Advice please - 70k equity what to do with it?

Martinslovechild

Nope - house prices are way above trend (approx 30%) and share prices are below trend (P/E's of approx 13, well below the long-term average of 17). Do you want to buy into an inflated bubble or buy into something that's undervalued?

The Nationwide House Price Affordability Index shows an index of 134.1 for the West Midlands. The highest figure that it has reached since 1983 is 175.6. From a similar position to today's (137.8 in 1988 Q4), it climbed for a further 18 months to reach a peak of 175.6 before falling rapidly to hit 72.4 three years later (1993 Q1). So, if you invest now while the current level is 134 - would you be happy to see your investment drop to 72 - a loss of 46%?

Similarly, the First Time Buyer House Price Earnings Ratios show a long-term average of 3.0 from 1983 to the present day. In the West Midlands, the current value is 4.9. This is simply not sustainable.

advent1122

I think it is stupid renting somewhere for £1000/month (even if it does have ten acres).
£12,000 a year on rent????? Totally dead money.
You will not get a £12K per year return on £73K.
Your neighbours are not called Jones are they?

egg345

yeah they are actually........not.
Just wanted some advice on what to do with equity. not knowing as much as you guys.
thanks to others for advice, going down IFA route.

clairehi

OP- you say you are going to rent for 1-2 years. Will you then need the money back to put down on another house purchase? if so, keep it in cash/low risk investments. No advisor should tell you to put it in equities for this period of time as it is too risky. The length of time you are prepared to invest the money for will be a major determinant of where it is invested.
If you are prepared to tie the money up for longer then there are more options and you would be best to get investment advice from an IFA.

follyfoot

egg345 wrote:

Thanks for quick reply!
Thanks for website on property crash.

Both age 36, married with 3 kids.

Where to start looking for stockmarket advice though?
Have ABSOLUTELY NO idea about any of it, this surely makes it very risky for us?
Feel 70% investment a 'safer' option??


Any comments gratefully received.

I invest with Wilco. I have made quite a bit of money from AIMS shares. However, i am going to look at trading myself and try and trade from home. I know people who have made loads of money off shares but they are agressive traders - try and make as much profit in the shortest possible time. you need nerves of steel and i would advise to read up as much as possible before starting otherwise pay a broker to do it for you.

chappers

to be honest you only have £73k if you want to make a large fast buck then invest it in something short term and take the risk.
However it seems that at some point you are going to want to buy another property as a permenant home. As has been said , unless you are paying a ridiculously low rent you aren't going to get the return to pay your rent.You may be able to get a better rate than the rise in the housing market, that is the risk you take.
Personally if I were in your position with young children I would be on the lookout for your next dream house, with the money invested in the best place you can find with fairly instant access and then buy another property.It all depends on the risk you want to take with your money.But at the end of the day you have to provide a home for your family so why pay rent unnecessarily

gemini666

We are thinking of doing exacty the same - selling and renting. We move often, so it seems more sensible.
I would say that interest rates are likely to rise, so your money will make more for you.
If house prices slip, you may be able to afford a bigger place, but your mortgage will then cost you more. We are 50, so not so important for us - and we aren't concerned with leaving a house to family.
Everyone says renting is dead money, but you overpay a vast amount on your mortgage also. What is important is what is the right thing for you to do, not what others say.
I'd love to rent a place with acres..just wish landlords were a bit more flexible over pets!

advent1122

Everyone says renting is dead money, but you overpay a vast amount on your mortgage also.

Pay rent for 25 years. Return = £0
Pay a mortgage for 25 years. Return = A house.
RENTING IS DEAD MONEY.

What is important is what is the right thing for you to do, not what others say.

So why come on a forum asking for input?

I would say that interest rates are likely to rise, so your money will make more for you.
If house prices slip, you may be able to afford a bigger place, but your mortgage will then cost you more.

I have highligted the important bits.

whambamboo

advent1122 wrote:

Pay rent for 25 years. Return = £0
Pay a mortgage for 25 years. Return = A house.
RENTING IS DEAD MONEY.

Oh dear. The same old "renting is dead money" nonsense comes up again and again.

http://www.rightmove.co.uk/viewdetails-13420159.rsp?tr_t=buy&pa_n=1&mediamode=pictures&curr_media_n=1&from_feat=false

£399,000

Rental cost: £1,200/month MAX

Cost of borrowing (renting!) £399,000 from the bank:

about £2,000/month (without repaying the debt, just interest only)

Difference:

£800/month

£800/month invested in a UK growth fund for 25 years at 10% return:

£1.1 million after 25 years

And let's not forget, in reality you won't rent for ever, in the short term:

Pay rent for 3 years - save money compared to buying, as above
Buy after 3 years for 40% less (as in the last property crash): result about £200,000 better off on the property above having bought it for £240k

Renting is only dead money when interest rates are zero.

They are not, therefore you're talking rubbish.

At present levels where rental costs are lower than the cost of money from the bank you are *gambling* that prices will go up.

gemini666

advent1122 wrote:

Pay rent for 25 years. Return = £0
Pay a mortgage for 25 years. Return = A house.
RENTING IS DEAD MONEY.


So why come on a forum asking for input?


I have highligted the important bits.

I think you are extremely rude.
Is your opinion the only valid one?
No, thought not.