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What to do with £150,000?
mynameisthehulk
Posts: 34 Forumite
So then...
Lets say I am selling a property which I expect to net me approx £150,000 and wish to use these funds to purchase another property to let out. The property I am selling is a 2 bed flat in a very nice area of a South Coast city, I am looking to buy in a "student" area in an East Midlands city.
What are people's thoughts on how I should go about this? I have been thinking about selling quick and then holding onto the the cash for 6 months or so, to see what happens with prices because it looks to me as, if house prices do increase, it will be by very small amounts, whereas if things go the other way then it will more likely be by larger amounts. I am basing this on the substantial amount of reading I have done, and I think the important figure is the number of properties actually selling at the moment which suggests that if forced sales increase then prices could fall sharply. Anyway, that's probably for the "other" forum! but I would be interested to know opinions.
The other question on my mind is whether I should look for a cash buy at £150,000, or use this sum as a deposit on a larger property (or two properties?), I would not be interested in going any lower than 50% LTV in order to protect myself against any decrease. My current property is valued at around £90,000 with a mortgage of £56,000, I earn approx £20k PA taking home around £1200 per month. I also let the spare room in my house to a mate for £250 per month including bills. This means that my outgoings per month including all bills/tax/credit etc is about £500. I can't drive, which saves money
Rental income round here is about £2800 per person PA.
Lets say I am selling a property which I expect to net me approx £150,000 and wish to use these funds to purchase another property to let out. The property I am selling is a 2 bed flat in a very nice area of a South Coast city, I am looking to buy in a "student" area in an East Midlands city.
What are people's thoughts on how I should go about this? I have been thinking about selling quick and then holding onto the the cash for 6 months or so, to see what happens with prices because it looks to me as, if house prices do increase, it will be by very small amounts, whereas if things go the other way then it will more likely be by larger amounts. I am basing this on the substantial amount of reading I have done, and I think the important figure is the number of properties actually selling at the moment which suggests that if forced sales increase then prices could fall sharply. Anyway, that's probably for the "other" forum! but I would be interested to know opinions.
The other question on my mind is whether I should look for a cash buy at £150,000, or use this sum as a deposit on a larger property (or two properties?), I would not be interested in going any lower than 50% LTV in order to protect myself against any decrease. My current property is valued at around £90,000 with a mortgage of £56,000, I earn approx £20k PA taking home around £1200 per month. I also let the spare room in my house to a mate for £250 per month including bills. This means that my outgoings per month including all bills/tax/credit etc is about £500. I can't drive, which saves money
Rental income round here is about £2800 per person PA. 0
Comments
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""What to do with £150,000? "
give it me0 -
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Perhaps you could donate it to the FTBs that you have stole 150K off?0
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Perhaps you could donate it to the FTBs that you have stole 150K off?
Please reserve the unkind remarks for the banks that lent so much that prices went (still are, actually) through the roof.
To the OP, if you are going to follow this investment route, I would recommend not gearing up, ie not borrowing. The income yield on these properties is probably only just going to cover the mortgage, so you are effectively getting a geared speculation on whether prices are going to increase or decrease. So, I would just stick to one, knowing that the income will be more than you could get in the bank at the moment. You could even pay off some of your mortgage on your own place and buy a student flat for less.No reliance should be placed on the above! Absolutely none, do you hear?0 -
>I am looking to buy in a "student" area in an East Midlands city<
Courageous IMHO. Given that attending a 2nd rate 'uni' simply means £10K debt and no job, it would be rational for peeps to stay away from such unis. And 'iffy' areas are the first top drop and drop hardest if we get a double-dip.0 -
Student area needs careful research. Often higher crime rates as students are easy targets. Uni accomodation is now huge industry but student numbers going to decline...0
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Thanks for all of the responses so far, when I say "student" area, it isn't only students renting around here, its very popular with non students too in terms of letting.0
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You are asking us to predict house price and rental income paths.
The question on the appropriate level of gearing (mortgage debt) to use is a direct result of that first question. Zero, if you think it will be a bad investment (in fact, even better, don't do it at all). If you think it will be a good investment, the right level of gearing is the maximum possible.
In reality, you don't know the future so the size of your LTV should be reflective of the risk tolerance you have. Figure out how much equity you might lose for different falling price scenarios.
Personally, I think now would be a bad time to invest in property, I would go into my reasons but this will turn into another bull/bear thread and i'm not interested in that.0 -
To the OP, if you are going to follow this investment route, I would recommend not gearing up, ie not borrowing. The income yield on these properties is probably only just going to cover the mortgage,
but if they are at 50% LTV or higher then they are in profit...so you are effectively getting a geared speculation on whether prices are going to increase or decrease.
Not really, they're only speculating that rent is going to go up/stay the same - as long as they are keeping the property they aren't including the property price in any of their calculations (at least not in the short to mid term).0 -
My personal opinion is that in most areas student lets will already be over-supplied as everybody and his dog "learnt" that they could screw more money out of a house by doing it to students/HMO rather than to one person/family...
Uni funding is becoming smaller, so less students.
Students that are going will be looking at property now, so if you were buying in 6 months' time you'd have a reduced market who might be looking to rent as most will already be suited.
Speak to the Uni accommodation offices to get their opinions on the local areas and whether there's not enough or too much accommodation already.
What if you get one student into the house and that's it for the year...?0
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