£200k inheritance, property ladder or not?

Herzlos

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

You are assuming that the future will be like the past, classic investing mistake, overpaying for a house now could potentially mean big losses in future depending on interest rates/inflation, jobs etc. I am not saying don`t buy a house, I am just saying don`t automatically assume that any money that comes your way should be immediately thrown into property because it is a one way bet (as most of the advice here seems to assume?) the 200k should be treated separately as money that didn`t exist before, wasn`t part of your planning on whether to rent or borrow a house, and has the potential to create a very strong cash cushion that makes you financially independent, again, once the money is "in a house" that financial independence is gone. Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is.

I think it's a safe assumption that the future will be like the past. Houses are only going to get more expensive. Rent is always going to be due unless a mortgage is paid off.

If you were talking about a 2nd house as an investment I'd agree with you that it's a bad idea, but since you need to live somewhere, buying a 1st house is the best investment anyone can make.

"Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is."

Why is rent free in quotes? Do you not agree that once a mortgage is paid off, the payments drop to £0? How is that not financially independent?

Having £200k in a savings account is great, but you'd need to be hitting something like 10% APR to cover the rent payments, well beyond retirement, whilst still having the downsides of renting. It's madness.

Overpaying on a house is no big deal in the long run at all. In a very specific set of circumstances (overpaying and needing to sell whilst in negative equity) it can be pretty bad, but in general you're fine. I overpaid on both of my houses, and it's not caused me any real difficulty.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

Why would a landlord want different tenants every year, that still doesn`t make any sense?

I thought I already answered it. Back in the days of yore you'd claim some repair and refuse to give a deposit back.

Alternatively, now you can bump the rent up by a hefty sum.

Why are you fixating on *that* bit and not the rest of the discussion?

A typical deposit was one months rent, not worth the risk of a void or the next tenant being "bad" to try to steal deposits, and in smaller towns word of mouth could mean tenants avoiding you all together, so we know that this wasn`t happening on the scale you want to portray.

Herzlos

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

Why would a landlord want different tenants every year, that still doesn`t make any sense?

I thought I already answered it. Back in the days of yore you'd claim some repair and refuse to give a deposit back.

Alternatively, now you can bump the rent up by a hefty sum.

Why are you fixating on *that* bit and not the rest of the discussion?

A typical deposit was one months rent, not worth the risk of a void or the next tenant being "bad" to try to steal deposits, and in smaller towns word of mouth could mean tenants avoiding you all together, so we know that this wasn`t happening on the scale you want to portray.

OK. I'll play along because there's no point arguing. How do you feel about all of the other points?

Herzlos

For the benefit of @jem1276 who has probably been chased off already. ReadySteadyPop is an alias for an old troll called CrashyTime who ran a website call housepricecrash.co.uk. He was a key part of a conspiracy theorist movement back in the early 2000's where a huge house price correction was about to happen and that anyone investing in property was an idiot. As such, he sold his flat and rented the cheapest bedsit he could find with a view of saving hard to cash in on the property crash. There have been 2 recessions since that point with his crash not happening, but he still seems adamant that it's going to happen soon despite him likely needing to see at least a 90% drop in house prices for him to break even.

He's been banned from here a few times, and Mumsnet, which he seems to like haunting for some reason.

In a similar timeframe, I bought a house and for a similar outlay to him I have decent equity, more stability and a much nicer home.

As such, any advice he provides is heavily skewed against home ownership and in my opinion is pretty dangerous from a financial point of view. You'll notice that literally everyone else has said that buying is the sensible thing to do with the money, because it is.

ReadySteadyPop

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

You are assuming that the future will be like the past, classic investing mistake, overpaying for a house now could potentially mean big losses in future depending on interest rates/inflation, jobs etc. I am not saying don`t buy a house, I am just saying don`t automatically assume that any money that comes your way should be immediately thrown into property because it is a one way bet (as most of the advice here seems to assume?) the 200k should be treated separately as money that didn`t exist before, wasn`t part of your planning on whether to rent or borrow a house, and has the potential to create a very strong cash cushion that makes you financially independent, again, once the money is "in a house" that financial independence is gone. Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is.

I think it's a safe assumption that the future will be like the past. Houses are only going to get more expensive. Rent is always going to be due unless a mortgage is paid off.

If you were talking about a 2nd house as an investment I'd agree with you that it's a bad idea, but since you need to live somewhere, buying a 1st house is the best investment anyone can make.

"Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is."

Why is rent free in quotes? Do you not agree that once a mortgage is paid off, the payments drop to £0? How is that not financially independent?

Having £200k in a savings account is great, but you'd need to be hitting something like 10% APR to cover the rent payments, well beyond retirement, whilst still having the downsides of renting. It's madness.

Overpaying on a house is no big deal in the long run at all. In a very specific set of circumstances (overpaying and needing to sell whilst in negative equity) it can be pretty bad, but in general you're fine. I overpaid on both of my houses, and it's not caused me any real difficulty.

"I think it's a safe assumption that the future will be like the past"

That is why I would be wary of your advice and keep the 200k in a safe liquid investment, not property, by it`s nature the future is unpredictable, the best investors/money managers always acknowledge that (even if only to themselves)

ReadySteadyPop

Imagine the future scenario where you maybe have a mortgage, rates have spiked because of some bond market crisis or credit crunch event (like they did after the Truss budget) maybe there is also an economic downturn and you lose your job, would you then have rather kept 200k handy earning interest or dividends, or thrown it into a property that may now be losing value?

Herzlos

Ignoring that outside a brief window, recessions don't impact house prices much and that mortgages now have built in affordability checks to ensure people aren't screwed by moderate rate increases, who do you think is going to be safer in such an event?

The mortgage holder for a property that's in negative equity, or a renter?
For the mortgage holder the bank is unlikely to repossess the house whilst the payments are being made, so the only impact is if the rates increase too much or the owner can no longer afford it. They can then sell up, take any remaining equity and downsize.
For the renter, the landlord may be forced to sell up or push up rates, but that's out of the control of the tenant.

The only people who'd benefit from a big drop is someone who is sitting on a pile of cash at exactly the right moment. The problem there is (A) finding the right moment, since you've claimed it's imminent for 20 years now, and (B) being able to outbuy the investment firms and super rich. Assuming OP keeps their £200k in cash and the market collapses tomorrow, they'll be competing against people with millions in cash who'll buy up everything when it becomes cheap enough.

But if the market doesn't collapse they are losing out by paying rent, missing any house price increases and not gaining any equity. It's a hell of a gamble, especially since you've proven it wrong consistently for years.

With savings, you also need to beat inflation after tax, which is quite an achievement.

Dustyevsky

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Herzlos said:

ReadySteadyPop said:

Why would a landlord want tenants to "move annually as contracts expire"? That doesn`t make any sense.

I said it's no longer a thing. Back when I last rented, we moved every year because there was no shortage of renters and they could sting us on a deposit every time. I think that was around the time you sold your flat to start renting to try and cash in on a crash that was never going to happen.

Of course since then I've gained about £80k in equity (after weathering 2 recessions where rents didn't go down) instead of paying £200k towards someone elses mortgage without anything to show for it except a happy landlord.

Have you been in the same bedsit for the whole time? That's kind of impressive, but I don't think that's the norm.

Anyway, short term a mortgage may be a bad deal if you buy at the wrong time. Like when I bought about a week before the 2007 crash and was in negative equity almost immediately. But over the long term it's really hard to lose out, like the aforementioned £80k in equity and becoming rent free when I hit 65.

I was a bit upset about having bought come 2008 but now I'm happy that I did. I dread to think what the rent would be on my current house, but the mortgage on my last house was almost certainly less than your rent.

You are assuming that the future will be like the past, classic investing mistake, overpaying for a house now could potentially mean big losses in future depending on interest rates/inflation, jobs etc. I am not saying don`t buy a house, I am just saying don`t automatically assume that any money that comes your way should be immediately thrown into property because it is a one way bet (as most of the advice here seems to assume?) the 200k should be treated separately as money that didn`t exist before, wasn`t part of your planning on whether to rent or borrow a house, and has the potential to create a very strong cash cushion that makes you financially independent, again, once the money is "in a house" that financial independence is gone. Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is.

I think it's a safe assumption that the future will be like the past. Houses are only going to get more expensive. Rent is always going to be due unless a mortgage is paid off.

If you were talking about a 2nd house as an investment I'd agree with you that it's a bad idea, but since you need to live somewhere, buying a 1st house is the best investment anyone can make.

"Being "rent free" maybe 30 years in the future if you manage to pay your mortgaged debt off isn`t being financially independent, having 200k saved or invested and growing NOW is."

Why is rent free in quotes? Do you not agree that once a mortgage is paid off, the payments drop to £0? How is that not financially independent?

Having £200k in a savings account is great, but you'd need to be hitting something like 10% APR to cover the rent payments, well beyond retirement, whilst still having the downsides of renting. It's madness.

Overpaying on a house is no big deal in the long run at all. In a very specific set of circumstances (overpaying and needing to sell whilst in negative equity) it can be pretty bad, but in general you're fine. I overpaid on both of my houses, and it's not caused me any real difficulty.

"I think it's a safe assumption that the future will be like the past"

That is why I would be wary of your advice and keep the 200k in a safe liquid investment, not property, by it`s nature the future is unpredictable, the best investors/money managers always acknowledge that (even if only to themselves)

It is always a safe assumption the future will be like the past, but knowing which part of the past is the important thing!

I would say those with eyes know the recent past has been very different from the world many of us grew up in.

That's not to say buying a house would be a bad thing. Depending on one's age and personal adaptability, a valid consideration might be in which part of the world to make that purchase.

As dear old Arthur Daley, my mentor, used to say, "The world's your lobster, son."

horsewithnoname

ReadySteadyPop said:

Imagine the future scenario where you maybe have a mortgage, rates have spiked because of some bond market crisis or credit crunch event (like they did after the Truss budget) maybe there is also an economic downturn and you lose your job, would you then have rather kept 200k handy earning interest or dividends, or thrown it into a property that may now be losing value?

So when did you sell your home, how much for, what is your ex-home worth now and how much are your investments worth now?
Not expecting an answer, but it’s something you might want to ponder on.  

newsgroupmonkey_

ReadySteadyPop said:

Myci85 said:

We have just bought our first house, and borrowed into retirement age to make the monthly payments more manageable due to also being older and needing a family home with 2 children. I was a bit worried about the longterm implications of doing so, but then figured that over the years that monthly amount will seem less due to inflation and earnings going up so can hopefully start to overpay, and the alternative was to keep renting. If we kept renting, that monthly rent would have increased steadily, we wouldn't have the security of our own home, and we'd be paying rent for life rather than maybe a few years into retirement. 

The monthly amount isn`t fixed for the full term of the debt though, you can`t fix for 20 or 30 years in the UK, if interest rates go up in future your monthly payments will rise, this has happened to a lot of people recently, rents eventually hit the ceiling of wages, if there was a recession for example rents would fall but mortgage debt payments would still be governed by movements in the bond markets.

Actually Crashy, you can. There are loads of 10 year mortgages and a handful of lifetime too.