Sell House and Rent for a while

sezdav

Cor... I know exactly what youre going through talos!

Myself and my partner bought our first house over a year ago and have just sold it for a small profit (which we are exreemely greatful for). We spent months arguing.... I mean discussing.... whether to rent (and stash the profit! ) or continue on the ladder (and gamble the profit). In the end we have decided to buy.... This was based on 3 main factors:
1) if prices drop i would hope that it would be across the board and so (?)we wouldnt be that worse off if we wanted to move (if that makes sense?!)
2) we hope that we would be happy if we had to stay in the home we are buying if prices did drop (as its such a nice area compared to where we are now)
3) at least we would continue to be on the ladder and even if prices do drop... hopefully it wouldnt be too long before they rise again. We were too frightened that we may never have been able to jump back on.

Anyway, I cant give you anymore advice than my own experience and thoughts. But just to let you know i understadn what a difficult decision it is to make... and good luck with it!

Oh... and Gavwill.... If you find that crystal ball, chuck it my way would ya!!! ;D

Pal

House prices will generally fall across the board so for home owners moving house the actual price makes little difference as long as your mortgage is fairly small.

The big problem is when people end up in negative equity. At that point, unless someone has a lot of savings they cannot move even if they wanted to. This is the real danger of buying a house at the moment or owning a house with a large mortgage.

moneymatt_2

Personally, I'd go for it - it's a gamble, but I think the odds a fairly good. Seems to me there's a small risk of prices going up a little and a good chance of prices falling a lot.

I can't see prices rising any further - we're already seeing the lowest level of new mortgage apps for 4 months. Also, now that the BofE have warned people about buying houses, I think the sentiment of the market has changed. People no longer see house buying as a route to instant wealth.

Even if prices stood the same, you wouldn't lose a great deal. Just a bit of money on rent (which would be offset by the interest on your increased savings and not having mortgage interest to pay). So your only risk is if prices go up.

Even then, market forces mean that they'll have to stabilise sometime. Just might mean you need to rent a little longer. And if you get a nice place with a decent landlord, is that really worse than owning your home?

I think it's a mistake to just ignore the economics of it on the basis that it's your home. Buying a house is the biggest financial decision most of us make so it's worth getting it right. Some people have said that you won't be worse off if you sell and buy, but that's just ignoring a good opportunity. If someone offered me 100-1 on a horse that was much better than the rest of the field, I'd take a punt.

I'm thinking of selling to rent as well and am trying to work out the costs involved. If you do that, you can figure out what the 'tipping point' is - i.e., how much prices would have to full in order for you to be able to make a profit. Then, I'd look at some indexes of house prices in the area to see how they've risen recently.

It's a risk certainly, but as one economist said, if house prices don't fall this'll be the only bubble in economic history that hasn't burst.

kpj11

I too find myself in this situation. We have had our house on the market for six months now with little interest. We have reduced the price three times, done loads of redecoration and still no takers. If we could sell, we would be happy to rent until market seems more stable. Someone suggested letting out the owned property to pay the mortgage whilst renting yourself? Isn't this avenue fraught with difficulty (from martgage company,taxes,etc)? I am now considering selling to Housing Association or investment company for whatever I can get. I am frightened if I don't get out now, it will be worth even less in a few months time.

zcaprd7

Hmm...


Selling and renting isn't really a gamble - you won't 'lose' any money - you may 'not gain' any money if house prices go up but you won't lose anything.


Why not sell, then rent and if you really want to bet on house prices (going up or down) take out a spread bet on property.

This allows you to control your exposure to the property market - and you can do it on margin e.g. £10,000 in your account allows a £100,000 bet - rather like buying a property but much easier to close your bet than to sell a house.

Many high net worth individuals who own property are taking out sell bets on property to 'hedge' their position (they don't lose/make money whatever happens to property prices) - but they lock in their recent gains...

EDIT: BTW spreadbet gains are tax free

Robert_Sterling_3

So if you've got £50-£60 grand to put down on new house. Even if house prices dropped your new house would have to go down in value by £50-60 grand b4 you were in neg equity.

Yes but you would still have lost £60,000 and all the costs associated with moving.

Spendless

Yes but you would still have lost £60,000 and all the costs associated with moving.

Well you'd not actually loose it as such. That would only come into play if you either wanted to move up the ladder again, or wished to take out some equity in your home for whatever reason. The housing market will always (IMO) have highs and lows, it's whether you can sit and ride them out. A year after buying my 1st place I was in neg equity and that remained the case for 8 years. Even after going thru this I personally would not come off the property ladder, to me it is far too risky.

Jezza101

I think once your on the property ladder you may as well stay. Your house value drops? Then most likely so will the value of your next property - no loss! Your house value rises? Well so will the value of your next property...

What is likely is a short sharp correction for the overvalued housing market. So that people like me, young successful grads, can actually afford to buy places again.

If you know the area and know what place you are looking for then Id stick on the property ladder rollercoaster - trying to 2nd guess things in the short term is asking for trouble!

deemy2004

This is a tough one

The safest bet would be to stay on the property ladder.

If you want to take a risk and go with the weight of probability that house prices are likely to decline then rent and buy later.

Just as you are fully aware that the latter option carries a risk.

eurows

I did this 18 months ago and am waiting to get back on the ladder. My wife moans constantly that renting is not for her even though we live in a nice farmhouse. I notice prices are going down now. Probably 10% cheaper than they were 12 months ago. I still think the market is overpriced by 30%. Knowing when to jump back in is the tricky bit. I suspect I won't win either way. When we did it we were getting told all the time by everyone that we have made a mistake, houses will always go up.

Much the same way that my father-in-law who is an antique dealer used to tell me to put away all this furniture in a storage and wait 20 years. It will just go up and up. For anybody that knows the antique trade if fell in a hole and you are lucky to get 30% of its value now.

The interesting thing is that people still think prices can only go up.

The most important thing in this though is not to view your house as a money making machine. It is your home, your dreams and your memories.

It seems like I will make money by selling and then rebuying. However my wife feels like she has lost 18 months of her life and begrudges paying the landlord the rent even though we were paying more interest on our mortgage on our old house than we are paying rent.

Are you sure you would be happy renting.