Should I sell to invest

LXdaddy

I agree with the general feeling here.
A secure roof over your heads is important.
A new small business enterprise is VERY risky - an overwhelming proportion of startups fail (I read that on the internet so it must be true )
Renting a property for you and your family could easily cost more than your mortgage and you would lose the increasing value of the property

You COULD consider downsizing the property - but that involves moving costs.

hoc

Another "No" from me. Unless you can downsize and make a significant saving best not to get in this. I do empathise with your situation, being a nurse isn't easy.

jamesd

So, let's look at what you might get from investing. About £180,000 available after selling. I'd expect to make 10% or more on that from peer to peer lending, after allowing a couple of percent for bad debt, before tax. So maybe £18,000 a year before tax.

That income would count for any means tested benefits you're receiving. So would the capital. This means that any means tested benefits you are receiving now would probably end, depends what you get, if anything, because some don't use savings or non-work income in their calculations.

While I like investing I'm not keen on that plan in your situation. Partly because of the children but also because the house value is completely ignored for benefits and you're in a situation where you could lose a lot of money by losing benefits, either now or in the future.

Instead, I prefer the idea of looking for an alternative place to buy in a cheaper area that's smaller as well. Then port the mortgage to the new place and free up maybe £50,000 to £100,000 from the sale and move. That keeps you the relative security of owning and an asset free of means test risk, while I assume that the mortgage is cheap and good borrowing to keep around. You could then make maybe £5,000 to £10,000 a year from investing, depending on how much you freed up. But don't do this without understanding the effect on every benefit that you're getting. The move itself will be fine, the invested money may not be.

I grew up in a single mother, four children household living in a terraced house with two full size bedrooms and one smaller one. There are far worse things than a smaller house, though do look for the potential of one with say a dining room that could be used as a bedroom for a few years while the kids are around.

jamesd

There's another potential option. Your kids being young and having high childcare costs is temporary. A couple of thousand pounds a year of extra income a year might be needed for only a few years. It's understandable that family might not like you selling the former family home. But would they be willing to help out with some longish term loans at a fair interest rate for a while?

You might say offer something like this:

1. Interest paid monthly at the best available savings or current account interest rate at the time, for as long as you have the money.
2. Borrow say a couple of thousand a year.
3. Repayment to be 30% of the part of your net pay above some amount - maybe above £15,000? - pick a sensible number for what you might be able to make with no kids around.
4. No repayment at all at least until the kids are all in school.

Family loans are potentially troublesome so do each sign a written loan agreement which sets out the key terms of the deal, particularly any parts about you not being obliged to repay for a while or more than some amount.

For example, for one of my family members having trouble after my mother's death I sent them a cheque accompanied by a letter saying no repayment needed until the estate was sorted out and they would get money to repay that way. They accepted the offer, which was to pay rent they had to pay. I could afford it and the loan terms are easy and sensible, though of course repaying earlier by them could be done if desired.

Borrowing can also potentially save you money if it's used for things like insulation or a modern boiler. Worth considering whether family might be willing to help out with lowish rate loans to get that done, either repaid over ten years or no repayments for five years then repay over five. If you move you could pay for this sort of thing yourself out of any money you get from the sale and lose bills are both tax exempt and do t count towards means tests.

jamesd

I assume that your mortgage lender wouldn't go for increasing your mortgage by say £2,000 a year for say five years but no harm to ask and it's another way of getting more money to live on for a few years.

It's also worth looking at the mortgage interest rate. Is it a good one? Could you save money by remortgaging to a lower rate, either as you are now or after moving home?

jamesd

On the higher income side, you work part time as a nurse. Are you allowed to do other work? Private care agencies might well welcome a properly qualified nurse to do some work for them, maybe a weekend day or night or maybe on call cover if you're available and they need someone at short notice.

badger09

jamesd wrote: »

On the higher income side, you work part time as a nurse. Are you allowed to do other work? Private care agencies might well welcome a properly qualified nurse to do some work for them, maybe a weekend day or night or maybe on call cover if you're available and they need someone at short notice.

Could be difficult for a single mum of 4.

jamesd

In this case, kids sleep and some night cover might work, as might a few hours on demand if the time happens to work. Finding someone - family? - to look after the kids for the odd night or few hours might not be too much of a challenge.

One of the things my mother did early on was evening work cleaning a local school but a nurse could probably do something better paid than that.

Family might also provide cheap holiday options if any go away themselves and leave an empty but usable home in a useful place available. More secure for them to have the place occupied as well.

Audaxer

jamesd wrote: »

So, let's look at what you might get from investing. About £180,000 available after selling. I'd expect to make 10% or more on that from peer to peer lending, after allowing a couple of percent for bad debt, before tax. So maybe £18,000 a year before tax.

I don't know much about peer to peer lending, but to get that sort of return it surely must be a lot more risky than just losing a couple of percent to bad debt? I would have thought that investors would only consider peer to peer lending for a small percentage of their portfolio.

Annie0707

Thank you so much jamesd, for the detailed response. Thank you everyone for your time. I now see why people post to these forums.

I have done a lot of thinking over the last few days and after such a resounding 'no' I have decided not to sell and rent. I may downsize, my kids range from 16 to 2 so I had planned to downsize once my older two leave home in the next few years. I may do so sooner. Regarding extra shifts, I do have great friends to support me, but am very limited with my childcare options, besides more income just affect my tax credits. I love musing, I believe it's a calling rather than a job, however it is frustrating working so hard for so little and that is forcing me to consider other options, hence the business idea. I've lived here for over 30 years but I'm Canadian and my children all have dual nationality. Selling and moving to Canada has always played at the back of my mind too. Although taking the kids away from their dad is what stops me.

I guess I am in a rut! Didn't even realise.