Owning and renting vs owning and living in

Samsonite1

AdrianC said:

Samsonite1 said:

We currently live in London, but as we never go into central London, it is appealing to move elsewhere and we would like to be near family (for many reasons and it would even help with childcare as both sets of parents/grandparents live in the same area).
What I thought of was the fact that we could potentially buy a property without needing a mortgage (due to the price difference between London and where we would move).

Where are we talking about?

The main issue is that all of the good schools (target location) are in an area where there are no good houses to buy (mostly flats, little to no garden, no parking, etc.).
So to the question!  Would it make any sense at all to buy a house without a mortgage to rent out, then rent a nice flat near the schools - in the long term, as we would not have a mortgage, we could consider buying another property or moving into the house we were renting out - the kids are too young to send on the bus by themselves and so being near the school would matter for a few years.

Anyway, not sure if I am just having crazy ideas, but it almost makes sense (until someone talks more sense into me).  Otherwise, I am looking to buy a house as close as possible with all the things we want and as I say, there is nothing ideal at any price and you simply have to live at least 2 miles away from the schools.

So you buy a property in an area you don't want to live, and you rent it out...
You (presumably) pay an agent 10% to manage it.
You keep a pot for maintenance, voids, damages, bad debts...
You pay income tax on the profits.

Meanwhile, you pay to rent a flat you don't want to own, because you can't find houses you do want to live in...

So what happens when a house DOES come available? You can't leap for it, because all your equity is tied up in a business you're paying somebody else to run - and which may not even be particularly profitable.
Maybe you scrape together enough equity to make it mortgageable. Now you're paying +3% SDLT on top of mortgage interest... while you pay somebody else to run a business you don't even want.

Finally, you get the tenant out and put it on the market. But what if it doesn't sell for a while...?

It's not just a fairly iffy investment (relatively low maximum return, possibilities of losses and lots of stress), but it's so illiquid that it could jeopardise your chances of buying the property you DO want to own...

No, invest the money and be ready to move quickly when the house you want comes on. Sure, the return might be a bit lower than you could theoretically get from the rental property... but...

Just to clarify - the house I would buy would be the one I want to live in and in the area I want to live in long-term, but not for a few years - at some point move in and settle there (e.g. if it was being rented, maybe at a natural gap or end of a tenancy in the future, it would be a move to make).  There are plenty of these houses available - I much prefer the houses a few miles out because they are much nicer in all ways.  The properties near the school are ok, but not my ideal properties (mostly period properties of flats or townhouses) because parking is a real problem around the schools and the houses have little to no parking and tiny gardens or no gardens (no matter how expensive) - this is because the schools are near the city centre, so parking restrictions are tight and it is heavily populated.

So I would not be looking to sell the property and I would not be looking to buy in the area right near the schools, but it is a nice enough area to live in for a while until the kids are old enough to get there under their own steam.

That probably did not clarify anything, but I tried!

hazyjo

Is the sort of house you would buy today the sort of house you would buy in X number of years' time? Not really sure you could know for certain. I've moved every 2-6 years so really can't imagine buying for the future. Are your salaries likely to increase any a lot? It may make a difference to what you would buy in the future (with or without a mortgage).

Samsonite1

hazyjo said:

Is the sort of house you would buy today the sort of house you would buy in X number of years' time? Not really sure you could know for certain. I've moved every 2-6 years so really can't imagine buying for the future. Are your salaries likely to increase any a lot? It may make a difference to what you would buy in the future (with or without a mortgage).

We are fairly certain about the property type and area - we are looking for a dream home with the usual things: large, many rooms, big garden, sweeping driveway, pretty street, local shops and restaurants, pubs, parks, etc.  That kind of thing, and there are plenty of them around - we both know the area(s) well.  So the house purchase is a long termer.  It is more around the practicalities of schools.  There are plenty of good private schools if we need to go that route, but they are actually in the same location as the other good schools - then it just becomes the inconvenience of getting the kids to school - there is the possibility of a school bus to pick them up, so there are more options potentially.

So in essence, buying and living in the dream house would mean private school fees and school bus fees potentially, which is going to be more than renting a property near the state schools. If we had to do a school run, it would likely be an hour round trip x2.  The irony of having a 100% remote job is that you are expected to be more available so you want to avoid long trips during the day.

We could make the move when we are older (when the kids are older), but then we miss out on spending time with our families (and the parents/in-laws will be a lot older by then...) - which would be one of the big reasons for the move.

I know it is first world problems and all that - you just feel a weight of responsibility to not mess up completely.  My parents messed up by selling and sitting on the money when house prices rocketed - turned a 5 bed house into a 1 bed flat...

getmore4less

I would aim to find the right house in the right location and put up with the school run for a few years

If it is a family friendly location for the kids to have mates then there will be potential to share some of the transport load.

You have not said were but I know a few places in cities and towns that look like they have no parking but do,  hidden behind the facade onto the road there are big gardens with access and garages.

Samsonite1

getmore4less said:

I would aim to find the right house in the right location and put up with the school run for a few years

If it is a family friendly location for the kids to have mates then there will be potential to share some of the transport load.

You have not said were but I know a few places in cities and towns that look like they have no parking but do,  hidden behind the facade onto the road there are big gardens with access and garages.

Yes, I am warming to just getting that perfect house and living in it - that was the initial idea.  The area is good for kids plus as you say friends and family would be able to help out if we are in a tight spot on any given day.  The areas we are looking are really near the in-laws and they are retired so have plenty of time on their hands...