'd probably consider option 2. If you are okay, I'd put the money into overpaying the mortgage / saving for the move up, rather than spending extra on rent.

Yes, she wouldn't save anything on renting in a nicer area. Thing is though, cash flow isn't an issue for the OP, she's about to go back to work and bring in more money, when they've being living happily on just one income.

I see it as a flat choice for her: sit tight in a too-small house and save but he forced to buy sooner and compromise as they need the space, or rent whatever they need to and worry about buying their 'forever' house when it's convenient.

Therefore option 2 to my mind.

You're right kenobi - that's exactly the dilemma.

We would make sure that the rental contract line up so that we can always move back into our current home - we won't be moving far in terms of area.

At the moment, the rent we would get would be around £500pcm more than the mortgage we pay as we have a decent amount of equity. We will have a small amount of tax to pay, but not much after all associated costs are deducted. Maintenance, well we'd have to pay those costs if we lived in the property anyway.

Unless things change drastically in either of our careers, I just don't know whether we'll ever be able to buy our forever house in the city we love. We were just wondering whether this was a way of living in a lovely house sooner rather than later.

Thanks for all your thoughts. I think we're getting closer to a decisions.

how about sell now, rent for a year or 2 then look to buy when hopefully prices are more reasonable.

We have thought about that fergoose but like the fact that our mortgage is being paid off and that we have the security that if we needed to, we could move back to a house we can easily afford in the area we like.

I know of 2 people who are having issues with renting. One where she was about to move in, but LL decided to move back into the property and another where friend has been in property for 4 months, but LL wants to sell. In both cases the LLs have been made redundant. IMO that renting is less secure if you want to guarantee where you'll be living in 2 months time. Personally I'd stay in your current house atm.