Selling To Rent

nollag2006

My favourite STR story has to be this one from one of the founders of HPC:
http://www.housepricecrash.co.uk/forum/index.php?showtopic=246

One of these jokers STR'd in 2003!!

Wow! How much money has that gamble cost him?

My heart bleeds

wotsthat

Andy Verity who presents R5 wake up to money STR'ed in 2004. I think he's still in rented. When I've heard him talk about it he seems quite sanguine but seems slightly bemused at just how bulletproof houses prices have been given the dire predictions of a few years ago.

Abatement

wotsthat wrote: »

I thought about STR’ing in 2006 as I thought prices couldn’t keep rising and was worried about the ease that credit was available. (I never thought in a million years we’d be in the current turmoil though)

I didn’t STR for four reasons; my wife told me I was being a retard, I had two children settled in a good local school, the mortgage was affordable and, to be honest, I couldn’t be bothered with the hassle.

I’ve tried to revisit the situation and work out the situation I’d be in if I’d STR’ed.

In Q3 2007 my house, 3-bed detached, was worth around £200,000 and according to Nationwide it’s now worth £179,400 however I’m certain that it would be sold this time next week if it was £170,000 so I’ll go with that. Let’s say I sold in 2007, rented from the purchaser, and bought back today at this ‘distressed’ price.

The basic reduction in price has been £30,000. My selling fees (1% EA + legal) would have been £2611 and my buying back fees (mortgage valuation, stamp duty and legal) would be £2759. From my profit of £30,000 therefore I need to subtract the total fees of £5370 which leaves me with £24630.

Then I need to factor in the rent I needed to pay – well today there’s a house almost identical to mine within ½ mile up for a rent of £775/ month. We know rents have risen since 2007 so let’s say I could have rented for £650/ month and because my landlord likes me the rent hasn’t changed since. 48 months of rent at this level would be £31,200.

So using figures intended to help an STR argument i.e. bargain rent, low EA fees, selling at peak, buying back at distressed levels, no moving costs etc. I’d be down a total of £6570 just on the basic buying and selling.

As it happens my mortgage has remained quite some way below the rental and I’m 4 years closer to paying off the mortgage too. Maintenance costs have been minimal; most of the expenditure such as a new bathroom were cosmetic and I’m sure wouldn’t have been considered by a landlord.

If I had STR’ed I’d need prices to fall roughly 10% (from an already distressed price) just to break even by the end of 2012. If I wanted to present the figures more realistically I’d need much more significant falls to break even and who wants to take a five year punt against a market just to break even.

The only realistic circumstances I can see this working is as short term gamble i.e. sell up, short sharp crash and buy back. Even gradual declines don’t really help as rent just means that you end up treading water.

Has anyone managed to make STR pay?

err, slight problem...you haven't factored in your mortgage interest you have paid since 2007 or the amount you'd have earned from investing your proceeds of sale.

At 3% on 200,000 x 4 years that's £24,000...

Even at only 1% mortgage rate/interest return, it's £8,000.

nollag2006

wotsthat wrote: »

Andy Verity who presents R5 wake up to money STR'ed in 2004. I think he's still in rented. When I've heard him talk about it he seems quite sanguine but seems slightly bemused at just how bulletproof houses prices have been given the dire predictions of a few years ago.

I love hearing these stories.

I have a guy renting from me who STR'd in 2009. London house prices are up over 10% since then. I've just put his rent up well more than that recently too !!!

:eek:

I love to hear him lecture me on the coming house price crash. Almost as entertaining than reading the musings of brit1234 or geneer on here!!
:rotfl:

wotsthat

Abatement wrote: »

err, slight problem...you haven't factored in your mortgage interest you have paid since 2007 or the amount you'd have earned from investing your proceeds of sale.

At 3% on 200,000 x 4 years that's £24,000...

Even at only 1% mortgage rate/interest return, it's £8,000.

I wish I could have trousered £200,000! - there's the outstanding mortgage to pay.

However, realistically I could have included interest on was the difference between the selling and buying price. At 3% it would be a tidy sum but it's still wouldn't profitable especially when I should have also included the capital paid off in the meantime which was way in excess of this sum

JonnyBravo

IveSeenTheLight wrote: »

Hey geneer, what's the significance of your new avatar?
I get the feeling there's a meaning behind it.

I did like your previous mug shot.

He's probably a bit gutted it took so long for someone to ask.
Nice to see that pimpernel's number thing never got to him or inspired him though.
Totally different meaning.

I'd say it's not that hard to guess it's meaning.
But I have a feeling a couple of people might never find out.... or be able to admit to finding out.

But then I could be wrong.... it did happen once before....

marlonthemagnificent

i STR'd in 2007, due a job move
i started renting in a new area while i looked to buy, then prices started dropping like a stone

i was well advised to buy metals, which i did with 100% of my equity..a massive gamble, but one based on a lot of research

since then, metals are up 3-400% and house prices are down 20+%

i'm massively better off by STR'ing...although it was not intentional

i have no intention of buying a house in the short to medium term...and possibly not again in my working life, because renting is easier, cheaper and far less hassle

if you had equity and STR'd and invested wisely, i'd say there is a very good likelihood that you'd be better off....although i agree that STR'ing purely for financial gain was a massive, and in my opinion, stupid risk to take

nollag2006

marlonthemagnificent wrote: »

i STR'd in 2007, due a job move
i started renting in a new area while i looked to buy, then prices started dropping like a stone

i was well advised to buy metals, which i did with 100% of my equity..a massive gamble, but one based on a lot of research

since then, metals are up 3-400% and house prices are down 20+%

i'm massively better off by STR'ing...although it was not intentional

i have no intention of buying a house in the short to medium term...and possibly not again in my working life, because renting is easier, cheaper and far less hassle

if you had equity and STR'd and invested wisely, i'd say there is a very good likelihood that you'd be better off....although i agree that STR'ing purely for financial gain was a massive, and in my opinion, stupid risk to take

Yep - sounds like a very sensible thing to do - sell your house and gamble the proceeds on shiny stuff, which has nil yield and no intrinsic value... all the while rents rise well above inflation while mortgage payments drop

marlonthemagnificent

nollag2006 wrote: »

Yep - sounds like a very sensible thing to do - sell your house and gamble the proceeds on shiny stuff, which has nil yield and no intrinsic value... all the while rents rise well above inflation while mortgage payments drop

did you actually read what i said?
i did the STR for work....not financial gain

and did you understand the % figures?
+300% on investing STR fund and -20% on house prices over the same 5 year period

house prices continue to go down and meal prices continue to go up....that's fairly simple to understand isn't it?

nonetheless, i'm slowly moving momey out of metals into lesss volatile investments...that's the beauty of metals...you can get in and out easily. try doing that with a house in a falling market

Dan:_4

marlonthemagnificent wrote: »

nonetheless, i'm slowly moving momey out of metals into lesss volatile investments...that's the beauty of metals...you can get in and out easily. try doing that with a house in a falling market

Only and idiot would want to 'get out' their home because the market is falling.