Diary of a House Search

lessonlearned

Hi Everyone

OK I admit this is a bit nerdy. However, it is interesting - well I found it to be a nice little academic exercise.;)

As you know I sold my family house. In order to get a quick sale I offered to go into a rental property and allow my buyers a speedy purchase.

There have been some people on these threads who are dead set against doing this. They either see it as money wasted or just too much hassle.

I can assure you it is neither.

1. My competitors who had similar properties at the same asking price as mine, have still not sold - despite generous price reductions. One has discounted by £25K - a much larger house than mine and just as nice if I am honest. 7 months on and still for sale.

2. Being chain free has meant that we are "good buyers" and we have already made good savings on our first purchase.

Here are the sums, taken on a 6 month lease. (I am hoping that we will be out within a month of the lease expiring if all goes to plan).

6 months rent @ £650 £3900
Less 6 months mortgage @ £424 £2544

Net rent £1356

Discount on 1st purchase £4950
Plus Value of white goods, say £1500

Total Gross Savings £6450
Less net rent £1356

Net savings £5094

Less arrangement fees for lease £250

Total net savings £4844

Council tax remains the same for both properties, both Band D.

Not a bad outcome and moving twice will not be more traumatic than moving once.

As you know I am looking for a property for myself and fully expect to negotiate a discount because I will be a cash and chain free buyer. So the overall net savings should be even higher.....:D

Better_Days

I was initially against going into rented accommodation, but after keeping a close eye on RM for a year or so I realised that it was going to take us a while to find a property that fits our criteria. Given how expensive it is to move I wanted to make sure that our next purchase isn't simply a property that will 'do' but is very close to ticking all the boxes.

So, when we put our property on the market we said we would go into rented. We got a very good offer (the second highest ever paid in our development of 38 properties) and completed a chain of 7 properties.

We can now look round at our leisure and are popular with EA's who ring us up about properties that are just about to come on the market. We can if we wish overlap the rental with the purchase and move in at our convenience. When we find somewhere suitable we can move quickly to secure the purchase.

When we accepted our offer I didn't want the stress of the buyers EA ringing me up every other day asking if we had found a property. Been there, done that, didn't like it!

It was difficult finding a rental that would accept pets but we are all happily settled in our bungalow now.

It really has reduced the stress not trying to tie up a sale and purchase at the same time.

We didn't have a mortgage, and are now paying rent, but this has been offset by the excellent price we got for our property when we sold. We would have to stay in rented for over a year to wipe out the financial gain.

Now just have to find 'the' property. Wish me luck

moneyistooshorttomention

The "go into rental" or not thing will depend to a large extent on peoples circumstances/how their local market is going.

I've just scanned down some pages of rival houses for sale on RightMove in my area and, to date, only come across 3 properties that are empty (and one of them is an obvious probate one), so I estimate that there are probably very few people in my area doing the temporary move to rented and probably a large part of the reason is because our properties take somewhere between a few days and 2 months to sell usually anyway regardless.

Obviously too, anyone in mortgaged accommodation can put the mortgage money saved towards rent payable on a "temporary abode" and this mortgage money will be a sizeable amount if the house is a relatively recent purchase anyway. There is little, if any, saved mortgage money that can be put towards rent if someone has an old or paid-off mortgage. One of the reasons why I personally couldn't go into rented accommodation would be that I would go from £0 on mortgage payments per month to £750 on rent per month:eek:. Add approx. £2,500 pa for two removals:eek:.

It would be a bit cheaper to rent a "temporary abode" where I am moving to - but I can count the number of places available to rent there on one hand at any given time. There were exactly 3 places (of any description) up for rent last time I looked - as they just don't do rented there (well not private sector rented anyways....). There are houses there that are obviously Council housing - but private rented housing simply doesn't exist to all intents and purposes (along with buses on Sundays and evenings and anything much happening on a Sunday, etc, etc...its a very different lifestyle to a lot of places:rotfl:). So if someone is heading for the "back of beyond" then rented simply may not be an option anyway.

So - it may be an option for people who live somewhere where houses usually take some months to sell/there actually are rented places available to move into in the first place/the person concerned is spending quite a bit on mortgage payments each month anyway. It does depend on the circumstances involved...

It wouldn't work for me personally...but that's not to say it won't work for some people..

EDIT: and I wish you luck Better Days. I get why you have done this eventually. My own decision has been to "take what I can get" re a house, as long as it fulfils my most basic criteria and I'm not going to be that particular. As long as I have my location what the house itself is like is very much a secondary consideration....

Davesnave

lessonlearned wrote: »

As you know I am looking for a property for myself and fully expect to negotiate a discount because I will be a cash and chain free buyer. So the overall net savings should be even higher.....:D

I know interest rates are pretty poor just now, but if you've put your 'house money' into easy access accounts they'll earn something, which should be included.;)

When we went into rented because we couldn't buy again straight away, the interest we earned was 2.25x our rent.

Like you, we wanted only to deal with motivated sellers who could offer us a highly favourable price. It took 8months to do a deal, but we were prepared to wait 28months, if necessary.

Better_Days

Davesnave wrote: »

When we went into rented because we couldn't buy again straight away, the interest we earned was 2.25x our rent.

Good point, just done the sums and our rental, after interest on capital from the sale on our house and tax, is only costing us about £80 a month. (Although this doesn't take into account the effect of inflation on the capital)

Plus last month I put £20k in premium bonds and crossed everything!!!

Thanks moneyistooshorttomention, all offers of luck gratefully received.
As you say it does all very much depend on individual circumstances and what the local housing market is like. Also we have been very lucky with our rental, both the LL and the LA have so far been excellent. But it is a 'leap in the dark' and I must say that when the news broke about the 'haircut' for savers in Cyprus I did get very twitchy indeed.:eek:

moneyistooshorttomention

Better_Days wrote: »

I must say that when the news broke about the 'haircut' for savers in Cyprus I did get very twitchy indeed.:eek:

....and this is where I admit that THE main reason why I absolutely refuse pointblank to go into rented is exactly that....and its' way up the top of the list (head and shoulders above my own personal reasons not to...)

In my own little mind I was thinking "Sometime somewhere a Government/the banks will go stealing or attempting to steal money held in banks and I don't intend to have anything much there available for them to steal...". One life experience I would much rather not have ever is seeing the inside of a prison cell...and, if I could work out just exactly who to head for in a scenario like that, then "porridge" it might well be and that new "life experience"...:cool:. Wonders what sort of clothes female prisoners wear these days....

Though I don't foresee the British Government getting up to that sort of malarkey for the next couple of years...long enough for me to spend virtually every penny of my savings...

lessonlearned

Forgot about interest on "house money". As you say not very good rates of interest - but better than nowt.

Money - not sure why going into a rental necessarily means a house would be standing empty???

As I say it's all down to preference - all I wanted to demonstrate is that going into rental does not have to be a waste of money.

Even if I had been mortgage free and mortgage payments had not been factored into the equation I would still be in profit - because I was able to sell and get out quickly I have stayed ahead of the market.

As I mentioned my competitors have reduced their asking prices and still remain unsold - some 7 months on.

One has reduced by £25K - they will not get their new asking price - they will have to discount further. Their eventual selling price will be at least £30K less than their original asking price.

When I sold I gave a discount of £15K, same asking price don't forget- so I am already £15K ahead of the game.

So in real terms I have saved £4844 hard cash plus interest on the capital sitting in my bank. If I had played it differently I would have lost that £15K.

It was definitely the right decision in my case.

Good luck Better Days. You are in a nice strong position - it should go well for you.

Yorkie1

moneyistooshorttomention wrote: »

Obviously too, anyone in mortgaged accommodation can put the mortgage money saved towards rent payable on a "temporary abode" and this mortgage money will be a sizeable amount if the house is a relatively recent purchase anyway. There is little, if any, saved mortgage money that can be put towards rent if someone has an old or paid-off mortgage. One of the reasons why I personally couldn't go into rented accommodation would be that I would go from £0 on mortgage payments per month to £750 on rent per month:eek:. Add approx. £2,500 pa for two removals:eek:.

Without trying to argue with you about your particular circumstances , this point of view overlooks the fact that someone going from small or paid-off mortgage will have a lot more capital in the bank than someone who has moved from a relatively recently mortgaged property.

Whilst the change in monthly outgoings will be different, it is balanced out by the level of equity in the bank to make such outgoings in rented accommodation. Plus the interest on the sizeable amount of equity in the bank, which could well offset a lot the rental outgoings.

Davesnave

Better_Days wrote: »

It was difficult finding a rental that would accept pets but we are all happily settled in our bungalow now.

Bet you didn't have two ferrets, like we did! :eek:

Took us 24 hrs to find three rentals that suited.

And no, we didn't have to put 'em down anyone's trousers! :rotfl:

moneyistooshorttomention

Yorkie1 wrote: »

Without trying to argue with you about your particular circumstances , this point of view overlooks the fact that someone going from small or paid-off mortgage will have a lot more capital in the bank than someone who has moved from a relatively recently mortgaged property.

Whilst the change in monthly outgoings will be different, it is balanced out by the level of equity in the bank to make such outgoings in rented accommodation. Plus the interest on the sizeable amount of equity in the bank, which could well offset a lot the rental outgoings.

True that there would be some level of interest payable on the previous house (whilst it was sitting there as money in the bank). My very rough guesstimate (based on the interest I am getting on my savings currently) would be that I would be lucky to see myself getting more than £100 per month interest and that would go absolutely nowhere towards £750 per month rent.

If someone has a pretty expensive house (rather than a little terrace like mine) on the one hand/had very few possessions/was prepared to move to the smallest accommodation possible then maybe the interest would cover the rent. So if I had a £500,000 house and so few possessions that a 1 bedroom flat (£550 per month) would suffice then it might be worth getting out the calculator and see if the figures added up. A £170,000 house and £750 for rent each month and no mortgage money saved (because there isn't a mortgage) means hundreds of £s down the drain each month.

In my personal circumstances, if I were prepared to lose so much money then I might as well cut the price of my house from £170,000 to £165,000 and "cut out the middleman" by selling it in a few days instead of a few weeks. As it is - £170,000 is the average asking price for a terrace house locally and therefore mine is a bargain price because it's in the 2nd best terrace house area and should cost more than average accordingly (duly checked that out with neighbours and it is indeed the "rating perception" for areas locally).

Again, it's entirely up to a persons' individual circumstances and some people might be able to make the figures stack up that it worked for them.