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Guest rigsby II

Yet Another Hpc Myth

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Guest rigsby II

Another HPC myth - STR'ing and living off the proceeds by simply depositing it in a bank-account

I can see that if you can afford to buy, but dont want to buy, then in a stagnant or falling market renting makes sense.

I can also see that you could use your STR loot to gamble on the gee-gees and stock market, possibly make a killing, in which case renting also makes sense.

But what I can't see is the myth that you can simply stick your STR loot in a bank account, take several holidays a year, sit on a beach drinking long tall sallies, rent vicarages, converted barns, farmhouses, windmills and other desirable properties.

Suppose I sold my house (!) and stuck £100K equity in the bank. Then in a high interest account, say 5%, after tax I'd get £4K a year. Identical house down the road is renting for £450 pcm but I'd only get £333 pcm interest.

So lets assume that at £200k in the bank, you'd get £666 pcm. What you going to rent for that - nothing too tasty...

ditto £300k, £400k etc etc, the more you STR, the higher your standards surely and so higher the rent.

It just don't add up, you're telling porkies.

It's a myth and needs to be debunked.

:)

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But not only do you get the interest but you also don't have to pay the mortgage any more...

Say you had £100k equity and £100k outstanding mortgage. You'd be paying around £600 a month mortgage. STR and bank the £100k earning you £333 per month as you said. Now you're no longer a home owner there are other savings on insurance and maintenance etc so you are over £1000 per month better off.

Now you can rent a £200k property like you used to live in for less than £1000 per month resulting in a net gain.

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When we STR'd back in 2003 , my hubby had a big salary inctrease too. We either traded up and dumped ourselves with a huge loan, or rent the same type of property and use the interest from the loan to help reduce the rent. Everyones set of circumstances are different and str isn't for everyone.

Also my H works for Rentokils conference centres.......which are now up for sale. The future is uncertain....thk god we didn't take on a huge loan, maybe have to relocate (?) knowing the house would probably not achieve in price what we'de paid for it. IMHO str was our best move ever.

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Guest rigsby II
But not only do you get the interest but you also don't have to pay the mortgage any more...

I don't have a mortgage. Whenever I think of getting a mortgage I lie down in a darkened room.

"Identical house down the road is renting for £450 pcm but I'd only get £333 pcm interest."

If I sold up and rented my own property off someone I would be £(450-333) = £117 worse off if I STR.

The figures dont add up. The flexibility might add up, the freedom might add up, the millstone around your neck etc may add up, but pounds shillings and pence simply dont add up.

Offsetting your rent with the proceeds, like DrB says, adds up, but time and time again people on here create the impression that they sell up, bank the loot and live 100% off the interest and still have money left over to take holidays and piss themselves at their landlord.

Sorry I dont see it...

Edited by rigsby II

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Sorry I dont see it...

Fair comment and you also have to remember that if you use ALL the interest from your account then in real terms (after inflation) your lump sum is slowly decreasing in value.

However, a key driver for STR is to be able to buy back in at a lower price. That's when you really find if it's worked.

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Another HPC myth - STR'ing and living off the proceeds by simply depositing it in a bank-account

I can see that if you can afford to buy, but dont want to buy, then in a stagnant or falling market renting makes sense.

I can also see that you could use your STR loot to gamble on the gee-gees and stock market, possibly make a killing, in which case renting also makes sense.

But what I can't see is the myth that you can simply stick your STR loot in a bank account,  take several holidays a year, sit on a beach drinking long tall sallies, rent vicarages, converted barns, farmhouses, windmills and other desirable properties.

Suppose I sold my house (!) and stuck £100K equity in the bank.  Then in a high interest account, say 5%, after tax I'd get £4K a year.  Identical house down the road is renting for £450 pcm but I'd only get £333 pcm interest.

So lets assume that at £200k in the bank, you'd get £666 pcm.  What you going to rent for that - nothing too tasty...

ditto £300k, £400k etc etc, the more you STR, the higher your standards surely and so higher the rent.

It just don't add up, you're telling porkies.

It's a myth and needs to be debunked.

:)

The proceeds from my house sale generate enough interest to pay the rent on a nice 4 bed house and pay for a couple of holidays. I can't live on it but I no longer have a mortgage either.

Edited by Marina

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When we STR'd back in 2003 , my hubby had a big salary inctrease too. We either traded up and dumped ourselves with a huge loan, or rent the same type of property  and use the interest from the loan to help reduce the rent. Everyones set of circumstances are different and str isn't for everyone.

Also my H works for Rentokils conference centres.......which are now up for sale. The future is uncertain....thk god we didn't take on a huge loan, maybe have to relocate (?) knowing the house would probably not achieve in price what we'de paid for it. IMHO str was our best move ever.

That is a very good point - as far as I am concerned - in this rapidly changing world. I know so many people who have been affected by takeovers, re-structuring etc. Who can say these days that they know they can earn money steadily for the 25 years it takes to pay off a mortgage?

Much better to be happy with what you have - and enjoy some security - than to keep going out on a limb to trade up. Well, that's my take on it anyway.

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Guest prudence
I don't have a mortgage.  Whenever I think of getting a mortgage I lie down in a darkened room.

"Identical house down the road is renting for £450 pcm but I'd only get £333 pcm interest."

If I sold up and rented my own property off someone I would be £(450-333) = £117 worse off if I STR.

The figures dont add up.  The flexibility might add up, the freedom might add up, the millstone around your neck etc may add up, but pounds shillings and pence simply dont add up.

Offsetting your rent with the proceeds, like DrB says, adds up, but time and time again people on here create the impression that they sell up, bank the loot and live 100% off the interest and still have money left over to take holidays and piss themselves at their landlord.

Sorry I dont see it...

Just because you don't understand how it works doesn't mean it doesn't work. It just means that you don't understand how it works (maybe if you remembered to account for alternative capital opportunity it would work (plus the benefit of having your capital secured and not in a depreciating asset)............

Edited by prudence

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The figures dont add up.

The figures don't add up for you. £100K equity seems a very small amount for someone who bought before the boom. Do you live in some cr@p northern town or something?

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If I sold up and rented my own property off someone I would be £(450-333) = £117 worse off if I STR.

Don't you spend anything on maintenance? You've never had to call out a plumber, or a glazier, or do any redecoration? You need to take the maintenance costs into the equation, too.

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Guest rigsby II
Don't you spend anything on maintenance? You've never had to call out a plumber, or a glazier, or do any redecoration? You need to take the maintenance costs into the equation, too.

And that's yet another myth - maintenance costs.

Never called anyone out - ever.

I find modern electrical and plumbing equipment is extremely reliable and last years and years. The other stuff I do myself, it really is a piece of piss to do.

:)

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And that's yet another myth - maintenance costs.

Never called anyone out - ever.

I find modern electrical and plumbing equipment is extremely reliable and last years and years.  The other stuff I do myself, it really is a piece of piss to do.

:)

Well we're all different. When I was a property owner I seemed to spend half my life in B&Q and the other half using whatever it was I had bought in there.

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And that's yet another myth - maintenance costs.

Never called anyone out - ever.

I find modern electrical and plumbing equipment is extremely reliable and last years and years.  The other stuff I do myself, it really is a piece of piss to do.

:)

His name is Rigsby II. I think we can assume that the properties in question match up to those on view in the original 70s sitcom.

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Renters do have other expenses to add on though ie council tax. Also though wear and tear is acceptable anything else ie breakages/damage is also the tenants responsibility

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Another HPC myth - STR'ing and living off the proceeds by simply depositing it in a bank-account

I can see that if you can afford to buy, but dont want to buy, then in a stagnant or falling market renting makes sense.

I can also see that you could use your STR loot to gamble on the gee-gees and stock market, possibly make a killing, in which case renting also makes sense.

But what I can't see is the myth that you can simply stick your STR loot in a bank account,  take several holidays a year, sit on a beach drinking long tall sallies, rent vicarages, converted barns, farmhouses, windmills and other desirable properties.

Suppose I sold my house (!) and stuck £100K equity in the bank.  Then in a high interest account, say 5%, after tax I'd get £4K a year.  Identical house down the road is renting for £450 pcm but I'd only get £333 pcm interest.

So lets assume that at £200k in the bank, you'd get £666 pcm.  What you going to rent for that - nothing too tasty...

ditto £300k, £400k etc etc, the more you STR, the higher your standards surely and so higher the rent.

It just don't add up, you're telling porkies.

It's a myth and needs to be debunked.

:)

Hate to p*ss on your strawberries Rigsby but that is exactly what we have been doing and we are renting a far nicer place than the one we owned. Yes we have been using the interest, so you could argue that in real terms our savings are loosing value but the money is ultimately for a house purchase and from where I'm standing they are getting cheaper year on year. Incidentally both Mrs B and I work for a living unlike most 'Landlords' who seem to feel it their god given right to sit on their **** and collect for doing s*d all excpet being mug enough to borrow huge somes of money.

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Guest rigsby II
His name is Rigsby II. I think we can assume that the properties in question match up to those on view in the original 70s sitcom.

It's funny you should say that. The house we are in at the moment was originally bought to rent out in mid-2003 for £20k, but I mistakenly called the top of the market (haven't we all) and have been here since waiting forlornly for a crash, but its better and cheaper than renting. Mind you, we cannot sell at £100K admittedly - but there's a fair bit of pocket money in it even if we have to drop.

However, all the properties I have done up in the last 10 years have to be honest, been absolutely bodged up cr*ap holes, bought 'em cheap, flashed 'em and flogged 'em high - and certainly in the mad rush of the last few years they sold like hotcakes to FTB and BTL.

So I musn't grumble really...

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It's funny you should say that.  The house we are in at the moment was originally bought to rent out in mid-2003 for £20k, but I mistakenly called the top of the market (haven't we all) and have been here since waiting forlornly for a crash, but its better and cheaper than renting.  Mind you, we cannot sell at £100K admittedly - but there's a fair bit of pocket money in it even if we have to drop.

However, all the properties I have done up in the last 10 years have to be honest, been absolutely bodged up cr*ap holes, bought 'em cheap, flashed 'em and flogged 'em high - and certainly in the mad rush of the last few years they sold like hotcakes to FTB and BTL.

So I musn't grumble really...

& I'm sure we all feel the respect for you that you deserve

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If you STRed and got 100K, you may indeed only earn 3-4K per annum depending on your tax status.

But in a falling housing market, if you hadn't STRed, you would be worse off by the amount your house fell per annum PLUS the interest you would otherwise earn on the STRed capital. I'd say that could be more like 15K pa, nes pa?

It's the same as saying that in reality, the 3-4K interest from an STR fund isn't actually yours to spend, as there's inflation to take into account. A 40% tax payer earning 3% on STR capital is standing still WRT inflation (RPI rumoured to be around 3% but we all know it's more than this). You could argue STR is a really bad thing to do on that basis. But when the item you intend to target your cash towards is deflating in price (another house, and in fact most high-street goods as we slide into recession) then this isn't true. 3% net PA for a 40% ax payer then becomes 3% net MINUS the inflationary measure for the item(s) you intend to buy with your cash. If the inflationary measure is negative, you're making more money.

STR = very, very sensible thing to do. :P

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Guest Charlie The Tramp
Mr Rigsby, perhaps you should assume that everyone else does not necessarily share your circumstances/DIY abilities?Regards,

As Rigsby says a bit of a p**s really.

Go into B&Q buy the tools and you can perform miracles with a bit of thought.

Gutted and installed a new kitchen for Mrs C cost 3.5k total with the tools. A neighbour had a similiar kitchen installed cost 8k his materials were sub standard to mine.

Friends think I am winding them up and insist it was done by professionals.

The trouble today the emphasis is on using your brain, whereas we were taught to use both brains and hands. <_<

Edited by Charlie The Tramp

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As Rigsby says a bit of a p**s really.

Go into B&Q buy the tools and you can perform miracles with a bit of thought.

Gutted and installed a new kitchen for Mrs C cost 3.5k total with the tools. A neighbour had a similiar kitchen installed cost 8k his materials were sub standard to mine.

Friends think I am winding them up and insist it was done by professionals.

The trouble today the emphasis is on using your brain, whereas we were taught to use both brains and hands.  <_<

& how would Mrs C have fared if you weren't there to do the work, Mr C? Would she, too, have the requisite skills? - my beloved mate surely wouldn't..

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Its all about yields.

Clearly as you have no mortgage the 'rental yield' you would need to pay by selling and then renting is higher than you could get by selling and banking the cash.

But in reality most people have mortgages. The mortgage APR you would pay + the loss of your interest on your cash (if you STR, and had equity in your home) is usually higher than any 'rental yield'. So renting is more favourable!

Also, by your logic if you had a house on a 100% mortage, and sold to rent you would have to live on £0.00 per year! In reality people live off their salaries/wages - the cash interest is just a bonus!

Add in all the other arguments... maintenance/repairs, freedom to move, gardeners, depreciating house prices etc etc etc ... it makes sense to rent.

If interest rates were to go up, it would make even more sense to rent!

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