How I intend to make £'000s

tomstickland

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.

"paying someone elses mortgage off" using the interest from money he's made by using the market to pay off his mortgage for him.

The range of ifs and buts are no more significant than those relating to buying houses as in investment.

Why would the government/BOE not let a crash happen?

meanmachine_2

In the same way that the govt didn't let a civil war break out in Iraq...

..Or allow petrol prices to soar...

...Or BSE to happen...

...Or the Olympics to turn into a scandalous waste of money...

...Or Wembley to become a farce...

...Or England to lose the Ashes.

Not saying this lot are any worse or better than the last lot. They've just been lucky.

Politicians are pretty powerless to stop world economic events.

Property inflation has struck the entire Western World (apart from Germany where such silliness isn't allowed).

real1314

Is this £220k house the same as the houses you can rent for £400-500pcm?

I'd guess that you're looking at renting a house worth £130k-£150k max based on those figures, so you could just sell and trade down to make £70k anyway.

Most of your running profit is based on trading down and doesn't take tax off your 5% so it'll be £585.
Your current mortgage must be about £250 pcm so you're paying an extra £200 or so in rent, leaving your profit as £385 pcm.
Based on £180k that's a return of 2.57% before inflation is taken into account, and as it's currently around that figure, you're just standing still.

If prices drop, you'll win, but they'll have to drop a lot for you to make any worthwhile profit. You're expecting a 33% drop, which is highly unlikely.

If prices stay the same, you just lose out due to the cost of moving / an uneccessary risk.

If prices rise say 10% overall over 2 years , your £220k house will be £242k

You'll have £180k + £385 x 24 = £189,240 and will need nearly £52k mortgage, i.e £16k more than you started at.
Even if they rise by just 3% per annum (in line with inflation) you'll need a £44k mortage.

It's a gamble, based on house prices, just like buying a property as an investment assuming it will rise in price.

And you're sepnding 2 years in a lower standard of housing to pay for the gamble too.

meanmachine_2

It's a gamble I wouldn't be willing to make.

Also, I'm predicting a maximum rise in prices of around 30% between now and around 2009/2010 - then for a painful slow correction to set in.

I'd love to be proved wrong, but with the high street lenders loosening their lending criteria in 2005 - hence causing the recent increase, you're unlikely to see falls for a while.

Also mortgage approvals are strong right now - so again you'll defo see rises in the next few months.

I know you called it right last time. But was that luck or judgement?

Also, the ending of MIRAS was a clear trigger - in hindsight.

I still don't see one on the horizon, so it's v v risky.

a010454

What a lot of rot ;-) House prices aint going to fall. They may stagnate or at the higher end drop slightly in certain areas, but overall in the long term property is a great investment. This is a small country with a population due for a massive increase over the next few years and they all need houses.

potnoodle_2

i totally agree, its supply and demand, especially with immigration putting more strain on population figures. i dont think prices will fall and definelty wouldnt get out of market,

leftieM

I think it's a good idea if the circumstances are right - your family have grown up, you have an asset rather than somewhere you want to make your own, you don't mind the 'downsizing' aspect of renting (I mean getting rid of a load of stuff because it's too awkward to move from place to place). You are much more of a rolling stone when you rent - a month's notice and you're gone!
If I were at a different stage in life I would rent and pocket the equity from my house. Good luck to you.

jellyang

I am in that position now.
I have sold my house & will have 150k-165k in my bank.

Can not decide if I should buy or sit on my capital & rent.

Anybody got a crystal ball?

Jim_B_3

arkie wrote:

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

Arkie,

Can you tell us why the government let them crash last time? Also, why was the great depession of the thirties allowed to happen? Why don't the government simply make everything perfect?

Jim_B_3

a010454 wrote:

What a lot of rot ;-) House prices aint going to fall. They may stagnate or at the higher end drop slightly in certain areas, but overall in the long term property is a great investment.

I looked into this a while ago. The data is now a few monthes out of date, but nonetheless you're just plain wrong. The oldest consistent data on house prices is from Halifax. The lender's house price index shows that a property valued at £100,000 in 1983 would be worth £555,000 today (not quite today, anymore; needs updating by a few monthes). Although this may seem like a decent return, a similar investment in commercial property would have grown to £997,000, while investing in a FTSE All Share tracker fund would have returned £1.4m with all dividends reinvested.