£200k inheritance, property ladder or not?

Martico

I gave up trying to reason with that person a long time ago, and while I admire those that do (as they warn others about folly), once that person decides to get involved in a thread, they don't engage honestly, bang the same drum incessantly, and it all goes to !!!!!!. It's such a shame.

newsgroupmonkey_

Martico said:

I gave up trying to reason with that person a long time ago, and while I admire those that do (as they warn others about folly), once that person decides to get involved in a thread, they don't engage honestly, bang the same drum incessantly, and it all goes to !!!!!!. It's such a shame.

I think this is possibly the worse thread they've ever gotten involved in.

Trying to suggest that rather than buying a house, renting and then putting the money in a high interest portfolio would be better.

There is never going to be a high interest portfolio that not only covers the cost of renting, but will also give you a free house at the end.

It's just the weirdest flex.

theoretica

This thread is a good illustration of how one vocal person can cause it to appear there are two points of view, getting similar bandwidth, rather than the consensus that actually exists with a singular outlier.   I try not to argue with people who have been saying the same thing for years - they clearly aren't going to change their mind, and I don't want to give them more space.

strawb_shortcake

@ReadySteadyPop

If you advocate money market funds, saving, investing etc over home ownership, what's your end game renting forever? Or under what conditions would there need to be for you to buy a property? What % drop in today's, prices, what interest rates would you buy under? 

ReadySteadyPop

theoretica said:

This thread is a good illustration of how one vocal person can cause it to appear there are two points of view, getting similar bandwidth, rather than the consensus that actually exists with a singular outlier.   I try not to argue with people who have been saying the same thing for years - they clearly aren't going to change their mind, and I don't want to give them more space.

This type of thinking underlines why you shouldn`t really take advice from the internet, and probably a good reason for the OP not coming back, property forums are littered with people who are landlords, second home owners, heavily mortgaged etc. they quickly become echo chambers of one point of view, i.e buy buy buy, some of the gems from this thread include - Throw the money into a property, then MEW if you get short of cash later on - If I was the OP I wouldn`t be back either.

ReadySteadyPop

Stubod said:

So, 200k might get you £750 a month to rent a (small) property, (possibly even less after tax). 

After 1 year your rent goes up, but your "capital" stays the same assuming you have "wasted" all your interest on paying rent to somebody else, so the next year you now need to find additional money to pay the rent which has now increased, so your £200k is now reduces in value further, (even more considering inflation).

Fast forward a few years and your £200k is slowly wasting away and you have nothing to show for it? 

At least if you use it to buy a property, that property will have increased in value...

..but I accept, each to their own and if you want to give your money to somebody else and have no real security then it's a free country to do as you see fit....

What happens if a global trade war/global inflation forces mortgage rates and general interest rates up and causes a recession that forces rents down?  What happens if you have a smart private landlord with no mortgage who keeps the rent stable to attract long term tenants? Imagine having the choice of keeping 200k in a money market fund or throwing it into the property market just before interest rates started rising at the fastest pace in 40 years meaning you now have to MEW to get access to cash and find it hard to attract buyers because borrowing rates have shot up. I think you may have to think more deeply about "inflation", "inflation hedges", how inflation affects mortgage rates/employment/ free household cash flow etc. The stock market has outperformed property over the long term.

Index Funds Have Outperformed Other US Assets Over Time

The Results of a $100 Investment in 1970

US T-bills:

2.3K

Real Estate

1.5K

S&P 500 

22.4K

Corporate Bonds

7.8K

Stubod

..I would agree with you, but then we would both be wrong....( and there are an awful lot of "if's in your latest statement)...

However I accept you are a bit like a "flat Earther". I don't actually think anybody really believes the earth is flat, but some people just like to take an opposing view because they can, and they enjoy the argument for the the sake of it, but each to their own...it's a free country, (well at least for the time being.......).

..and I won't be commenting further to this thread as I don't like feeding tr.......

Herzlos

ReadySteadyPop said:

What happens if a global trade war/global inflation forces mortgage rates and general interest rates up and causes a recession that forces rents down?  What happens if you have a smart private landlord with no mortgage who keeps the rent stable to attract long term tenants?

Why would a recession driving interest rates up cause rents to go down? Rates going up means costs go up, and people need to rent somewhere. The bigger risk would be that the Government actually builds enough social houses and drives supply up, but that's not going to happen either.

Why would a private landlord charge much below market rates to attract good tenants? It's a captive market.

What happens if those things don't happen and your investment interest buys you less and less rent every year?

I really shouldn't be engaging with this nonsense, but it's kind of fascinating too. Especially since the OP has been long chased away.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

What happens if a global trade war/global inflation forces mortgage rates and general interest rates up and causes a recession that forces rents down?  What happens if you have a smart private landlord with no mortgage who keeps the rent stable to attract long term tenants?

Why would a recession driving interest rates up cause rents to go down? Rates going up means costs go up, and people need to rent somewhere. The bigger risk would be that the Government actually builds enough social houses and drives supply up, but that's not going to happen either.

Why would a private landlord charge much below market rates to attract good tenants? It's a captive market.

What happens if those things don't happen and your investment interest buys you less and less rent every year?

I really shouldn't be engaging with this nonsense, but it's kind of fascinating too.

 The OP`s rent is already cheaper than the mortgage they looked at, they would then be 200k richer if they put the inheritance in the bank, so they are saving on mortgage debt AND they have 200k yielding interest. You are tying yourself in knots trying to make a point, but I am not really sure you have thought through the value of having 200k in liquid assets for someone who said upthread that they "have no assets". It is a plain fact that private landlords have always kept rent below local averages for long term tenants, these boards are full of people saying that they did just that! Take time to read some threads and gain knowledge.

Herzlos

ReadySteadyPop said:

  The OP`s rent is already cheaper than the mortgage they looked at

The rent and mortgage are for 2 different sized properties. I've never heard of any rent being cheaper than the equivalent mortgage, or even being close. Here, it costs about the same to rent a 2-bed as the mortgage on my 4-bed.

Yes, a recession is likely coming thanks to Trump, but that doesn't mean rents will go down much unless demand drops to the point rentals are sitting empty, which there aren't. According to this, there can be upwards of 50 rental applications per property: https://metro.co.uk/2024/09/26/54-applications-per-rental-home-make-stand-21679994/ which means you'd need a huge drop before it'd force rent prices down, and by the time that happened we'd have other problems.

ReadySteadyPop said:

200k in the bank earning interest and a cheap rental would be a dream to many people, especially if we get the dreaded Stagflation scenario when all hell breaks loose in the global economy and credit markets next year.

200k in the bank earning interest and a cheap rental sounds like hell, especially with kids like the OP. As already pointed out, the interest from 200k in the bank will barely get you a rental now, and is going to get you less and less every year unless you're growing the capital.

If the interest from the 200k is 750/month, but putting 200k into a mortgage saves 1000/month, which is the better option?


On the rent front, how many posts do you see on this forum mentioning rent increases that people can't pay, or landlords selling up and kicking them out, vs people who can't pay a mortgage?