Selling Up and Bailing Out

keeperbear

500Triumph650 wrote: »

I am selling up and taking the £100,000 equity. It's renting for me for at least the next 4 years...I am comfortable with it because I think the crash is coming

As a homeowner who will not be selling, I bet that I will be better off than you in four years time. During the last property crash, prices in my area of London recovered within two years. Factor in rental costs and transaction costs of selling and eventually buying again, it makes little sense to sell in the hope of a housing crash. That idiotic website housepricecrash (whatever it is called) is so fun to read. When was it set up? Years ago. Anticipating a crash, a mate of mine sold his 2 bedroom flat for £195,000 in 2004 and now rents for £1,100 a month. His flat was recently sold on again for £249,995. Owning property is not like purchasing and selling shares on the FTSE. As you live in your property asset, why uproot yourself with the risk of making or losing a few thousand quid? I never want to be a tenant again.

In addition, I don't care what my property is valued at, as it saves me rent every month (I am mortgage free). Even if there is a housing crash, many people, including myself, will be buying a 2nd property for speculative gain.

payless

Trouble with renting is the ability to do what you want with property ... and then whether the tenancy agreement will be renewed, and yet another move ( if market does crash, how many buy to letters will try and sell out , meaning not renewing teancies)

keeperbear

hughgallagher wrote: »

I think you've timed it well ... IR and inflation are on the up and the USA is falling. Make sure you save and/or invest the equity to reduce the capital and interest on your next mortgage.

Whilst the OP did say that he had debts to settle, where exactly do you safely invest £100,000 of released equity? When people talk of "selling to rent" because of the "overvalued" property market, do they think about where the equity will be invested? The stock market? The FTSE and Dow are both at record highs, so is an investment in shares any less risky than an "overvalued" property? I think not, especially as property ownership gives you somewhere to live.

Of course, you can put your equity in a savings account earning about 4.00 net per annum (assuming you are not a higher rate taxpayer that is), but that rate barely exceed inflation and needs to be offset against rent payments. Assuming you will eventually rebuy, you also need to recoup your transaction costs from buying and selling, which will be considerable.

Putting it all together, selling to rent is not as clear cut or easy a decision as people make out. Much riskier than it seems, especially as no one can predict house prices in individual areas of the UK. For example, London prices are still booming, and it would be madness to "sell to rent" here, especially with the Olympics fast approaching.

Romani_Ite_Domum

keeperbear wrote: »

Whilst the OP did say that he had debts to settle, where exactly do you safely invest £100,000 of released equity? When people talk of "selling to rent" because of the "overvalued" property market, do they think about where the equity will be invested? The stock market? The FTSE and Dow are both at record highs, so is an investment in shares any less risky than an "overvalued" property? I think not, especially as property ownership gives you somewhere to live.

Of course, you can put your equity in a savings account earning about 4.00 net per annum (assuming you are not a higher rate taxpayer that is), but that rate barely exceed inflation and needs to be offset against rent payments. Assuming you will eventually rebuy, you also need to recoup your transaction costs from buying and selling, which will be considerable.

Putting it all together, selling to rent is not as clear cut or easy a decision as people make out. Much riskier than it seems, especially as no one can predict house prices in individual areas of the UK. For example, London prices are still booming, and it would be madness to "sell to rent" here, especially with the Olympics fast approaching.

Keeper bear, I agree, the housing market is very much a regional thing.

From my personal angle:

I am looking to move up the ladder so buying/selling costs are negated.

4% Net on my equity would cover 90% of my rental costs.( Bigger house than I am in now)

True my money would depreciate due to inflation but so will the equity in houses if the market stagnates or drops.

The above is clear cut to me. Of course if HPI continues above inflation I would be making the wrong call. With the current economic climate I doubt it.

harryhound

Some of my wad is in Inflation Proof gilts - cross your fingers for me

busabus

We'll not truely know what will happen until it happens.

So never be scared to do what you think best because someone else disagrees.

PJD

The OP might not live in London.

If house prices crash to a similar percentage they have done on the last three boom-bust cycles, - (ie return to the level they were before the boom), then the OP could be MUCH better off.

Who's to say that the market will recover in about two years (if indeed it crashes at all) - it might take much longer.

I'm in a similar position in that my equity is in 'high' interest savings accounts & ISAs, - and yes, although this might not cover inflation, - i'm managing to save reasonable amount of money (£700 - £1,300 a month including interest on my savings) because i'm house-sharing, not renting.

If the price of a similar property I sold in Dec 06 falls by say 50k (a reasonable estimation), and I get back on the ladder, then I'll definitely be better off even with buying & selling costs factored in.


I'm not saying the OP is right or wrong to do what he's done, - in truth no-one can judge because no-one can predict the future, it could be the perfect decision, who knows. But he's made his/her decision, & followed it through, - good for him/her.

Rick62

I think the OP is probably right, but so are posters such as Keeperbear. If you need to sell anyway, because of debts, moving etc then I think it makes sense to rent for a while and see how it goes, particularly when renting is often nearly half the cost.

If however you have a family home you are happy with then you should probably keep it, the hassle stress and cost of selling, renting, trying to buy back are unlikely to be worth it, and even if there is a crash, quality properties will go down less and recover quicker.

ninetysec

I just be new member and thanks for all useful information

kingkano

Rick62 wrote: »

I think the OP is probably right, but so are posters such as Keeperbear. If you need to sell anyway, because of debts, moving etc then I think it makes sense to rent for a while and see how it goes, particularly when renting is often nearly half the cost.

If however you have a family home you are happy with then you should probably keep it, the hassle stress and cost of selling, renting, trying to buy back are unlikely to be worth it, and even if there is a crash, quality properties will go down less and recover quicker.

ummmmmm riggghhhtt... I often wonder where this magical mystical place is that rent is half the cost of a mortgage. The last 4 mths I looked at renting instead of buying the next house on. I found some places that were slightly less, most were similar. Nothing was anywhere near HALF a mortgage..... (fair dos I live in SE).

If you can find that.... definitely rent and save the difference. Quids in.