to save or invest?

nicb

My partner and I recently moved out of a 1-bed rented flat in London and in with some friends to save money towards a deposit for our first home. We're now able to save about £1,400 per month (altogether). We have to buy in London due to work commitments.

We currently have about £12,000 saved towards our target of £40,000 deposit. I am now wondering if there is a creative way of maximising the return on our savings over the next 24 months (Approximately) ...

Instead of putting our £1,400 monthly savings into an ISA or other savings account, I'm exploring the idea of using the £12,000 we have at the moment to buy a small house in our home-town in Wales. By renting the house out to a tenant for at least the monthly interest on the mortage, I wonder if this could lead to a greater return in the long run? The rest of the mortgage repayments would come out of our monthly savings and go straight into equity, and if we bought somewhere with scope to rennovate and add value - we could sell the place on for more than we buy it for now in two years.

What are the holes in this plan?

Is general consensus that house prices will rise or fall over the next 2-3 years?

Are we better off putting all of our money into savings?

Any advice greatly appreciated!!!

brit1234

Don't buy a property in Wales in a falling market and economic collapse.

Get it straight away in one of these monthly high interest accounts and think things out.

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest

opinions4u

If you're looking over 3 years or less, my money's on house values dropping.

If you're looking over 5-10 years, I doubt you'll keep pace with the RPI.

Thrugelmir

nicb wrote: »

we could sell the place on for more than we buy it for now in two years.

Buying and selling property incurs considerable costs.

Property is illiquid as an investment. Cashing in may be more difficult than you think.

To sell the property you'll have to give vacant possession. Therefore no tenant in situ. So you'll be paying all the costs including mortgage interest while the property is empty.