Should I sell to invest

jamesd

Audaxer wrote: »

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.

The sort of lending which pays that normally has property as security for the loan, just like a mortgage. So the potential loss is whatever is left to pay after the property has been taken and sold. A couple of percent is probably above the loss level, not below.

edinburgher

Bravepants wrote: »

My partner and I paid our modest house's mortgage off last year or so. We don't have kids, but we are secure in the knowledge there will ALWAYS be a roof over our heads. They (whoever they are) will get our house off us over our cold dead bodies! My brother-in-law however thinks nothing of paying £1500 a month (yes, a month) in rent! That's over half my salary worth of dead money!

Well, dead apart from the fact that he has had a roof over his head (in a presumably HCOL of area with decent opportunities that afford being able to pay £1500 in rent)?

Not a landlord, but let's move away from the tired idea that renting gets you nothing but a hole in your bank account balance.

Eco_Miser

edinburgher wrote: »

Not a landlord, but let's move away from the tired idea that renting gets you nothing but a hole in your bank account balance.

Rent or buy, you get a roof over your head (and walls, etc).
If you buy you get an asset that normally increases in value faster than inflation, but also a need to keep repairing it.
What else do you get when renting, apart from that hole in your bank account?

bowlhead99

Eco_Miser wrote: »

Rent or buy, you get a roof over your head (and walls, etc).
If you buy you get an asset that normally increases in value faster than inflation, but also a need to keep repairing it.
What else do you get when renting, apart from that hole in your bank account?

You get a lack of commitment to maintain and insure that particular asset and a lack of being tied in to finance it. As a renter you are paying for the utility you get from your licence to use it with the ability to stop using it as and when something different or better comes along that is more suitable for your needs.

For example, as a serial renter I was well positioned to take advantage of an opportunity many years ago to go and work overseas on a secondment for half a year or so, and extend the trip somewhat, without having something to sell up or needing to seek permission from a lender to let out or wonder how to pay a mortgage on the "permanent" place at the same time as rent on the"temporary" place.

Having later returned to the UK employer i got itchy feet and relocated half way across the country for a new role with higher pay and in a more interesting industry. Later I spent a year at a time doing satisfying and challenging work in three global financial centres without ties to funding a "home base" which I wasn't using, before coming back and becoming UK resident again for the next phase of my career.

These things are easier to do when you don't have a mortgage to pay that ties you practically or emotionally to a particular street in a particular town.

As a result of having been able to be the guy in the right place at the right time and pick up valuable life skills and commercial experience when offered, my salary for the last few years has been 8-10x (in nominal terms) what it was as a graduate trainee a couple of decades back. These days I am "on the property ladder", admittedly having had to pay much higher prices in my late thirties than some of my friends who bought a decade or more ago, but my financial position is not bad.

Meanwhile I have a friend who unfortunately had to sell up a house that was no longer affordable and no longer met her needs, and got landed with a bill in the tens of thousands for the negative equity, at high interest rates, which she has yet to fully pay off around a decade later. Being able to just give back the keys to a landlord and move on with her life would have been lovely, but she could not, because she owned the "asset that normally increases in value faster than inflation".

Clearly if you are happy to be in the same place (size, quality, location) for "the long haul" and can commit to all the costs of ownership, it is sensible to cut out the profit-making landlord and obtain the financing yourself to own outright. And it seems like a no-brainer to do that if you knew house prices were going to go from 3x median household income to 10x median household income over the course of a couple of decades while finance gets gradually cheaper and cheaper from 10% to under 2%. Those who bought and prospered from that particular set of economic circumstances would be incredulous that someone would not want to participate in that prosperity through the wonder of home ownership. And with a time machine, yes wouldn't we all like to have a go.

Property ownership is something that makes a lot of sense for a lot of people and not so much sense for others. It is not a "one way bet" in terms of house price appreciation, other than over the very long term. But a number of people have a genuine sense of fear and panic that if they are an owner that sells up now, or a non owner who doesn't buy a property in the next few years while properties are 10x household income, and leave it for later, they'll have to eventually buy at 40x wages and will have missed out on the massive levered gains that others buying today on borrowed money are able to get. Fear that the Joneses will be unable to be caught up with, is something that people might give up a renter's flexibility, to chase.

That in itself together with various government support to help to buy a house for more than you could have otherwise afforded, continues to stoke current prices. I am not convinced it will last, other than in some areas. Certainly the rate of change of sold prices is flattening from the upward trend in a number of parts of the country. A good crash might be just what the doctor ordered to help people move up and down the ladder to where they would like to be, within reason. If your current house is bigger than you need (or can justify given your family finances) there might be some sense in gambling on a crash and cashing in, to rent a smaller place with a view to eventually buying a smaller place with some money left aside so you're not living hand to mouth.

However, "gambling" on timing of the economy and house prices as if they were some fun toy to speculate on, might be better for a singleton who has a good salary and who embraces flexibility of lifestyle - not so viable when you are head of household without an income significantly higher than your outgoings. Likewise jumping ship and seeing what Canada has to offer instead, if you can't properly afford the life you want in these shores, is going to be better suited to a person without kids and ties. With kids and kids' friends and other family to consider, it is harder to justify making a major lifestyle change of any sort.

None of that means you should definitely do it (downsize, emigrate, stay as is, whatever) or not do it. Just that it's not a decision to take lightly.

However, be careful not to use that as an excuse to say "I probably shouldn't move, because it would be a big decision". If you have £200k equity in a house which is bigger or in a nicer area than what you could get away with, and you have limited earning power or scope to save any money to provide a better long term lifestyle overall - then the choice to just stay and continue the status quo, is also a "big decision" that you're implicitly taking, even if you feel you're not taking a decision because it doesn't result in a move.

Some of the comment above is maybe better for the "debate house prices and the economy" board really, but I'd consider them relevant points to the matter at hand. I have not voted in the poll because to give a simple yes/no is to trivialise a complex financial and lifestyle choice which has significant impact on the next period of your life.

Bravepants

edinburgher wrote: »

Well, dead apart from the fact that he has had a roof over his head (in a presumably HCOL of area with decent opportunities that afford being able to pay £1500 in rent)?

Not a landlord, but let's move away from the tired idea that renting gets you nothing but a hole in your bank account balance.

I bought the modest house I haveabout 10 years ago, having moved to my current location for a job. I made £30K on my old house in profit simply by living there for 4 years! I have been in the same job for 10 years, enjoy it, and I'm secure in it. My partner moved in about 9 years ago and we realised we need no more property than we have. We paid off the mortgage last year and we owe no-one anything, no mortgage, no rent. If we continued to rent and risked the capital elsewhere we may have won, we may have lost. But we know we have won in paying off our mortgage. When you pay a mortgage your payment may stay the same month in month out for the fixed period of the mortgage, it may go up or down as capital is paid off. With rent you are subject to the whims and fancies of the landlord, who may at the end of the tenancy agreement decide he no longer wants to let his property but would rather sell. You then have the prospect of having to find a new place for you and your family. Say what you will but I would rather own than rent. Having no mortgage or ongoing rent payments means I have the cash flow to cover expenses, be they maintenance bills, insurance or whatever. Horses for courses, but I would not want to sell my house and risk my capital in a startup when I have a family to look after, which is what this thread was about to start with.