£200k inheritance, property ladder or not?

ReadySteadyPop

Herzlos said:

Dustyevsky said:

newsgroupmonkey_ said:

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.

Look Crashy, you've been saying this since 2003. "Next year will be the crash"

Well, he was right, in 2008. We used the bad situation then to buy in Devon. There are always those suffering the 3Ds:divorce, debt and death. We found vendors willing to take a hit of about -15% - 20% to escape quickly from those.

Potential buyers who were greedy, waiting for reductions of more than 20% were disappointed. It was never going to happen.

If it had, or if a mega collapse occurs in the future, what you can buy a house for will be the least of your worries!

The problem with the collapse in 2008 was that mortgage checks became much more strict, so it was perfect for cash buyers but if you couldn't afford a mortgage in 2007, you still couldn't afford a mortgage at 20% off in 2008.

With something that could be an investment property, the venture capitalists would swoop in and buy everything up long before normal people could jump in. So realistically, house prices would never drop more than maybe 30% outside of something catastrophic happening.

I think unlikely after how badly they got burned with the commercial property crash, far too risky to go all in on such an illiquid investment. For Sale numbers seem to have climbed yet again this year, up nearly 25% and that is after being up nearly 25% last year as well! VC very unlikely to come riding to the rescue in my opinion.

Herzlos

ReadySteadyPop said:

Herzlos said:

Dustyevsky said:

newsgroupmonkey_ said:

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.

Look Crashy, you've been saying this since 2003. "Next year will be the crash"

Well, he was right, in 2008. We used the bad situation then to buy in Devon. There are always those suffering the 3Ds:divorce, debt and death. We found vendors willing to take a hit of about -15% - 20% to escape quickly from those.

Potential buyers who were greedy, waiting for reductions of more than 20% were disappointed. It was never going to happen.

If it had, or if a mega collapse occurs in the future, what you can buy a house for will be the least of your worries!

The problem with the collapse in 2008 was that mortgage checks became much more strict, so it was perfect for cash buyers but if you couldn't afford a mortgage in 2007, you still couldn't afford a mortgage at 20% off in 2008.

With something that could be an investment property, the venture capitalists would swoop in and buy everything up long before normal people could jump in. So realistically, house prices would never drop more than maybe 30% outside of something catastrophic happening.

I think unlikely after how badly they got burned with the commercial property crash, far too risky to go all in on such an illiquid investment. For Sale numbers seem to have climbed yet again this year, up nearly 25% and that is after being up nearly 25% last year as well! VC very unlikely to come riding to the rescue in my opinion.

It depends on how much money it cost them though, right?

House prices trend upwords, with the occasional dip, so if you have the money and can sit on it (or charge enough in rent to cover it), you'll make money with the only issue being raising the capital initially.

Now imagine that property prices absolutely tank due to a market blip and not some massive house building scheme, and you can buy a house outright for £1000. It's worth the gamble that they'll rebound in the next decade and you could make 10000% interest, right?

So it's just a case of finding the cut off. If we assume it's at the point a normal person doesn't need a mortgage and everyone is a cash buyer, then we can also assume that people with more cash will buy up the stock. So you with £100k in cash are now competing with multi-millionairres over property, what makes you think you'd win?

We saw the same thing happen in Edinburgh when I was trying to buy about 20 years ago. Everything I was looking at was going for easily £50-100k over asking prices because investors were snapping it up, why do you think it'd be different this time?

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

Dustyevsky said:

newsgroupmonkey_ said:

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.

Look Crashy, you've been saying this since 2003. "Next year will be the crash"

Well, he was right, in 2008. We used the bad situation then to buy in Devon. There are always those suffering the 3Ds:divorce, debt and death. We found vendors willing to take a hit of about -15% - 20% to escape quickly from those.

Potential buyers who were greedy, waiting for reductions of more than 20% were disappointed. It was never going to happen.

If it had, or if a mega collapse occurs in the future, what you can buy a house for will be the least of your worries!

The problem with the collapse in 2008 was that mortgage checks became much more strict, so it was perfect for cash buyers but if you couldn't afford a mortgage in 2007, you still couldn't afford a mortgage at 20% off in 2008.

With something that could be an investment property, the venture capitalists would swoop in and buy everything up long before normal people could jump in. So realistically, house prices would never drop more than maybe 30% outside of something catastrophic happening.

I think unlikely after how badly they got burned with the commercial property crash, far too risky to go all in on such an illiquid investment. For Sale numbers seem to have climbed yet again this year, up nearly 25% and that is after being up nearly 25% last year as well! VC very unlikely to come riding to the rescue in my opinion.

It depends on how much money it cost them though, right?

House prices trend upwords, with the occasional dip, so if you have the money and can sit on it (or charge enough in rent to cover it), you'll make money with the only issue being raising the capital initially.

Now imagine that property prices absolutely tank due to a market blip and not some massive house building scheme, and you can buy a house outright for £1000. It's worth the gamble that they'll rebound in the next decade and you could make 10000% interest, right?

So it's just a case of finding the cut off. If we assume it's at the point a normal person doesn't need a mortgage and everyone is a cash buyer, then we can also assume that people with more cash will buy up the stock. So you with £100k in cash are now competing with multi-millionairres over property, what makes you think you'd win?

We saw the same thing happen in Edinburgh when I was trying to buy about 20 years ago. Everything I was looking at was going for easily £50-100k over asking prices because investors were snapping it up, why do you think it'd be different this time?

  There is no economic scenario that I can think of that would create this situation, best to look at what is happening in actual reality right now in my opinion, so For Sale numbers are up and mortgage approvals are dropping, this means that keeping 200k well clear of property at the moment is really far and away the most sensible move.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

https://www.bbc.co.uk/news/articles/c78631e4gygo

Keep liquid funds available in case of job loss or other emergency would be my advice.

Why? You keep jumping on anything with a headline that looks bad for the economy as to why having cash and paying rent is better than buying, but you never actually explain anything.

I can get that you want to keep some kind of buffer to handle job loss / emergency, but £200k is excessive. Putting £150k into a house and keeping £50k for emergencies would still leave them better off than most of the country.

 I am talking about building wealth not "emergency money", better to keep the full 200k in a more liquid investment vehicle and have it creating interest/dividends for you while the landlord pays for roof repairs new boilers etc.

shinytop

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

https://www.bbc.co.uk/news/articles/c78631e4gygo

Keep liquid funds available in case of job loss or other emergency would be my advice.

Why? You keep jumping on anything with a headline that looks bad for the economy as to why having cash and paying rent is better than buying, but you never actually explain anything.

I can get that you want to keep some kind of buffer to handle job loss / emergency, but £200k is excessive. Putting £150k into a house and keeping £50k for emergencies would still leave them better off than most of the country.

 I am talking about building wealth not "emergency money", better to keep the full 200k in a more liquid investment vehicle and have it creating interest/dividends for you while the landlord pays for roof repairs new boilers etc.

S&S are liquid but can be very volatile, even 'safe' investments like trackers. And if there is a house price crash, isn't there likely to be a S&S crash too? 

I wouldn't advise buying a house as a pure investment at the moment but if you need somewhere to live as well you'd have to be a very good/lucky investor to beat it. You won't build any wealth with £200k on guaranteed returns and paying rent.        

newsgroupmonkey_

shinytop said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

https://www.bbc.co.uk/news/articles/c78631e4gygo

Keep liquid funds available in case of job loss or other emergency would be my advice.

Why? You keep jumping on anything with a headline that looks bad for the economy as to why having cash and paying rent is better than buying, but you never actually explain anything.

I can get that you want to keep some kind of buffer to handle job loss / emergency, but £200k is excessive. Putting £150k into a house and keeping £50k for emergencies would still leave them better off than most of the country.

 I am talking about building wealth not "emergency money", better to keep the full 200k in a more liquid investment vehicle and have it creating interest/dividends for you while the landlord pays for roof repairs new boilers etc.

S&S are liquid but can be very volatile, even 'safe' investments like trackers. And if there is a house price crash, isn't there likely to be a S&S crash too? 

I wouldn't advise buying a house as a pure investment at the moment but if you need somewhere to live as well you'd have to be a very good/lucky investor to beat it. You won't build any wealth with £200k on guaranteed returns and paying rent.        

I've given up. He's refusing to answer this part of the question.

I'm not really surprised. He says he has lots of liquid investment, but realistically, he got out of the housing market back in 2003 because the market was about to crash and has been living in a bedsit ever since.

Taking advice from someone like this isn't probably the greatest idea. He could have paid his mortgage off and had loads of money to invest. Living in Edinburgh, as he does, the most expensive city in Scotland and one of the most expensive in the UK, he's missed out on 22 years of growth and won't be able to purchase a property there now.

I've reported him several times - he's constantly breaking the rules as well as being banned at least twice and coming back with a new name. MSE are threatening to ban me permanently because I keep calling him out, but let this fella carry on.

strawb_shortcake

What I'd like to know from @ReadySteadyPop and they didn't answer me previously, is if now is not the time to buy then when is? What is the optimum time to buy, what interest rate? What would house prices need to drop by?  

Or is there never an appropriate time to buy as those optimum conditions could never be maintained for 25 years. Jumping in and out of the property ladder is a fools errand.

Or do you just rent forever and die with liquid assets? What is the end goal for Readysteadypop's wealth? 

Herzlos

shinytop said:

S&S are liquid but can be very volatile, even 'safe' investments like trackers. And if there is a house price crash, isn't there likely to be a S&S crash too?    

Bingo. It's very unlikely that house prices will crash by enough to matter without hurting other investments.

However, if you own property and aren't planning on moving, you're not going to suffer any actual loss beyond maybe not getting a better mortgage deal with the higher LTV.

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

https://www.bbc.co.uk/news/articles/c78631e4gygo

Keep liquid funds available in case of job loss or other emergency would be my advice.

Why? You keep jumping on anything with a headline that looks bad for the economy as to why having cash and paying rent is better than buying, but you never actually explain anything.

I can get that you want to keep some kind of buffer to handle job loss / emergency, but £200k is excessive. Putting £150k into a house and keeping £50k for emergencies would still leave them better off than most of the country.

 I am talking about building wealth not "emergency money", better to keep the full 200k in a more liquid investment vehicle and have it creating interest/dividends for you while the landlord pays for roof repairs new boilers etc.

What kind of yield do you need where you're making a profit after paying rent? The math just doesn't work.

If it was £2.5m then the interest would allow you to rent anywhere you wanted, but £250k doesn't.

ReadySteadyPop

Herzlos said:

shinytop said:

S&S are liquid but can be very volatile, even 'safe' investments like trackers. And if there is a house price crash, isn't there likely to be a S&S crash too?    

Bingo. It's very unlikely that house prices will crash by enough to matter without hurting other investments.

However, if you own property and aren't planning on moving, you're not going to suffer any actual loss beyond maybe not getting a better mortgage deal with the higher LTV.

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

https://www.bbc.co.uk/news/articles/c78631e4gygo

Keep liquid funds available in case of job loss or other emergency would be my advice.

Why? You keep jumping on anything with a headline that looks bad for the economy as to why having cash and paying rent is better than buying, but you never actually explain anything.

I can get that you want to keep some kind of buffer to handle job loss / emergency, but £200k is excessive. Putting £150k into a house and keeping £50k for emergencies would still leave them better off than most of the country.

 I am talking about building wealth not "emergency money", better to keep the full 200k in a more liquid investment vehicle and have it creating interest/dividends for you while the landlord pays for roof repairs new boilers etc.

What kind of yield do you need where you're making a profit after paying rent? The math just doesn't work.

If it was £2.5m then the interest would allow you to rent anywhere you wanted, but £250k doesn't.

If you invest the 200k into property at the wrong time the maths doesn`t work either though, and we are not talking about immediate profit we are talking about building a sensible savings/investment portfolio, liquid and diversified, that will yield income in the future, you can`t really do that with property unless you sell and downsize, rent out (you have to live somewhere else though) take in lodgers (bad idea in my opinion) or MEW (shockingly bad and expensive option) and it is harder to quantify future property income, it is really a punt on finding a future buyer when you need to unlock some money, stocks, bonds, MMF`s, savings accounts are easier to figure out as far as expected regular income.

Even the experts are telling us to be careful.....

https://propertyindustryeye.com/uk-house-price-currently-out-of-sync-with-economic-reality-as-budget-cracks-start-to-appear/

[Deleted User]

I think this depends on the area.

In my area a property to rent for 1500 pcm, is about 400k to buy. Mortgage interest would be approaching 1000 per month on a 200k loan.

So as long as you can access a mortgage interest rate of under 4.5%, the buying is probably the best option.