Rent or Buy, ex-Expat's Dilemma

Nocturnes

Looking for opinions! Have been renting since returning to UK after a couple of decades away. Due to OH's current job we are unsure how long we will be in the UK. Could be another 2, 3 or more years. We don't have much say in the matter unless he resigns. When we arrived in 2011 we thought we'd be here max 2 years in total. We do not know where we will end up in retirement but are fairly certain it won' be the UK. Both late forties.

Anyway, current quandry is, should we buy a house here? We unexpectedly now need to leave our current rental, so considering if we should buy or rent. We sold our house overseas so could afford to buy with a small mortgage. Our house proceeds are accessible but earning minimal interest (savings a/cs, term deposits etc).

We think that if we bought a property, we would need to purchase something that would be easily rentable if we were unable to sell when we had to leave. This would then most likely not be our ideal place to live. (i.e. the house we sold was not a suitable place to rent from long distance, required regular maintenance, room layout not maximised etc. so we sold). Currently our rental options are not our ideal places to live either!

Our concerns about buying in this uncertain market are, possibly losing more than we would spend renting if we have to sell within 2 - 3 years or less, plus costs/fees of buying/selling a property. However, we have paid £30k+ to rent until now, plus large removals bill each time we move.

Appreciate anyone's input, thank you.



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bluesnake

so it is rent vs payments sides.

so say your current place cost £2000 a month to rent,

say your mortgage is £1000 per month (12k yearly), but you also put down £150000 deposit but at 2% bank interest, generates £3000 a year

Then solicitors fees twice (2k) for buying and selling, and agents fees say 2%.

Taking into account currently the market in many areas it flat an takes months or years to sell, an may be lucky to brake even. Taking into account if you are in the right area you will be making money and have a flock of buyers going to your door as my friend has done 1 month ago in clapham.

Also in your flat you can do what you want, no snooping landlord. In 3 years he had it, he made a slight gain of about £3000 in rent vs payments. £70000 was made in property value as he has just sold.

The key is buying at the correct price and do not be to eager, buy with you head and not heart, haggle and walk away.

knightstyle

We had a similar problem a couple of years ago. We decided to buy a property and let it for holiday lets, fully furnished with phone and broadband. That way it was available when we visited the UK. Can you get a relative to run this for a fee? Have a look at Hoseasons for ideas of rental prices in your area. It all went well and we had no problems at all.

sun-n-moon

I'd buy at the moment.
Better your money in bricks rather than in the bank where the government may be looking at ways to take it off you.

yoyoegg

An issue is that you put cash in a £ denominated asset but the FX goes against you in the place you want to retire to, wiping out any capital gains. You could be better off with a $/Euro/whatever account and saving into that.

Renting out when you're abroad is a 'mare, you'll need a full-service agency here in the UK who will be taking a big % of the rental income, and they'll not be looking for value when it comes to repairs etc.

Outside of London and a few 'hot spots' like MK, York, Aberdeen the chance of any decent capital gains looks remote, but it's also unlikely that prices will drop, just go sideways so a real fall when you consider inflation.

Rather than take a big punt on an illiquid asset (a house), you could look at an investment as a hedge against the UK market picking up, such as one of the BTL funds, a spread bet on the Halifax average house price index, or a futures contract on the £/$ exchange rate. That would be what a professional investor who do when faced with uncertainty, so they'd at least cover themselves on the downside.

thelem

Sounds like a lot of hassle if you're not likely to be here very long. What are you expected to happen at the end of the 2-more years though? 50 is early for retirement.

Regarding your cash, remember not to store more than €100k/£85k with any one institution.

Fire_Fox

Think very carefully before becoming an overseas landlord, that is a nightmare situation for both tenant and landlord. Property is a good investment over the longer term, a gamble over the shorter term, in many areas it really is not worth it for two to three years given we are in the middle of a recession.

Nocturnes

Thanks to everyone for replies.

bluesnake - agree, especially the "buy with your head" comment, something I learnt with our first house purchase - I make sure I have no emotional attachments to any property. Also, you are right, we hate being "landlorded over" as we have been recently.

knightstyle - thanks for that, it is not something I considered and where we are, there is a demand for furnished short term let property, but also we are in a good tourism area.

sun-n-moon - yes I'm also feeling uneasy about money in the bank in these times.

yoyoegg - we have taken a hit on our savings in Sterling. We perhaps stupidly decided to convert savings to ££s thinking we should have them in the currency of the country we are in. But in hindsight, we should have diversified into several currencies. Another reason for selling overseas was the long-distance landlord issue. It could never work for us. I will look into your investment ideas, we are not at all savvy in that area, but must learn.

thelem - That is the big question. Whenever we have made plans in the past, they have been blown out of the water, so we do tend to live in the moment without looking too far ahead. I would like to be able to plan, but this job situaiton means that we can't. Yes we have made sure we are protectded by FSA guarantee, so hopefully ok there

Fire Fox - Thanks, agree re long distance letting although we know some who have done it and it has worked out fine. I agree too that 2-3 years would be a gamble in this market, but I thought if we looked at something lettable and marketable, then we may have a chance. We feel in a difficult situation and not sure what is the best way forward.

Thanks everyone for your input. Any other comments are very welcome

harpoboy

I have worked overseas for periods during my career, and had no problem in renting the house out. You may even find your employer will pay for the EA's fees.

The beauty of this arrangement is that if you move back to your home after an overseas assignment, it resets the clock for your PPR and so is extremely efficient from a Capital Gains tax perspective.

Property prices (and rents, for that matter) are rising and these house price rises are likely to gain pace in the new year, once the governments new schemes take hold.

Sounds like you have an ideal opportunity to buy a great asset.

gfplux

Shame you have converted your sale proceeds into Sterling that is an expensive lesson. however you are where you are.
If you do buy, remember location, location location. Better the small property in the best location rather than the large in the not so good.
Being a long distant landlord is not an easy thing. Also selling an empty property by long distance is (was for us) a dreadful, painful and difficult experience.

yoyoegg

Any other comments are very welcome

As you are not an 'accidental' LL, could be good idea to join NLA or one of the other LL groups and go to their meetings/seminars to get a better idea of the costs and the type of properties with maximum occupancy and rates, even if that isn't your 'thing'.

That said, IMHO the taxation treatment of income and capital for owners and esp. BTL owners is likely to get much less favourable in the UK.

Having offered a 'carrot' for 20 years to get BTL LLs to invest in flats and HMOs to house the millions of 'seekers' instead of the Councils, it would be all too easy for the tax 'stick' to come out. In a world of 'mansion tax', 'levys' and 'haircuts', there's no-one in politics who will be on the side of 'absentee landlords'.