Renting vs Buying Outright

SteveRadner

booksurr wrote: »

at the moment it appears all the interest from your investment is being spent on paying "half" your rent therefore your investment is actually performing very badly since the capital has zero protection from inflation as it is not being topped up by rolled over interest

if therefore all you are looking for is an assessment of financial investment opportunities go see an IFA as you can do better than that

if on the other hand you want to buy somewhere to live that is a different matter as owning a prtoperty you live in compared to renting is a bit of a no brainer in London over a 5 year period for the reasons outlined by jimmy the wig

That's right. After I've taken the interest it staying at around the same amount... Could I do better? Should I be buying then?

The people the money is with say I should keep it with them.. but they would say that. You're right, it's worth having a meeting with an IFA and see what they say...

SteveRadner

JimmyTheWig wrote: »

I agree, ringo.
As I say, it just depends on how you look at it.

Sort of my point was that the OP is looking for a small property.
In many areas of the country this would mean that they wouldn't be paying stamp duty. In London I suspect that they will be.

Definitely will be! Anything over 125k is hit by stamp duty, right? I'm not sure I could buy anything for less than that in London...

[Deleted User]

So.. why are you limiting yourself to London? If you want to buy to rent it out, find somewhere in the country that it makes more sense to do it..

If I was you, i'd be getting a mortgage big enough to buy somewhere that will let you rent out a room or two; and ideally in an area that might raise in value

SteveRadner

ringo_24601 wrote: »

So.. why are you limiting yourself to London? If you want to buy to rent it out, find somewhere in the country that it makes more sense to do it..

If I was you, i'd be getting a mortgage big enough to buy somewhere that will let you rent out a room or two; and ideally in an area that might raise in value

My work is in London. I don't want to buy it to rent it out, I want to buy it to live in it. And if I did look outside London, I'd have to consider commuting costs and that I'd probably not make as much on it over the next 5 years.

I'm a sole trader without strong enough regular income for anyone to let me have a mortgage at the moment. I would do that, but don't think it's an option.

I'd like to do something with this money where it's helping me out right now and working as an investment for the future.

SteveRadner

I know I said this already but, I really do appreciate all the advice on this. It helps a lot to get other perspectives as I try and figure this out. Also gives me a lot of questions to ask an IFA and lots more to google!

JimmyTheWig

One question, Steve, that you may or may not be able to answer easily.
If you didn't have this lump sum but had enough for a deposit and your employment situation meant that you could get a mortgage, would you buy somewhere to live?

Or is home ownership something you've only thought about because of this lump sum?

needabed

Circle of money...

Basically you have money invested somewhere, they use this money to buy properties to rent out, you may even be renting said property.

At the end of 30 years you get your investment back and they've got a house which has probably doubled in value.

SteveRadner

JimmyTheWig wrote: »

One question, Steve, that you may or may not be able to answer easily.
If you didn't have this lump sum but had enough for a deposit and your employment situation meant that you could get a mortgage, would you buy somewhere to live?

Or is home ownership something you've only thought about because of this lump sum?

If I could've got a mortgage I would've bought some time ago, yes. But because I've almost always been freelance and am only recently starting to make a good living at it, it's never been an option.

This money makes it an option.

SteveRadner

needabed wrote: »

Circle of money...

Basically you have money invested somewhere, they use this money to buy properties to rent out, you may even be renting said property.

At the end of 30 years you get your investment back and they've got a house which has probably doubled in value.

Wow. I never thought about it like that before. Well, that makes what I'm currently doing seem insane. I don't get anything out of it.

SteveRadner

This is really interesting. So if I want to use the money to buy a house to live in then there seems to be no reason not to do so.

But if wanted to make as much regular cash from this money then what I currently have is potentially a good idea, but buying a house to rent out could achieve the same thing, and potentially give me a bigger long term return on my investment.

I'm starting to wonder if there are any plus points to having the money invested the way it currently is?