I'm going to sell, and here's my plan....

Angela_D_3

It's not something i would choose to do and i believe the crash will happen 100%. Big risk, big stakes.

master_blaster_2

like everything related to investing 'the higher the reward the higher the risk'
yes you could do well and sit smugly as you tell about selling our house for X thousand pounds and buying the same house 4 yrs later for Ythousand with Z thousand profit
BUT ..... it could really bite you on the bum and you find it impossible to get back on the ladder.
i dont know what area your in but here in belfast houses are 50-100% more than 4 years ago

i think its a very high risk stratagy but like i say i dont know what sort of area your in

good luck whatever you decide to do

Guy_Montag

ginger_nuts wrote:

ok here is my story .January 2005 I decided to buy a cheap BTL property .
I hadnt a clue .But I bought a one bedroom flat in May 2005 ,cost £40,000 .As I said a cheapy .By April 2006 it was worth £55,000 .I thought £15,000 in 11 months really good .This week I phoned an estate agent to ask for a valuation .........£90,000 .Would I sell my house and pay rent to someone else ,no way . different areas different prices.

£90k is only someone's opinion. Until you sell, it's not worth almost nothing & an almost infinite amount of money (kinda like a property version of Schrodinger's cat). Only when you bank the money can you say "my flat was worth £90k."

daz9643

just remember £100,000 equity in a 5% account will pay £5000 per year interest, if your house is currently worth say £300,000 and it goes up by 5% you make £15,000. I know 2 people who have sold their properties about 4 years ago that were thinking exactly the same as you are now, one of them worked for a stockbroker firm. I would wait until you see house prices fall for 3 consecutive months before deciding the housing market was on a downward slide. How many people are currently waiting to get on the housing ladder that can't afford it, once prices start to fall won't they then enter the market and bring prices back up again ?

Jags_2

We will see interest rates increase again next month, and this should probably lead to falls in 6 - 9 months, but probably only of the magnitude of 1 - 2 % a month max if we're lucky. STR is a very dangerous game, even for the most hardened of house price bears, and solicitors costs and stamp duty on re-entering will knock off a decent amount off your profits. It's a high risk strategy, so you'd have to weigh up the rewards carefully - and they should be equally high to match the risk before go-ahead.
Please don't sell your house to one of these rent-back schemes, as shorthold tennancy agreements aren't worth the paper they're written on. There are already anecdotal stories about rent-back schemes where former owners have been kicked out of their newly rented house after a few months - if the market turns sour, your new landlord will want to realise thier capital asap, and can legally give you the boot with no hassle.

clairehi

I dont think you should treat the roof over your head as a way of making money. Never gamble with anything you cant afford to lose. Can you tolerate the risk of losing money on this bet (which is what it it). That is a different point to saying the housing market will definitely rise, of course none of us knows, but you must accept the possibility that it could. The question is, could you put up with the consequences if it did?

Anyway, if you need to move house for a practical reason, then by all means do it the most cost effective route. If you are happy where you are, then why volunteer for one of the top three most stressful life events?

Have you taken into account the transaction costs of selling and buying again - estate agent fees, stamp duty, legal fees, removals. Plus there are lots of minor bits and pieces that add up. These will all eat into any surplus you make. Our last move cost us the thick end of £20K (half was stamp duty). I am not looking to repeat that in a hurry. Like changing cars,moving house is something I aim to do as infrequently as possible to avoid the "cost to change".

Guy_Montag

Speaking as a potential FTB, once house prices start to fall, I'll consider entering the market. However, I expect when that happens we'll see a number of other things happening.

Credit tightening - banks lending more than 3.5x salary will end, & they will expect a 5%-10% deposit.
Unemployment rising - as builders stop building houses, we'll see people getting laid off.
Net emmigration - all those helpful Poles will head off elsewhere if there's no unskilled labour jobs here.

At that point - well, what's the hurry in entering the housing market, especially when if I wait 6 months I might be able to get a better house for the same amount of money or the same house for less.

In the past FTBs haven't propped up falling markets, why should that change this time.

mrcow

HeWhoDares wrote:

Obviously I'm banking on the housing crash and making myself Interest Rate immune.

What do you money savers think - I'm still very much researching this idea!!

What do I think?

You're taking a gamble and if you feel comfortable with gambling with your equity then that's up to you (although it wouldn't be for me).

I personally know two people who have done this.

One couple (who are older) are now priced out the market completely and will never be able to afford a house like the one they sold. They are stuck renting due to poor advice given by their son (who is a financial advisor :eek: ).


Another couple who thought they were on to a sure thing with the "impending property crash" :rolleyes: (how many times have we ALL heard that?!) lost all their equity (about £80k) through poor investments and used the rest up on rent, then the strain on the relationship was too much and they split and their poor little boy (who is now five) is pushed from pillar to post as they now live hundreds of miles apart with random new boyfriends/girlfirends.

I don't know anyone personally who has done this sucessfully.

What ever you are doing, THINK about who else it's going to affect in your family and be prepared to take responsibilty for your actions if your gamble doesnot pay off.

Plasticman

clairehi hit the nail on the head for me: "Never gamble with anything you cant afford to lose". If you feel that the risk is acceptable then go for it but there is a possibility that prices will continue to rise, or will stagnate or will only drop marginally. This could mean that you can't afford to get back onto the property ladder or end up buying something much smaller than you have now. My uncle was planning to do this a couple of years ago because he was convinced that the market would crash. If he'd done it then I'm sure he would have been getting very worried by now! As property prices continued to rise month after month he would have been praying for a bigger and bigger crash to get his money back. Thankfully he changed his mind!

Guy_Montag

mrcow - but we've only seen one half of the cycle so far, of course you've not seen anyone pull this off.

Of course we may be in a new paradigm where prices don't fall, but this would be the first time it's happened.

But yeah, Plasticman & Clairhi are right - never gamble with what you can't afford to lose.