Keep the house or rent and invest?

Ray_Singh-Blue

5 years moving from rental to rental with your kids sounds pretty taxing. If you were guaranteed some big prize at the end, maybe it would be a thing to do.

But I reckon most people would *probably*  end up wealthier in 5 years time staying put.

Reasons:
1. if they have a mortgage, any increase in property value will greatly increase their wealth, due to the effect of leverage.
2. mortgage cheap, rent expensive.

Sure, there is a chance that property prices tank, while the stock market soars. But the opposite also holds. "Would you bet the house on it?"

Mickey666

Invest in what though?  Not a comfortable family life by the sound of it.
It sounds as if the OP has a lovely, spacious family home but they are considering impoverishing themselves at a important time for their growing family.  Most people make some sort of investment for the future but it has to be balanced so as not to deprive themselves, and their family, from quality of  life in the present.
It's always a balancing act of course, but I'd say selling up in this case is pushing the balance too far the wrong way.

ejchopshop

ian1246 said:

Other thing to think about is the difference in future house value in 5 or 6 years (you can sell just before going travelling) vs. now... and then factor in the costs of renting deducted from that house value.

I.e. if your house is worth £400,000 now and the value goes up by a modest 3% a year - it could be worth £463,000 in 5 years time.

Now, its true that could be less than what you'd get on investments if you sold the house - if we assume 8% growth over 5 years, £400,000 would be worth £587k in investments in 5 years time. However lets say you'd be paying £1000 rent a month... thats £60,000 rent you should factor in over 5 years - so that £587,0000 becomes £527,000 vs. £463,000.

The question is.... will you make an 8% return on investments? There's absolutely no guarantee and as a poster has said above, what happens if the stock market dips? You could easily end up worse off vs. if you'd have stuck with your house - especially if the investments dip but house prices continue to climb.

Throw into the equation that your rent may be more than £1000 a month(depending on where you live!) and may climb significantly in that time (increasing by 5%+ every year) and you could easily end up in a position where you become far worse off vs. if you had retained your house - imagine how you'll feel if you sell up and invest and your investments dip, whilst house prices shoot up and then you get hit with significantly increasing rent every year - plus the costs of potentially having to move between rented accommodation (I.e. landlord decides to sell for any number of possible reasons).

With this in mind, given the risks of selling your house vs. the benefits of retaining it - not least having a lovely home to live in which is yours to do with as you like - I think you'd probably be mad to sell and invest...

Thanks, this is very insightful and really puts it all into perspective! In response to the other reply above, we have in no way 'made up our mind', it is purely a thought process. This makes a lot of sense though and perhaps we are just too optimistic as our investments have done very well to date. But yes, the last thing we want to do is end up in a worse place. Our goal rather than being mega rich is to retire young and be able to live a modest lifestyle without working, it's just figuring out the best way for us to get there. I've had an eBay shop for the last 6 years and quit my desk job 5 years ago as I hated the 9-5 lifestyle but i'm limited to what I can do at the moment as we've got two young kids that I want to be at home with. I still work but it's mainly evenings and it's exhausting. Hubby can work and has good earning potential, just a lack of drive to do so as he doesn't like what he does (despite being very good at it). Half of me feels that another project house would be the better way to go (but the thought of it doesn't fill me with joy  ). We have the money, skills and a fair bit of experience it's just that it takes over life when you're living in it! 

Thanks again  

ejchopshop

Apodemus said:

I think I'd keep the house and rent it out while travelling.  We lived overseas when the kids were small, while keeping our house in UK, and it was always reassuring to know that we had a home base to come back to at some point.  It also made the transition back to UK much easier as schools etc were not unknowns. 

Yes we had considered this option also. But our mortgage wouldn't be paid in that time and unless we spent a fair bit of savings I don't think the rent would provide us with enough to live off whilst on the road. We're also not totally sure that we'll come back... although immediate family is nearby I grew up in the USA and hubby isn't particularly bothered about staying in this area. The prospect of being somewhat nomadic is quite appealing just as long as we have a source of income. If money wasn't so much of a thing, i'm sure we would keep a house here though  

Albermarle

Our goal rather than being mega rich is to retire young and be able to live a modest lifestyle without working, it's just figuring out the best way for us to get there

That is a perfectly sensible ambition and there are websites dedicated to promoting that as a lifestyle . Such as 

FIRE ( Financial Independence Retire Early)

Mr Money Mustache

However just be aware that reality can have a habit of interfering with dreams/ambition, especially when it comes to money matters.

Mickey666

ejchopshop said:

ian1246 said:

Other thing to think about is the difference in future house value in 5 or 6 years (you can sell just before going travelling) vs. now... and then factor in the costs of renting deducted from that house value.

I.e. if your house is worth £400,000 now and the value goes up by a modest 3% a year - it could be worth £463,000 in 5 years time.

Now, its true that could be less than what you'd get on investments if you sold the house - if we assume 8% growth over 5 years, £400,000 would be worth £587k in investments in 5 years time. However lets say you'd be paying £1000 rent a month... thats £60,000 rent you should factor in over 5 years - so that £587,0000 becomes £527,000 vs. £463,000.

The question is.... will you make an 8% return on investments? There's absolutely no guarantee and as a poster has said above, what happens if the stock market dips? You could easily end up worse off vs. if you'd have stuck with your house - especially if the investments dip but house prices continue to climb.

Throw into the equation that your rent may be more than £1000 a month(depending on where you live!) and may climb significantly in that time (increasing by 5%+ every year) and you could easily end up in a position where you become far worse off vs. if you had retained your house - imagine how you'll feel if you sell up and invest and your investments dip, whilst house prices shoot up and then you get hit with significantly increasing rent every year - plus the costs of potentially having to move between rented accommodation (I.e. landlord decides to sell for any number of possible reasons).

With this in mind, given the risks of selling your house vs. the benefits of retaining it - not least having a lovely home to live in which is yours to do with as you like - I think you'd probably be mad to sell and invest...

Thanks, this is very insightful and really puts it all into perspective! In response to the other reply above, we have in no way 'made up our mind', it is purely a thought process. This makes a lot of sense though and perhaps we are just too optimistic as our investments have done very well to date. But yes, the last thing we want to do is end up in a worse place. Our goal rather than being mega rich is to retire young and be able to live a modest lifestyle without working, it's just figuring out the best way for us to get there. I've had an eBay shop for the last 6 years and quit my desk job 5 years ago as I hated the 9-5 lifestyle but i'm limited to what I can do at the moment as we've got two young kids that I want to be at home with. I still work but it's mainly evenings and it's exhausting. Hubby can work and has good earning potential, just a lack of drive to do so as he doesn't like what he does (despite being very good at it). Half of me feels that another project house would be the better way to go (but the thought of it doesn't fill me with joy  ). We have the money, skills and a fair bit of experience it's just that it takes over life when you're living in it! 

Thanks again  

A 'project house' can certainly be lucrative - as you've found - if you have the skills and drive because the rewards are basically tax-free if it's your own home.  No need to comment about the downsides though as you're already well-experienced in that
I think it's great that you're exploring your options and have specific goals you want to achieve.  Best of luck with whatever you decide

ejchopshop

Mickey666 said:

ejchopshop said:

ian1246 said:

Other thing to think about is the difference in future house value in 5 or 6 years (you can sell just before going travelling) vs. now... and then factor in the costs of renting deducted from that house value.

I.e. if your house is worth £400,000 now and the value goes up by a modest 3% a year - it could be worth £463,000 in 5 years time.

Now, its true that could be less than what you'd get on investments if you sold the house - if we assume 8% growth over 5 years, £400,000 would be worth £587k in investments in 5 years time. However lets say you'd be paying £1000 rent a month... thats £60,000 rent you should factor in over 5 years - so that £587,0000 becomes £527,000 vs. £463,000.

The question is.... will you make an 8% return on investments? There's absolutely no guarantee and as a poster has said above, what happens if the stock market dips? You could easily end up worse off vs. if you'd have stuck with your house - especially if the investments dip but house prices continue to climb.

Throw into the equation that your rent may be more than £1000 a month(depending on where you live!) and may climb significantly in that time (increasing by 5%+ every year) and you could easily end up in a position where you become far worse off vs. if you had retained your house - imagine how you'll feel if you sell up and invest and your investments dip, whilst house prices shoot up and then you get hit with significantly increasing rent every year - plus the costs of potentially having to move between rented accommodation (I.e. landlord decides to sell for any number of possible reasons).

With this in mind, given the risks of selling your house vs. the benefits of retaining it - not least having a lovely home to live in which is yours to do with as you like - I think you'd probably be mad to sell and invest...

Thanks, this is very insightful and really puts it all into perspective! In response to the other reply above, we have in no way 'made up our mind', it is purely a thought process. This makes a lot of sense though and perhaps we are just too optimistic as our investments have done very well to date. But yes, the last thing we want to do is end up in a worse place. Our goal rather than being mega rich is to retire young and be able to live a modest lifestyle without working, it's just figuring out the best way for us to get there. I've had an eBay shop for the last 6 years and quit my desk job 5 years ago as I hated the 9-5 lifestyle but i'm limited to what I can do at the moment as we've got two young kids that I want to be at home with. I still work but it's mainly evenings and it's exhausting. Hubby can work and has good earning potential, just a lack of drive to do so as he doesn't like what he does (despite being very good at it). Half of me feels that another project house would be the better way to go (but the thought of it doesn't fill me with joy  ). We have the money, skills and a fair bit of experience it's just that it takes over life when you're living in it! 

Thanks again  

A 'project house' can certainly be lucrative - as you've found - if you have the skills and drive because the rewards are basically tax-free if it's your own home.  No need to comment about the downsides though as you're already well-experienced in that
I think it's great that you're exploring your options and have specific goals you want to achieve.  Best of luck with whatever you decide

Thank you that's very kind Yes, we've been lucky to find two great 'projects' in the same village that we love living in. It has been lucrative for sure. I think really we have both been out of the real world of work for so long that going back to being employed, working 9-5 etc is just no longer an option either of us want to consider. We do well considering but it would be nice to find a way to save a bit more. I've dabbled in all sorts of things in the last 10 years and always find a way to make plenty of money to live off but never much more. Matched betting, auctions, dog walking, eBay, you name it! Would be nice if hubby could find something better to do as he's very intelligent, can fix and build just about anything and is mega into technology, home automation, PC's, home cinemas etc which I think is why he struggles with his life as a builder! 

At the end of the day, I suppose we just want to enjoy our lives and not be tied down to the 9-5 lifestyle (not that there's anything wrong with it, but neither of us have found our calling). It's great to have access to forums like these though, great to get others opinions and insight as well as ideas. What did we do before the internet? 

Ray_Singh-Blue

TV mainly

ejchopshop

Also, would a mortgage lender let you borrow more if you tell them you're going to invest it? I was under the impression that they wouldn't! 

george4064

ejchopshop said:

Also, would a mortgage lender let you borrow more if you tell them you're going to invest it? I was under the impression that they wouldn't! 

If you are remortgaging your house then you can borrow more by increasing your LTV (assuming you have enough room to increase LTV) and hence releasing equity, you’d then be free to do as you wish with the released equity as cash.