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Stressed-Out

Advice Please!

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OK I realize I'm probably not going to get much sympathy here, but I'd really appreciate some advice from some well-informed people.

I happen to have recently inherited £250K to spend on a property. Since my partner and I earn next to nothing (and are both self-employed), the purchase really needs to be an outright one, as we can't really raise any kind of a mortgage.

At the moment in our area, 250K will buy you a 2-bed house or flat.

For the last 2 years, we have been renting a small but nice 2-bed house in West Kent for around £800 pcm.

Basically, we'd be happy to stay here for another year, keep the cash in the bank, and see what happens to house prices. The 'problem' is that we have a daughter of 3-and-a-half who will be starting school in September 2006, which means that we need to put her name down with the LEA for school in February 2006. At present we live in the catchment area for a school that has a bad reputation. So, in the next 5 months (at the very outside) we need to move into the catchment area for a better school.

House prices are dropping in this area, but how long should we wait before we buy? Is it worth the upheaval of trying to find another place to rent in the catchment area for a better school (which would certainly cost us nearer £1,000 pcm, plus agency fees, deposit, etc.)? Or should we just try to buy something now? Or will we really regret it if house prices fall in the next year or so and could have bought something much better?

I appreciate that this probably seems like a 'non-problem' to a lot of people on this forum who are finding it hard to scrape together a deposit for a flat, but I feel really stressed-out by it all and would love some sound advice from those who have been watching the market closely.

Thanks!

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Hi

You might do better going on the main forum, it might get moved there anyway

The best advice is for you to do some research (and dont get frightened by the Chuz if he replies..he is a big softy really)

The front page of this site has links to all sorts of property reports. Read these and bear in mind the limitations of each one, this might help gauge where prices in your area are going. Lets face it, most of us here think there will be a 20-30% drop in the next couple of years, so most peole will tell you to wait!

A good site to help weigh up buying versus renting is firsttimebuyerhelp.co.uk also linked to the front page.The site has a clear opinion but is factual so may be of some help. I guess you have to take into consideration the possible loss of value on a property and what you could make out of the money by investing it plus all the extra costs, against rent and associted fees.

Having said that, you have inherited the money, so you could just say sod it. If owning a house makes a big difference to your quality of life, then whats 50k (and the rest)

If you do buy, you are in a good position (cash) so find a forced seller and haggle like crazy. If you are lucky this could buffer against some potential falls

Good luck whatever you decide.

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Just be brave and patient & rent a place in the catchment area you are interested in for your daughters education. It may cost you more initially but you will save money on house prices in the longrun. With 250k in the pot & a self-employed income or 2 on top surely you can afford to subsidise your rented accomodation for a while and in a year or so's time you'll find the housing market is "your Oyster"!

That's what i'd do in your situation anyway.

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Thanks very much to you both for your sound advice (I realized after I'd posted that it had gone in the wrong forum, so I've moved it now).

I guess I'm just afraid of making the wrong decision.

Ideally, I'd like to buy, but I don't want to end up feeling like a total idiot in 2 years' time if prices drop 30% and i could have got a bigger place for the same money.

Anyway, thanks!

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OK I realize I'm probably not going to get much sympathy here, but I'd really appreciate some advice from some well-informed people.

I happen to have recently inherited £250K to spend on a property. Since my partner and I earn next to nothing (and are both self-employed), the purchase really needs to be an outright one, as we can't really raise any kind of a mortgage.

At the moment in our area, 250K will buy you a 2-bed house or flat.

For the last 2 years, we have been renting a small but nice 2-bed house in West Kent for around £800 pcm.

Basically, we'd be happy to stay here for another year, keep the cash in the bank, and see what happens to house prices. The 'problem' is that we have a daughter of 3-and-a-half who will be starting school in September 2006, which means that we need to put her name down with the LEA for school in February 2006. At present we live in the catchment area for a school that has a bad reputation. So, in the next 5 months (at the very outside) we need to move into the catchment area for a better school.

House prices are dropping in this area, but how long should we wait before we buy? Is it worth the upheaval of trying to find another place to rent in the catchment area for a better school (which would certainly cost us nearer £1,000 pcm, plus agency fees, deposit, etc.)? Or should we just try to buy something now? Or will we really regret it if house prices fall in the next year or so and could have bought something much better?

I appreciate that this probably seems like a 'non-problem' to a lot of people on this forum who are finding it hard to scrape together a deposit for a flat, but I feel really stressed-out by it all and would love some sound advice from those who have been watching the market closely.

Thanks!

You might want to also post this on the "main discussion on house prices" as it seems like your question is not that specific to a geographical area. You will probably get a fair few replies, some helpful, some might see it as an excuse for a rant, sorry -- it's a lively forum as you have probably already discovered. :)

Calculate the interest you can get on the 250k in a good cash account, be sure to include any tax that you will pay on this interest. Should be around 500pcm after tax I would think. Subtract this from the 1000pcm. This gives how much it will cost you to rent per month as opposed to buying. Remember, if you buy you don't get that interest.

Decide the maximum period you are prepared to rent. Decide from the data what you think house prices will do in your area, rise or fall, for how long, and by how much. I would guess since it is in the south east it is probably already falling, but you have to judge that for yourself. If you believe it is rising and will continue to do so, you might as well buy now. If you think it is falling by say 0.5% per month, then that's 1250 a month you lose (on paper) by buying now, until the market hits the bottom.

250k is a magic figure as it is on a stamp duty threshold. Due to the "stamp duty chasm" effect, very little property will sell for 250-265k, it will tend to be either below 250 or above 265. This acts in your favour in a falling market.

According to many observers, 2-bed flats and possibly small houses are the most likely to crash, especially new-builds. It would be interesting to find out how much new build development of properties of this type there has been recently in your area. If a lot of new developments have gone up, this increase in supply could mean that this class of property is risky to buy now in that area.

When you do decide to buy, you are in a good position to negotiate very very hard indeed. You have no chain and you are a cash buyer. There is almost no-one in your position today. Irrelevant of the market conditions, these facts in and of themselves deserve a sizeable discount unless the seller is in no hurry at all (but they usually are these days).

If you believe the market is falling, you can play ahead of the game a little bit and put in very low offers, which will represent the market value of the property in a few months or a year. Never ever be embarrased by putting in low offers - 20-25% under asking price is not a bad starting point today, but it could be more or less depending on the situation, especially how reasonable the asking price was.

I hope this advice helps you in your decision!

frugalista

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Dear Frugalista,

Thank you so much for your great advice - so considered and helpful.

Prices are falling in West Kent, slowly but surely. I am gradually being persuaded by the forum that the best thing to do is rent in the catchment area for a better school for a year and buy in 12 months' time - let's just hope that the further interest-rate cuts predicted for this year will not spark an upturn in prices...

Thanks again! I certainly feel less like :blink: and more like :)

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Dear Frugalista,

Thank you so much for your great advice - so considered and helpful.

Prices are falling in West Kent, slowly but surely. I am gradually being persuaded by the forum that the best thing to do is rent in the catchment area for a better school for a year and buy in 12 months' time - let's just hope that the further interest-rate cuts predicted for this year will not spark an upturn in prices...

Thanks again! I certainly feel less like  :blink:  and more like  :)

Right, remember though that this is a forum for sceptics (or realists as they prefer to be called). I come here because I'm naturally optimistic and need to read about the potential downside before I do anything silly.

You should also do your own research/thinking to try to come to a balanced view: if you only read this forum you'll end up buying gold coins and stuffing them under the mattress - not necessarily the least volatile strategy. :)

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Right, remember though that this is a forum for sceptics (or realists as they prefer to be called). I come here because I'm naturally optimistic and need to read about the potential downside before I do anything silly.

You should also do your own research/thinking to try to come to a balanced view: if you only read this forum you'll end up buying gold coins and stuffing them under the mattress - not necessarily the least volatile strategy. :)

I second that. I am a skeptic / bear, but I would not want anyone to adopt the skeptic view unless they had heard the arguments and facts, and decided themselves using their own faculties of reason what was the best action for them.

frugalista

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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