3 Years, Can I make money with a house?

Firestorm_2

Hi Everybody.

I have been saving hard and working hard for several years now and have recently become debt free earlier on this year.
I have just signed a 3 year work contract in Plymouth, so I know I will be in the area for the next 3 years and my job is pretty stable.

I’m a single guy, renting currently at £420 a month For a 1 bed flat.
After my 3 years I am hoping to move abroad.
I have £10k in a savings account.

What I want to know is what is the most sensible thing to do money wise over the next 3 years. As I see it I have 3 options:

A)[FONT=&quot] [/FONT]Continue as I am renting at £420 a month and paying all my bills by myself. And invest the 10k in high interest savings or similar.
[FONT=&quot] [/FONT]Rent a shared 2 bed place to halve bills with my cousin and invest the 10k in high interest savings or similar.
C)[FONT=&quot] [/FONT]Spend the 10k on a deposit for a 2 bed house, and rent out the second room to my cousin, then sell it in 3 years when I move abroad.
I do not want to be living in Plymouth for much longer than 3 years if I can help it, so I would be gutted if the house went into negative equity in 3 years time, and I figured maybe Brown would shake things up a bit by then. Also I would be a bit screwed if my cousin rented from me and then went his own way after 6 months. But I guess I could always rent it out to someone else.

What would YOU do in my situation?

PasturesNew

Houses cost a lot to actually buy - and even more to sell. So it could wipe out most of your £10k just to buy/sell.

Then, it is my belief that houses will drop in price. So you'd be selling it for less than you paid for it.

Put £3k in a high paying ISA (see martin's list but I think NS&I is the one) and the remaining £7 kinto high interest instant access account (Sainsburys? But see Martin's list). Then move £3k from there into an ISA each year.

Your original £10k will be safe.
You'll have accumulated another £1500+ in interest so it will be £11.5k

If you buy and it goes down in value, you could easily lose a lot more than that

pcwilkins

Personally I'd definately go for option B. As long as you like and trust your cousin. If not, option A. I would definatly advise against buying now, especially if you're only there for 3 years.

The other thing is that unless either a) property prices are very low in Plymouth or b) you are on a high wage, you may struggle to get a mortgage.

Peter

Firestorm_2

No, property is not low, and I am on a "good" wage but I am not a stockbroker or anything!

On the other hand, I am only 26 years old, and potentialy I could keep the house for a full 25 years, just not live there, rent it out maybe through a letting agency. That would give me a longer term to ride out any blips in the market.

It is worth mentioning that I am not risk averse at all, and I made all the money I currently have through running my own business, so I am also thinking of other ways to invest my 10k that may not be quite as "safe" as an ISA if it means a higer rate of return.

Any ideas for that?

dolce_vita

Firestorm wrote: »

It is worth mentioning that I am not risk averse at all, and I made all the money I currently have through running my own business, so I am also thinking of other ways to invest my 10k that may not be quite as "safe" as an ISA if it means a higer rate of return.

Any ideas for that?

Have you considered investing in stocks and shares?

Firestorm_2

Stocks and shares?
Yes, I did read a "dummies" guide, and it would be something that I could do. I was put off a bit by 1) the fees and 2) the complexity of it all.

I was worried that I might become a bit obsessed with it, checking stocks and shares every few minutes and not getting on with my work! Does anybody here do well with stocks and shares...?

pcwilkins

Probably best to ask on the investment forum

Firestorm_2

Ok, lets forget about stocks and shares for the moment and get back to the house topic.

I was wondering, what would be more likely if I was buying a house now:

In 3 years would I make £10k or lose £10k ?


I wonder how likely a huge crash actually is. I know a lot of people talk about it but wouldnt it take more than 3 years for something to happen to cause a crash? we are after all living on a small island running out of space.

Guy_Montag

Firestorm wrote: »

Ok, lets forget about stocks and shares for the moment and get back to the house topic.

I was wondering, what would be more likely if I was buying a house now:

In 3 years would I make £10k or lose £10k ?


I wonder how likely a huge crash actually is. I know a lot of people talk about it but wouldnt it take more than 3 years for something to happen to cause a crash? we are after all living on a small island running out of space.

Have a look on google earth, especially round devon - how much is green & how much is grey? There is no shortage of land in this country, there is a shortage of land with planning permission, but that could (though it's unlikely) change with the stroke of a pen. Right so having got rid of that specious argument...

It's impossible to say whether you'll make 10k or not in that time. According to the Land registry (via the Beeb) prices for terraced houses in Plymouth are rising at c. 8% with an average price of £160k, so on the face of it you'd be looking at selling for £200k in 2010.

On t'other hand you'll be paying some £27k in interest (@ 6%) vs. £15k in rent.

Then there's the buying/selling costs - can someone supply those? & if you want to leave in a hurry at the end of your contract to take up work elsewhere, I'm not sure you want to be tied down trying to sell.

Personally I think we'll see a house price correction, but no-one can be sure if that will happen or not. (I thought 2005:rotfl:)

If you want to really money save check out:

http://www.rentfreecornwall.blogspot.com/