I have £150k cash. Should I buy or rent? House or flat?

mubeye

I'm 34, single, I've saved up 150k. I feel under pressure to do something with the money. I know it's a hugely personal question, but what would you do in my situation?

I've drifted around a lot, but am currently in the middle of a 6 month tenancy in Edinburgh. I have no real ties here.

So options are

keep renting until I have more concrete reasons to buy
buy a flat in cash.
move somewhere cheaper and buy a house in cash.
buy half a flat + small mortgage
buy a house + larger mortgage.

I don't really buy the 'rent is dead money' argument. I invest in stocks etc.

Any anecdata or advice appreciated

Twiggy_34

If it were me I'd go for buying a flat outright and tucking away the money you've been spending on rent. If/when you do settle down with someone and want to move to a more suitable family home, you might find you have 2 options, the first being to sell the flat and put the proceeds towards said family home, the second being to buy the family home (assuming the savings you acquire in the meantime will be enough for a sizeable deposit and can get a mortgage for the rest) and rent out the flat which might cover all or most of the mortgage repayments on the family home.

If what we're hearing right now is true now is a good time to buy for most areas as property prices are starting to rise, so that could work out well for you if you choose to sell in the future.

I'm in agreement with those who say rent is dead money, you're never going to get anything back from that money. I rented from 2008 through to 2012, with an average rent of 500pcm. Had we bought instead we'd have been 4 years into a mortgage and getting something back for our money.

We're now 18 months into the mortgage of the flat we bought in 2012 and choose to make overpayments to reduce the term. As things currently stand we're set to clear our mortgage after 15 years (reduced from 20 with the overpayments) so we would be both rent and mortgage free after that time. In addition we bought a doer upper and within 12 months and with minimal financial cost we'd increased the value from £80k to £120k.

Of course another angle to look at it from might be the fact that mortgage rates are pretty much as low as they'll ever be and that might be worth taking advantage of and buying something bigger which might be your forever home...

Edit: In the light of citricsquid's response, I will add that they make a good point about taking the time to buy the right place for you. I certainly wouldn't rush out and buy the first flat you find that falls within your budget, you definitely want to find somewhere that you'll be happy in for however long you might be there for. I still think buying is the better plan though, even if it didn't turn out to be right for the longer term, for whatever reason, you could consider renting it out and renting somewhere else yourself.

drbraindead

Where I live, you could buy 1 good house and 2 not so good houses. I would live in one and rent out the other 2 for 430pcm.

hcb42

I doubt you could get much for £150k in edinburgh. If you are going to remain there for the foreseeable then I would go deposit plus mortgage..if not, then I would not compromise just to buy something...unless you want to become a landlord, in which case, different criteria apply

G_M

Buying ties you down - it's less flexible than renting.

You don't sound as if you are tied to Edinburgh by job? Family? Partner? etc so do you want to tie yourself to Edinburgh (or anywhere else) at this stage in your life. What if you find a job in London next month?

On the other hand, buying provides security. It lets you live in a place that is 'yours' to decorate etc how you like. to improve and mak it nice knowing you are benefiting long-term, not a landlord.

On the other hand, buying means responsibility. For repairs, boiler breakdown, roof leaks etc. No landlord to ring up and demand it gets fixed.

Only you can decide, but there are other ways to manage your money in the short, medium and long term ie, as you say, investments.

ging84

you say you invest in stocks and share
i assume that gives you a far better return than the current low mortgage interest rates, even after tax

so if you buy a property, it would make sense to put the minimum amount of deposit in that you can that gives you a high enough LTV to get the best interest rate.

the rest of your capital can continue to be invested in the same way as before

norabatty_2

I'm agreeing with citricsquid. If you "invest" in a house, you will be lucky to see a 2-3% annual return if the market starts to improve, which is starting to happen in *some* areas of the country. How much return are you getting from your stocks?? I'm guessing a lot more than 2 or 3%!

I appreciate the argument that rent is dead money and I know that you can't invest your rent money in stocks but at the same time, buying and selling houses/apartments costs a lot of money, not including the purchase price. Solicitors fees, surveys, estate agent fees, stamp duty all add up. Buying our current home cost over £4,000. And you don't have to pay any of these fees while renting. The process also takes a lot of time. If you want to sell an apartment in 2 years time, you should expect to wait another 6 months before you see your money again.

Me and OH own two properties. One is our family home bought in 2010, the other is an apartment OH bought just as we got together in 2006. The apartment is in negative equity and we are currently plugging all available funds into reducing this mortgage asap. The apartment may have been right for him in 2006 but within 3 years we had outgrown our 2 bedroom apartment and really needed to move to just feel like we could breathe in our own home.

While getting into negative equity is not very likely for you if you buy property now, you admit yourself that you aren't sure where you see yourself in the next few years and have no ties to where you currently live.

My advice is to keep to what you're good at - keep investing in stocks and building up that nest egg. The time will come when you realise you "need" to buy a place and set up home. You most likely will find a place that you just have to live in. Once you do this, you have signed yourself up to a big commitment, that will be costly to get out of! Don't buy something now just because you're 34 (my age also!) and you are feeling pressure from others that buying houses is what responsible 34-year-olds do!

On a separate note, all of my 34 year-old married friends own houses. I have more friends that are single than married - none of them own houses! They do, however, all have substantial nest eggs like you and are waiting for the right moment to buy. This has proved to be a really good idea for one of them - she was recently offered her dream job in Spain and will be moving out there shortly for a 9 year contract! She is very glad she didn't buy here, because it literally means she can pack her bags and just go.

Pixie5740

If I were living in Edinburgh and had a nest egg that size I'd use it as a deposit to buy something in the New Town. I've always liked the architecture in that part of Edinburgh ever since I was wee. Mind you if the neighbours turned out to be anything like the characters in the 44 Scotland Street books I would probably end up regretting the decision.

In your shoes though, as don't seem in any hurry to settle in any one particular place, and this is real life and not some day dream of mine, I would just keep saving and investing as you have been doing. Why do you feel under pressure to do something if you don't mind me asking?

mubeye

Pixie5740 wrote: »

Why do you feel under pressure to do something if you don't mind me asking?

I work online and have taken advantage of this my moving every few months, lived in Spain for a while and all over the UK. it's starting to get tiring though. I'm always wondering where I should move next. And I have paid a premium for that flexibility, staying in Airbnbs sometimes to avoid contracts. Decision fatigue is taking it's toll though and I feel like dropping anchor would be a stabilising influence. And if it makes financial sense too, that would be good.

In terms of asset allocation, having some money in property and making most of the low interest rates seems sensible on the surface. However, it's quite likely that unless there is a big shift, the stock market will return more than my rent (if i can resist overtrading) so I don't see rent as a big factor in the decision. Though seeing it go out of the account every month is irrationally tough.

Amba_Gambla

Find your nearest casino, then £150k on black.

Done, done and done.

bluebeary

if you prefer not being tied down to a property, buy a flat and rent it out, therefore gaining more

three bedroomed detached house or something similiar

when i buy a place i always consider how im going to sell it, a two bedroomed might be too small for some and a four bedroomed might be too big for others