Buying a house outright in cash from savings or not in this situation...(there's a few caveats)?

DhwERbf689

So, I'm in the situation in that I have a decent chunk of money in the bank that is not even earning interest.

But also because my business is no longer functioning very well for the last couple of years I have very little monthly income either currently (business monthly overheads are very low thankfully) so I am living off those savings to cover my living expenses and rent etc.

I was perhaps naive, with it being my first business (though it has lasted over 10 years), that things would always be good / fine and didn't forsee that things can change and your current business model doesn't always work forever etc. 

I'm in the position where even if my business makes no money going forward I won't run out of money for a few years yet due to money made previously / savings.

However obviously if I can't get my business back to bringing in a healthy income that sustains me then I will either have to switch to a new business (no idea what or if that will work as other attempts I've made have not been successful) or go back to the job market after many years of being self employed (dread that idea and don't know what I would even do!)

It's got me kinda worried about the future / income / money etc and making me think I should have been doing more with the money I was making every month when the going was good.

I did setup a pension and put a nice chunk into it + made some regular payments and invested a decent sum into the stock market too so I didn't just squander it and I like I say I have savings so I have done OK for myself but I also don't feel very secure right now considering I own no real assets and rent rather than own a home.

However, I did think maybe I should "secure my future" in some ways by buying a relatively low priced property (there's a few on the market where I live right now) outright in cash from my savings whilst I have it just to give me some peace of mind about the future in at least the housing aspect (one less thing to worry about and I can focus on trying to get my business working again / a new one / a job if need be) and move in there.

Having so little income + being self employed means a mortgage is probably unlikely and even if it was I don't like the idea of being in debt for the next 20 years (or whatever) and not knowing what my money situation will be like going forward. 

I currently rent and I feel like owning a home gives me some long term security, is a weight off my shoulders, and makes me feel like I've gained something substantial from all these years of being in business (I probably should have bought a home a few years ago when my business was at its peak in retrospect but it didn't seem like a priority then for some reason) even if going forward my business doesn't work out and it's back to square one for me.

Buying a property would still leave me with a good chunk of savings in the bank for going forward and not wipe me out totally so it's not like it'll put me at £0.

So, what do you think...should I purchase an affordable property from my savings and at least secure a roof over my head whilst I figure things out and still have money?

Or is this somehow a dumb move that I'm not seeing?

Love any and all insights and if I missed any needed information just ask and I'll answer, thanks.

theartfullodger

A major advantage when buying for cash is being able to tell estate agents and sellers that that is the case, no mortgage approval required, you can buy really quickly,  

Quite a few people like (or need) the "genuine quick purchase" deal.  It worked for me a couple of times. But get a god survey (maybe two..)

And take a builder or canny DIY-er round with you....

DhwERbf689

Yeah, I can see how buying in cash is appealing to the estate agents and the seller and maybe even means I can get a discount (not sure?) but does it make sense in my current particular situation in your mind?

It's kinda unique I feel. I have money in savings but no consistent income and an unsure business / work future and not sure what direction I'm headed in.

I don't know if using a sizeable part of that savings to buy in cash now makes sense or is a dumb idea. There could be things I'm not considering or missing because I'm blinkered to it. 

Yorkie1

With the increasing uncertainty around the rental market, because landlords are finding it a harder place to make a decent business out of it, there is a lot to be said for being the master / mistress of your own destiny.

You don't say how old you are, but the prospect of renting throughout retirement may not be attractive.

DhwERbf689

Yeah, just knowing I own a place I feel gives me a lot of peace of mind and my rent has already risen recently and will likely do so again in future.

Renting in retirement definitely doesn't seem attractive and who knows what anyones financial situation is all those years down the line, I've still a fair way to go till that yet but also should really be on the property ladder by now considering my age too.

ian1246

Absolutely 100% buy yourself a house and move out of rental - that will reduce your overheads substantially.

Worst case scenario - if your business continues to struggle or goes under, then is there anything stopping you getting a basic employed job such as at your local supermarket or other employer?

Without a mortgage or rent to worry about, it means any job you go for will only need to cover all of your utility costs, food, transport & council tax, giving you a good flexibility in the type of job/work you can go for - including potentially even just looking at part time work. As long as the bills are covered (Which will be substantially reduced due to no rent or mortgage), you have a huge amount of potential flexibility in what you can choose to do, should the worst happen with your business.

If you can cover the essentials with an employed job, this would then allow whatever savings remain after the house purchase to be kept in a high interest account (you can get easy-access savings accounts which pay close to 5%. If you use a combination of regular savers, fed each month from your 5% easy access account, you can bump this up further - there's some regular savers out there at 6-8%).

On the other hand... if you continue to deplete your savings you'll come to the point where a house purchase is beyond you and your then in a situation of potentially your business still going under, but having to still find the rent, so a massively inflated overhead which in turn will reduce your options on what jobs you can consider.

Cloysterpete

ian1246 said:

Absolutely 100% buy yourself a house and move out of rental - that will reduce your overheads substantially.

Worst case scenario - if your business continues to struggle or goes under, then is there anything stopping you getting a basic employed job such as at your local supermarket or other employer?

Without a mortgage or rent to worry about, it means any job you go for will only need to cover all of your utility costs, food, transport & council tax, giving you a good flexibility in the type of job/work you can go for - including potentially even just looking at part time work. As long as the bills are covered (Which will be substantially reduced due to no rent or mortgage), you have a huge amount of potential flexibility in what you can choose to do, should the worst happen with your business.

If you can cover the essentials with an employed job, this would then allow whatever savings remain after the house purchase to be kept in a high interest account (you can get easy-access savings accounts which pay close to 5%. If you use a combination of regular savers, fed each month from your 5% easy access account, you can bump this up further - there's some regular savers out there at 6-8%).

On the other hand... if you continue to deplete your savings you'll come to the point where a house purchase is beyond you and your then in a situation of potentially your business still going under, but having to still find the rent, so a massively inflated overhead which in turn will reduce your options on what jobs you can consider.

This is it, because I’ve always owned my own place and never rented I’m able to comfortably manage just working part time in my local supermarket, it gives me enough to cover my monthly expenses and still leaves enough for me to put away savings. Which is good really as I’m very limited in what jobs I would be able to secure, I don’t drive and I have zero applicable skills. 

It might be a daunting prospect after a long time of being your own boss, but doing twenty hours a week in a supermarket sat on a till or stacking shelves is not at all difficult and is infinitely preferable to watching your total available funds slowly drain away over the years. Lidl/Aldi will actually expect you to work, but some of the British supermarkets like Sainsbury’s you’re able to work at a glacial speed so a measly 20 hours a week is not at all tiring.

EssexHebridean

Regardless of what else you do, get those savings earning some interest anyway - ensuring of course that you deposit no more than £85k with any one banking institution. Allowing that you aren’t certain of the eventual outcome of your buying or not dilemma, for thr time being even too paying easy access savings options will be better than them earning nothing at all! 

FlorayG

To me this is a no-brainer. You have enough cash in the bank to buy a house? Buy one. Even if you later sell it you will have made a profit. If you buy a suitable one you can get a lodger if you like which will top up your monthly income. 
Yes you will have the upkeep expenses but you can also have it how you want it.
If in the future your financial situation becomes unstable you will have the reassurance of nobody being able to take your home from you because you defaulted on mortgage/can't pay the rent

Chieveley

Worse case scenario you could have a lodger? give that idea some thought when choosing a property, eg. 2 bathrooms or ensuites, plenty of parking. good luck

BungalowBel

Buy yourself a house with your cash.  Then even if you have to get a minimum wage job, you won't ever be homeless.