Is there such a thing as being too risk averse?

<sebb>

I'm starting to think that I'll never get on the property market because of the fact that I'm so risk averse.

I've been looking to buy a property where I live in London. Although I could easily have afforded more, I decided I wanted to still be comfortable and save a decent amount each month so limited myself to £250k (and this also helped with the stamp duty).

Over the last couple of years I saved a deposit of £50k giving me a 20% deposit. I found what I felt was my perfect property. It was 3 beds when everything else on the market in my price range was 2 bed (although it didnt have parking at all - restricted residents parking not available for this flat and no garden). I pulled out because the vendor lied to me about having building regs for the conversion to flats. I didnt even give him a chance to get them retrospectively. My reasoning being that he'd lied to me (and lied about other things) and I felt the risk of finding something wrong with the property at a later date was too great.

Even now I'm terrified of being stuck in a flat I dont want in a few years if prices fall and I wont get consent to let so cant move. It just seems like I will never be in the position to bring myself to take that leap of faith I feel it needs to own a property. I read all the stories of things that have gone wrong on forums like this with people who had unforseen circumstances happen to them that are probably quite rare and wonder what I would do if they happened to me. Once I add them all together it all seems to risky!

Even in my savings, I wont invest in shares, I always go for capital protection. Even if it means that inflation will erode my savings because at least I wont be subject to potentially 20%+ drop in the value of my savings.

My job is in risk management, and I wonder if that has clouded things. Over the last 10 years, I've seen clients invest heavily in equities and seen it put their businesss at risk because of it.

I just wonder whether I'll ever be able to bring myself to buy a house. Am I just worrying too much, or being sensible? Do I just need to bite the bullet and take the risk?

tiggerjj

Sebb,

Remember for every 1 person posting on here that everything went wrong for them, hundreds other had everything go ok, people just dont tend to post when things work out normally.

Buying a house/flat is scary, its supposed to be, but that doesnt mean it is a bad and risky idea.

Not sure if any of this helps just my thoughts at the mo buying my first house and buying it all by myself

shaven-monkey

I pulled out because the vendor lied to me about having building regs for the conversion to flats. I didnt even give him a chance to get them retrospectively. My reasoning being that he'd lied to me (and lied about other things) and I felt the risk of finding something wrong with the property at a later date was too great.

He lied to you.
It doesn't mean other people will.

As for your investment choices... well shares can go up as well as down but until you sell them it's just a number on the page. As long as your chosen stock company doesn't do an HBOS, you can choose when to sell and how much for.
Do you need to own a property? You could always buy a plot of land at reasonable altitude, away from any waterways, cliffs and major fault lines without any known mining works underneath. Safe from flooding, flash floods, subsidence and earthquake it will accumulate value.
Do you need to buy a property or just feel that it is the thing to do at a certain stage in life?

Doozergirl

A risk is only a risk when you haven't researched properly. You manage your risk - you know how to do that.

You have a full buildings survey on a property so that if anything is wrong, you have someone to blame. You have a decent deposit and try to manage your outgoings in your choie of mortgage product and against your own salary. You have decent insurance policies to cover you should anything go wrong either with you or your home. You use a decent solicitor to do your conveyancing. You find the 3-bed that finds decent value over the 2-beds even if it means waiting longer for the right property. I'm not sure about the lettings thing - don't buy somewhere that you genuinely don't think you could cope with living in for a few years! I'd be alright about staying in our house for 10 years, though that isn't exactly the plan.

We've been buying houses for a while and whilst a lot of people would call us brave or stupid, I'm not convinced that I've ever taken a real risk in buying a property. I wouldn't have bought one if I wasn't exceptionally confident about where it was going to take me. It's hard when it's not something you know about but you use the best people to help you through and you will get there.

I do think people can be too risk averse if it prevents them from making a rational decision. If you want a house and can afford one then if you go about it correctly then there's no real risk involved in it.

Ultimately, it's only money - if something so dreadful happened to you then perhaps a bit of negative equity for a while wouldn't be your main worry? You only realise a loss if you sell.

Catblue

I think that so long as you explore what you intend to do if things go wrong then the risk is lessened. If you have substantial rainy day savings then you are in a decent position. On the face of it, a one-bed flat might be less of a risk than a two-bed. It should be cheaper, for example. However, if you get a two-bed then you can always get a mate/lodger in to share costs so it might be less of a risk to get the two-bed. Probably easier to sell on as well.

Also, if you make sure that the location is decent then someone else will probably want to buy the place when you are ready to sell on. I think buying in a dodgy area (and hoping that the area gets better) is always much more risky than buying a smaller place in an established area. Proximity to decent transport links is also going to help when you come to sell the place on.

There are always going to be people (rightly or wrongly) who would never buy ex-council flats, so that kind of place might be more risky to sell on when you are ready to.

Remember that it is also a risk to keep renting (risk of being chucked out with little notice, risk that house prices rocket while you are saving for the perfect deposit).

This forum tends to be used by people who experience problems - that is the nature of it. However, the vast majority manage to get through the problems, and I'd suggest that some of them are not as sensible as yourself with money.