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Kazuya

Need Advice For A Friend

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A friend of mine has been living in an inherited 2-bed terraced house for nearly a year now. It would of fetched £135,000 in 2007 and would probably fetch £110,000 - £115,000 now.

He asked me whether it is a good idea to sell it to someone he knows and rent from him and buy a better place in around 2011.

The person who wants to purchase from him has got caught up in the current bull trap sentiment and is trying to build a property portfolio :rolleyes:

I told him to go ahead and sell it but couldn't guarantee how much property will fall from now. Houses like his rent for around £500 per mo. so he would be out of pocket £6000 per annum.

What do you think?

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A friend of mine has been living in an inherited 2-bed terraced house for nearly a year now. It would of fetched £135,000 in 2007 and would probably fetch £110,000 - £115,000 now.

He asked me whether it is a good idea to sell it to someone he knows and rent from him and buy a better place in around 2011.

The person who wants to purchase from him has got caught up in the current bull trap sentiment and is trying to build a property portfolio :rolleyes:

I told him to go ahead and sell it but couldn't guarantee how much property will fall from now. Houses like his rent for around £500 per mo. so he would be out of pocket £6000 per annum.

What do you think?

Talk about other things. Your friendship is at risk if he relies on your advice and it turns out to be worng.

p-o-p

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best to sell it when he needs a better place, as whatever the price moves, the prices will move together.

£12000 is a big punt on the differential being more than that, in 2011.

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Talk about other things. Your friendship is at risk if he relies on your advice and it turns out to be worng.

p-o-p

excellent advice might I say

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Talk about other things. Your friendship is at risk if he relies on your advice and it turns out to be worng.

p-o-p

I thought about that too. I did mention to him he can do whatever he likes because at the end of the day its up to him and not to take my advise seriously. I did give him the advice like this "If it were me I'd sell".

best to sell it when he needs a better place, as whatever the price moves, the prices will move together.

£12000 is a big punt on the differential being more than that, in 2011.

Well it wouldn't be out of the realm of possibly that the house he is in now will be worth around £95k or even less in 2 years and the place he's after, a 3-bed detached or 4-bed semi I believe are currently around £250k.

At around peak they were selling for around £310k so they could likely drop to £200k.

Lots of "possibilities" so I'll leave the decision to him.

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A friend of mine has been living in an inherited 2-bed terraced house for nearly a year now. It would of fetched £135,000 in 2007 and would probably fetch £110,000 - £115,000 now.

He asked me whether it is a good idea to sell it to someone he knows and rent from him and buy a better place in around 2011.

The person who wants to purchase from him has got caught up in the current bull trap sentiment and is trying to build a property portfolio :rolleyes:

I told him to go ahead and sell it but couldn't guarantee how much property will fall from now. Houses like his rent for around £500 per mo. so he would be out of pocket £6000 per annum.

What do you think?

I'd tell him exactly what I believed and what I would do; whether I'm right or not is another matter, but it's my opinion not advice.

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Guest happy?
Talk about other things. Your friendship is at risk if he relies on your advice and it turns out to be worng.

p-o-p

+1

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Guest KingCharles1st

IF he was MY friend- I would tell him just how LUCKY HE IS!!!!

And to not rock the boat, and live in and ENJOY his financial freedom.

OR- sell it, but not before getting somebody trustworthy to agree to take the money and put it in a VERY SAFE PLACE WHERE HE CAN'T GET IT

Edited by KingCharles1st

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A friend of mine has been living in an inherited 2-bed terraced house for nearly a year now. It would of fetched £135,000 in 2007 and would probably fetch £110,000 - £115,000 now.

He asked me whether it is a good idea to sell it to someone he knows and rent from him and buy a better place in around 2011.

The person who wants to purchase from him has got caught up in the current bull trap sentiment and is trying to build a property portfolio :rolleyes:

I told him to go ahead and sell it but couldn't guarantee how much property will fall from now. Houses like his rent for around £500 per mo. so he would be out of pocket £6000 per annum.

What do you think?

Can't find the particular article but John Kay has some interesting ideas on risk/probability and investment:

http://www.ft.com/cms/s/2/c0765fa0-5a7a-11...144feabdc0.html

Seems to me you'v got a fifty-fifty chance of being wrong on this one. I'll wager there's someone on this site who can tell me why the odds are different though.

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The normal mathematics over STR-ing don't apply in this case, because he owns the property outright. So there isn't a mortgage payments versus rent equation to be considered.

At a very rough, back-of-the-envelope sum, house prices would need to fall 10% a year for him to have made any profit by the time he buys again. Add to that the hassle of renting (LAs' fees, risk of an unscrupulous LL or one who gets repo-ed, etc. etc.), and my overwhelming inclination would be to stay put. As he didn't pay anything for the house, he is immune from the risk of NE.

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I was in the casino with my friend.

He was up £300

He wanted to bet it all on black but i told him not to

He refrained and it spun red

He then placed it all on black despite me telling him not to and doubled.

He then wanted to bet the whole £600 on red.

Again i told him not to

He bet and it spun black and he lost everything.

Advice: there are 4 outcomes.

He will lose and you were right

He will win and you were right

He will lose and you were wrong

he will win and you were wrong

Either way, never get involved as advice is never appreciated and will only cause conflict no matter the outcome.

2 things to bet on: Tax and death

Edited by delboypass

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Just an update. He has decided to sell to the cash buyer. He has backing from his uncle who also wants him to sell so I've backed away from it all although he still talks to me about it.

He plans to put the money from the sale into two 5% bonds to claw back most of the money lost from renting.

I wished him good luck and thats that :)

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Here's a crazy thought, he could just live in it. I thought we were all against housing market greed? Or is that just when it's convenient for our own needs?

Once you factor in the cost of moving, time and disruption I would say no way. Perhaps if it were a 1m house dropping 20% then yes, but with the sums being talked about it is to much risk for to little return imo.

Edit: ^^ oh well good luck to him, hope it works out :)

Edited by Orbital

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He wants to be a liquid cash buyer at the ready fro his next purchase.

His house won't sell for ages if he were to put it on the market even for £115,000. That is the main reason he is doing all of this.

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Here's a crazy thought, he could just live in it. I thought we were all against housing market greed? Or is that just when it's convenient for our own needs?

Once you factor in the cost of moving, time and disruption I would say no way. Perhaps if it were a 1m house dropping 20% then yes, but with the sums being talked about it is to much risk for to little return imo.

Edit: ^^ oh well good luck to him, hope it works out :)

Very true, although most on this site seem in favour of making money of property on the way down, whilst pouring scorn on people who did it on the way up (whilst conveniently forgetting that they made money then too!)

If the seller has banked £110k at 5%, he will make £3.3k in interest if he is a higher rate tax payer or £4.4k if he is at basic rate. This can probably be rounded up to £4k (higher) or £5k (basic) to take account of the repairs that his landlord will now be responsible for.

So if he can rent for £6k, this could be costing him as little as £1k a year net.

If the current differential in price is £140k and prices come off by 20% in the next two years it will come down to £112k - a £28k gross 'profit', coming down to maybe £20k once fees etc have been deducted. Not a bad result, but it has a lot of dependencies e.g. if the larger house goes down in value quicker than the smaller one, most of this advantage would be wiped out.

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