How I intend to make £'000s

silvercar

the problem with living in a rented house is its never your home. what happens when the landlord turfs you out?

Generali

I strongly believe that house prices are going to fall precipitously. However, this is a very risky thing to do. Asset prices can remain 'too high' or 'too low' for many years. If the Greenspan put (slashing interest rates to support asset prices) comes back you could get your fnigers badly burned.

zkeithz

arkie wrote:

Be careful, if the house market crashes, interest rates will probably go up and up, therefore your rent will go up, as will you council tax etc, your savings account will probably go up but not as much as the mortgage rate, and do you think its realistic for you to sell your house now for £220k, wait for the market to crash and get it back for £150k. Houseprices will never crash like that, the government wont let it, although the bank of england is independent from government, the MPC is appointed by the government. According to the press today, an average house rose nearly £1400 per month, we have one of the best property markets in the world, and once you are on the property ladder dont get off... stay on it

Arkie,

My point entirely.

It will crash, there is hard evidence, re my previous comments on earning levels and demand for mortgages, and my personal experience in the property market.
Rent will only go up in accordance with the limitations of "Market Rents" as controlled by supply and demand, as well as the rent officer service.
With the pressures on demand for social housing, because people are finding it difficult to buy and even rent, I am sure the Government would be more than happy to see house price deflation, who would lose out? mainly private landlords and unfortunately first time buyers of the last 1-3 years due to negative equity returning. But wouldn't deflation have a massive effect on preventing inflation from rapidly rising?
I wonder whose figures the press are using " reported house ""asking"" price rises" - not actual sales prices - see previous comments
I don't disagree with you about the magnificent property market, but I would disagree about staying on the property ladder, particularly now, as it appears the time is right.

meanmachine_2

arkie wrote:

we have one of the best property markets in the world,

Words fail me.

By the same token we have one of the best gas price markets in the world too.

Are you seriously a moneysaver?

Do you cheer every time the price of a tin of beans goes up?

Doozergirl

It's good to see people putting their money where their mouth is.

Good luck to you

brasso

zkeithz wrote:

I don't expect people to take my advice, but I will share my plans with you anyway.

My plan:

Sell now for £220,000 (conservative estimate). Total outstanding mortgage £36,000, no loans or credit cards (thanks to MSE) Giving me a balance of£180,000.
Invest in high yield savings, say 5% p.a. which will return in the order of £750per month compounding. Let's face it, inflation and interest rates are not going down in a hurry!!
Rent decent house in Midlands. Plently of 3 bed semi's available for £400-500 pcm. See: https://www.ononemap.co.uk
This represents a minimum return of £250 per month.
Hope the house price crash is as big as it was in late '80's early 90's.
Purchase same house again 2-4 years time, suggest £150,000, alternatively continue renting, or even sell my business; hardyconsultants and move abroad.

Regards

Keith

There are many assumptions in there. IF you sell for x, IF you rent for x, IF the housing market collapses at a moment convenient for you and IF it begins to rise again when you want it to. You're just pulling figures out of... well, let's be polite and say out of the air. They may be right, they may not be.

You also seem to live in a tax-free world. Assuming you pay tax at the higher rate, that's a big bite out of your £250 per month. So IF all your assumptions are correct, you'll be making £150 or so a month as well as all the disruption and having to rent a place i.e. paying off someone else's mortgage for them.

You also have to factor in the cost of moving, estate agent's fees, legal fees, mortgage redemption etc.

I firmly believe that there'll be a correction in the housing market but you shouldn't make the blithe assumption that it will be 35%. Also, it's not possible to talk about rebuying in 2 years time. Who knows how long or how deep the downturn will be? Also, when you rejoin the housing ladder (paying those fees once again), your mortgage may well be more expensive than it is now.

Don't get me wrong. IF all your assumptions turn out to be correct, you could make money. But remember that people have been selling-to-rent for nearly 5 years now, certain that a crash was about to happen. It hasn't yet. Supposing that a crash is delayed by a year or so, and prices rise another 10 or 15%? Perhaps you'll need a crash of 50% to get your £150K buy-back dream.

It's back-of-a-fag-packet stuff. It's what I might daydream about while sitting in the pub, gazing out of the window while waiting for my mates to turn up. That's perhaps where it belongs rather than in the real world!

But good luck if you have the courage to carry it out.

nrsql

I love the way people on this site seem to be driven by fear of failure.

Nothing wrong with your basic plan - and you are old enough to know that that house prices can fall by the amount you suggest. And that rents don't follow house prices.

You do ned to take into account tax - your 5% return on the money will be taxed the rent you pay will be after tax - but interest rates look like going up.
Timing and location is the key. Are you selling at the top of the market? Will prices go up another 20% before falling? Are you willing to rent for long enough?

Worst case scenario - you sell, move to rented accomodation, house prices continue to rise, you decide to buy again, house prices fall.
Best case scenario - as you have pointed out.

I've been expecting prices to fall for the last two years - it's stopped me from buying rather than selling - did think about moving somewhere smaller though.

franklee

Well I've done it, with figures not so very far away from yours except I'm paying more rent than you say. Have had two rentals so far, negotiated the rent DOWN on renewing both times. The first I still miss, got turfed out when the landlord wanted to sell. It's a lovely flat with a stunning sea view and still empty and unsold The second is a pretty boring magnolia box of a terraced house, clean and functional but I really want the sea view back.

Anyway respect to you for doing it in 1988. I was too young back then.

I see people still believe the government will bail the debtors out, I doubt they will. Interest rates will go up if inflation takes off as it seems to be doing now. The government will be worried about the wage bills for public sector workers who are even now talking of strikes. The government can't afford to pay them higher wages without increasing taxation and fuelling the upward spiral of inflation!

As for rents going up, long term perhaps they will but for now rents have been static or falling. What sane landlord would lose a good tenant for the sake of a few pounds when there are plenty of empty rental properties on the market? Few tenants would pay over the odds so any landlord pushing the rent too high will just end up with an empty property.

As for the legal and other fees of moving like stamp duty, well I wanted to move anyway and have just broken the move with renting. Therefore I would need to pay all these fees anyway. The only extra fees I've incurred are letting agents fees (100 each time) and removal fees for any extra moves after the first one.

Frankly I like the irresponsibility of renting, no DIY, no worries about how to find a plumber, can move around to try out new areas, can try out different types of property. Originally having sold a three bed semi I had planed, post crash, to buy a detached house, but since I'm still missing the rented seafront flat I'm having a rethink!

wibble68_2

arkie wrote:

Houseprices will never crash like that, the government wont let it.

The government are only interested in one thing. Remaining in power.

If in years to come the majority of voters can't afford to buy a house, then the government you have so much faith in would engineer a correction to claw back voters. They don't give a sh** about you or anyone else. At the moment it suits their needs to encourage and support high house prices because it supports the economy and creates instant voters.

arkie wrote:

We have one of the best property markets in the world, and once you are on the property ladder dont get off... stay on it

Try telling that to the younger generation who have had to sell their soul to the bank to buy a piece of the mythical ladder.

zkeithz

nrsql wrote:

I love the way people on this site seem to be driven by fear of failure.

Nothing wrong with your basic plan - and you are old enough to know that that house prices can fall by the amount you suggest. And that rents don't follow house prices.

I've been expecting prices to fall for the last two years - it's stopped me from buying rather than selling - did think about moving somewhere smaller though.

nrsql

I tend to agree with you re others.

I say; don't knock it until you've tried it, I already did as previously posted, the time is now right.!!

I have four grown up kids, two now working (relatively high incomes; - solicitor and pilot) both can afford to buy, but concur with the growing view on house price deflation, and therefore each rent modest properties.

No doubt if I am doomed to utter failure, in my whimsicle, ill-informed, back-of-a-fag-packet, kind of way, they can help their old man out in the future!!

Keith