What's the downside (if any) of selling now and moving into rented?

[sparkleymummy]

I've seen various comments on some of the other property threads indicating that it might be risky to sell now and go into rented accomodation. Why would this be?

We've sold our house and haven't yet found anything and are probably going to end up in rented to see what happens. Is there a downside to this?

Renting is far more expensive than our mortgage but we have £300k equity which can sit in the bank for a year and earn interest.

BLoody hell. Wish we had that much equity.

renting is dead money. financially you only lose by renting.

well, the REAL upside is that you will not be part of chain when you go to buy.

and with that kind of cash, you could potentially be a cash buyer with no chain.

a real advantage.

Keep looking sparkley there are some bargains to be had especially in a situation like yours!!

Yes but the figures do seem to stack up.

If we buy now we'll have a £450k mortgage (eeek!) If we rent we'll pay about £1k a month in rent but we might pick up a bargain in a years time if the market drops.

In the meantime the money in the bank earns interest.

Or am I being too simplistic about it?

Disadvantages could include:

• it's a faff.
• you might be in rented for ages.
• two lots of moving costs.

Hadn't thought about the logistics of investing the money hanaflower. Isn't it a £30k limit for compensation if a bank collapses.

I'm an investment banker and accountant, and I reckon the OP is being very wise for a whole host of reasons. Rental yields are at an all-time low and (depending on property & area) normally lower than you would pay for the interest element of your mortgage repayments (hence NOT dead money), there is little pressure in terms of house prices going up for the foreseeable future, and when you do come to buy you will be mortgage free and therefore in a strong position.

The very limited downsides are that you will probably have a shorthold tenancy arrangement so no security of tenure beyond your initial rental period, you might have a dodgy landlord who doesn't fix things when neeeded, and the supply of suitable properties might not be great in your particular area. Obviously if prices continue to rise you will lose financially as well (but I think that is highly unlikely). The other possibility is that your landlord might go bankrupt but if you are in there paying the rent then the risk of this reduces, and anyway I believe that in these situations you would be left alone for your period of tenancy anyway (reposessors will wait until tenancy is up before selling because they make more money on vacant property).

Renting is not dead money it is the same as an interest only mortgage in a falling market.We have similar equity and rent a place which is 950 a month The interest after tax is about 1300 so we are better off nand will be able to buy mortgasge free very soon.

And its not 'if' the market drops really because it already is dropping.

krusty and fool you mean

noddy you always cheer me up with your property doom. Its exactly what I want to hear at the moment!

Your figures were helpful too!!

I hope I am not too doomy i just really think prices are going to come right down I did take advice before selling to rent didn't just guess!

I was just about to explain why renting is not always dead money. but see noddy has beaten me to it. paying rent is like paying to keep your money in a bank account earning interest - and if the interest is more than the rent (like for noddy) then you're a happy bunny.