Is housing still a good investment?

maddognellie

We have inherited a large sum of money and hve spread it around lots of accounts, but should we buy something solid like a house with it?

pinkshoes

Do you already own a house?

If not, and you're paying rent and could buy a house without needing a mortgage, then this might be a good idea.

It really depends which area you're in. In some areas prices are dropping a bit, in other areas they're stagnant or still rising. Find out how much you'd be able to get in rent per month.

Personally, I think buying a house mortgage free then renting it out is a good investment, as after 30 years you'll have made alot of profit in rent, and you'll still own a house, which can then perhaps be sold to fund your retirement!

Sisyphus

I would say that with a very large sum of money, don't put all your eggs in one basket. I personally would spread the money over different assets, possibly over more than one currency. Some could be property, most would be in Gilts, some in a balanced portfolio of shares, some in high interest savings accounts. The weighting you give to each asset class might vary according to your view of that market at the present time. Personally I would underweight property at the moment, but if the amount I had was very large there would probably be some property nonetheless.

boinging_2

Of course housing is a great bet at the moment. Prices will only ever rise (just look at the last 10 years).

Best bet would be a new build, especially apartments.

maddognellie

We dont own our own house but love where we live. We pay a low rent. Thought with the inheritance we could help our daughter onto the housing ladder with her topping up with a mortgage. Just worried about loosing money as we have no pension yet.

zappahey

pinkshoes wrote: »

Personally, I think buying a house mortgage free then renting it out is a good investment, as after 30 years you'll have made alot of profit in rent, and you'll still own a house, which can then perhaps be sold to fund your retirement!

I suspect that, once the lost interest on the cash is taken into account, the profit from renting out may not be as high as you think.

pinkshoes

zappahey wrote: »

I suspect that, once the lost interest on the cash is taken into account, the profit from renting out may not be as high as you think.

Indeed, hence I suggested finding out what a house they could afford would rent out for.

If it's the case that monthly rent is more than they'd get in interest from the bank, then it's probably a good move. I'd say that in 30 years time, there's a good chance the house will be worth more than it's worth in 2008.

Also with interest, you have to be strong willed not to spend more than the interest, which isn't always easy. Rent will rise approximately 3% each year over 30 years, whereas the interest might be alot today, but in 30 years time (assuming you SPEND the interest each month) won't amount to much.

I would suggest the OP going to see a financial advisor who will no doubt have some suggestions to make on what best to invest in at the moment.

Sisyphus

maddognellie wrote: »

We dont own our own house but love where we live. We pay a low rent. Thought with the inheritance we could help our daughter onto the housing ladder with her topping up with a mortgage. Just worried about loosing money as we have no pension yet.

No need to rush for oyur daughter IMO - some might question the existence of any 'ladder' at all at the moment. Nobody around me seems to be trading up at any rate.

boinging_2

pinkshoes wrote: »

Also with interest, you have to be strong willed not to spend more than the interest, which isn't always easy. Rent will rise approximately 3% each year over 30 years, whereas the interest might be alot today, but in 30 years time (assuming you SPEND the interest each month) won't amount to much.

Most high interest saving accounts, will pay the interest into the same account thus you earn interest on your interest each month.

Buying today could see you already having to make up 10% by the end of the year (plus what ever stamp duty you have to pay) as opposed to a guaranteed 6% in 12 months time.

I would not suggest against buying a house, the trick for you will be waiting until the market is at it's lowest and then buying (or certainly near the bottom).

maddognellie

Do you think we are heading for a recession, I would hate to buy just a prices are going down. Maybe i should ask a financial advisor. Estate agents just say that the prices are NOT going down, but there are a lot of houses for sale with no chain so i think they are buy to lets being sold. I dont think they are all executer sales. Thanks for the advice.

shelovestobuystuff

Yes buy a house.If its for the long term you will find its a very good investment.The value of housing has always doubled every 10 years for at least the last 50 years.No matter what it does in the short term,in the long term its safe as houses.
How many people made a killing during the last recession buying up cheaply all the properties that people were selling quick before the prices dropped any further.The values went back up again and they made money out of other peoples fear and panic.
Absolutely wait until the market is at its lowest before you buy.I would say wait a month or two and see what the market does.Watch the interest rates keenly and keep an eye on public opinion too.Once the interest rates drop to 5% or less the market should start to recover so timing is everything.I think you are looking at about 4 months before the market hits bottom so keep a close eye on it for the perfect time to buy.
Having said all that though if you buy a good house in a good area you cant go wrong no matter wgat the market in general is doing.Some areas are so sought after they are immune to UK market fluctuations so do some research.