Any way i can make renting instead of buying work to my advantage?

freeflyer

Hi all, so i'm splitting with my partner and selling the house. I was considering renting in order to make things easier, and to give myself longer to find a new house and avoid a logistical nightmare on transfer day with three houses involved. I'll get back £120k from the sale of the house. I'll only have around 200k to spend on the new one once I get the mortgage.
So, if I rent for a year, is there any way I can make the 120k from the house sale work to my advantage? I was thinking if renting will cost me 7.5k for a year, then will interest, investment etc of my original 120k cover a part of that? I'm just wondering if instead of using 120k to put into the next house, I could do something else with it and gain something back whilst I rent short term.

Voyager2002

You might get a better response from the Savings and Investment board.

It doesn't really matter why you will have this money: what is important is that you expect to have about £120K for around a year but no longer, and want to know how to maximise your return from it. A key issue is your attitude to risk: investment in equities offers the chance that your funds would grow faster than the increase in house prices over that period, but also a fairly substantial risk that you end up with less money at the end of the year! With cash and interest ("saving" rather than investing) you are not going to lose, but probably will fall behind the housing market.

You might look for an investment trust based on property (in the hope of tracking the housing market), although most investments seem to be based on commercial property and have other disadvantages.

saajan_12

freeflyer said:

Hi all, so i'm splitting with my partner and selling the house. I was considering renting in order to make things easier, and to give myself longer to find a new house and avoid a logistical nightmare on transfer day with three houses involved. I'll get back £120k from the sale of the house. I'll only have around 200k to spend on the new one once I get the mortgage.
So, if I rent for a year, is there any way I can make the 120k from the house sale work to my advantage? I was thinking if renting will cost me 7.5k for a year, then will interest, investment etc of my original 120k cover a part of that? I'm just wondering if instead of using 120k to put into the next house, I could do something else with it and gain something back whilst I rent short term.

Absolutely, the £120k in a high yield savings account @ 5% earns £6k. Note you'd have to pay income tax on most of that as it'll be over the allowance, but some should be protected in an ISA. 

Or buy a Gilt with 1 year left to maturity, essentially a bond issued by the UK Government. The capital gain part is tax free, you'd just pay some tax on the interest. 
Eg UKT 0.125 30/01/26 - buy now at ~£95.80 each, earn 0.125% interest, and get back £100 at the end. The capital gain is £4.20 for every £95.80 invested, ie 4.38% which is tax free, plus you get a bit of interest, albeit taxed. 

Or invest in stocks and shares - theres more risk over your short timeframe, but on average you should end up in the positive by more than the amounts above.. in reality it might be much higher or much lower. 

El_Torro

Investing in the stock market is not a good idea at all if you plan to spend the money in 1 year's time. At the best of times investing is most suited for those who are investing for the long term. 5 years at a push though 10 years or more is a much surer bet. 

Bear in mind as well that global stock markets have risen about 20% in the last year. That doesn't necessarily mean that they will fall in the coming year, though the risk is there. 

freeflyer

Thanks all  

ciderboy2009

Bear in mind though that, in 12 months time, house prices could easily have increased enough to wipe out any interest that you have made (this obviously depends on the area where you're looking to buy).

{waits for Crashy/ReadySteadyPop to join in spouting their usual nonsense}

ReadySteadyPop

freeflyer said:

Hi all, so i'm splitting with my partner and selling the house. I was considering renting in order to make things easier, and to give myself longer to find a new house and avoid a logistical nightmare on transfer day with three houses involved. I'll get back £120k from the sale of the house. I'll only have around 200k to spend on the new one once I get the mortgage.
So, if I rent for a year, is there any way I can make the 120k from the house sale work to my advantage? I was thinking if renting will cost me 7.5k for a year, then will interest, investment etc of my original 120k cover a part of that? I'm just wondering if instead of using 120k to put into the next house, I could do something else with it and gain something back whilst I rent short term.

Have you already sold it?

Herzlos

Financially, unless you can get an incredibly good deal on rent, you're probably not going to make money from it.

There are companies where you can essentially get dirt cheap rent for house-sitting though, so if you aren't fussy about where you are staying and have the flexibility to move around a bit, you could try that.

The other option is to make it work for you. Can you work out of a different city for a year and try something different?

ReadySteadyPop

Herzlos said:

Financially, unless you can get an incredibly good deal on rent, you're probably not going to make money from it.

There are companies where you can essentially get dirt cheap rent for house-sitting though, so if you aren't fussy about where you are staying and have the flexibility to move around a bit, you could try that.

The other option is to make it work for you. Can you work out of a different city for a year and try something different?

What are the best one or two companies for doing this in your opinion?

[Deleted User]

It may be practically easier for you to sell the house but the chances are the longer that money sits outside of property the less it will be worth. The rent you pay for 1 year is likely to be much greater that the interest on a mortgage for a like for like property. You cannot afford to risk a stock market downturn otherwise potentially scuppering your plans to buy in a years time. Putting money in a cash ISA or savings might beat inflation but I don't think would be putting a dent in the rent. There is no risk free approach but in my experience renting is a money pit.

Sapindus

I'm currently renting, having sold my house, while I look for somewhere to buy in a new (and cheaper) area.  The house money in savings accounts, plus the money I'm saving by not paying a mortgage, covers my rent.  But as others have pointed out if houses to buy get much more expensive in the meantime, I've lost out.  Where I've gained (hopefully) is by being able to find and buy exactly the house I want instead of buying in a hurry to fit with my own sale and having to move again too soon if it didn't suit.

At least renting I don't have to worry about house maintenance and repair.  I guess it's a bit like people who "rent" a car, although I never have.