Finally Going Str

[Optobear]

Joined here in Jun 2007.

Finally going STR (exchanged contracts last week after months of messing around). Found somewhere okay to rent, but much more expensive than having a mortgage.

Plan to buy sometime fairly soon:

Questions are:

1) Where to put cash? shares, savings, bonds, gold?

2) When to think of buying again?

Odd anecdotal is that although nothing seems to be selling, and chains appear to be breaking locally, the removal firms are very busy!

Optobear

[abbot26]

Got mine in savings accounts but then I'm not sure about all the other options, I just wanted something risk free, others on here will say I'm losing money due to savings rates being so crap and they'd be 100% right....!

OK hpc gang, what's the options for us ?

[Cinzano Bianco]

Joined here in Jun 2007.

Finally going STR (exchanged contracts last week after months of messing around). Found somewhere okay to rent, but much more expensive than having a mortgage.

Plan to buy sometime fairly soon:

How soon in soon?

Questions are:

1) Where to put cash? shares, savings, bonds, gold?

2) When to think of buying again?

Odd anecdotal is that although nothing seems to be selling, and chains appear to be breaking locally, the removal firms are very busy!

Optobear

1) Depending on how long you are waiting, I guess you need to diversify... all of the above would be my answer

2) My guess is a couple of years (2013ish)... but I guess when you have found the type of house you are looking for, in an area you like, for a price you are happy to pay.

[Meat Puppet]

Did you have nothing at all other than the equity in your house?

Amazing you've never had to make this decision before.

[Cinzano Bianco]

I am not a financial advisor, DYOR, etc.

Got mine in savings accounts but then I'm not sure about all the other options, I just wanted something risk free, others on here will say I'm losing money due to savings rates being so crap and they'd be 100% right....!

OK hpc gang, what's the options for us ?

All your savings, in cash, in banks is not risk free!

What are your timescales?

[Pent Up]

Cash savings are fine as long as you spread it around enough separate financial institutions. It's not being eroded if the sole purpose is to buy an asset which is currently deflating ie a house. You will get better returns by taking more risks it just depends on your timescales and the level of risk your comforatable with.

[Optobear]

Did you have nothing at all other than the equity in your house?

Amazing you've never had to make this decision before.

Without going into personal specifics too far...

before we complete on the sale, the majority of assets we own are in the property - with most of the the rest in saving accounts - mostly ISAs, but also equities (also held in ISAs) and some other stuff - some gold, some antiques. Also a fairly substantial chunk in pension scheme.

once we complete, we'll have a large additional chunk of cash, and we probably had more than sufficient cash anyway. That is why I'm asking.

But the issue is more about timing. Purchased the gold in 2007 - ditto with quite a lot of the equities - so some pretty significant gains. Continuously buying into equities on a monthly basis - on the grounds that you do better that way. Less clear that buying gold or shares is such a good plan at the moment?

So the difference is the single, one-off, shift from having a portfolio that was dominated by property - with smaller amounts of the others - to a portfolio which will be very dominated by cash.

[Optobear]

Optobear can you tell us what your objective to STR was especially if you intend buying again ?

I recognise that I do need to buy again, particularly because the UK tax system so much favours home ownership.

So, if you own a home worth, say, £250k you can live in it rent free.

If you own £250k of cash in savings accounts and rent a house, then you earn interest on the £250k, but you pay tax on the interest. So the tax treatment is very unequal.

So it is more tax efficient to own the house on the grounds of income tax - but also for CGT.

So I will need to buy at some point - could be in 6 months - could be in 4 years - partly depends on how we enjoy renting - partly on a hope that house prices may fall a little (or a lot).

Another, and probably more significant factor is the desire to be in a position to be a cash buyer. We've tried to move home several times over the last few years, always proved impossible, largely due to the difficulty of getting a chain together rapidly enough to match the seller's requirements. We're hoping that being in a position to be chain free will allow us to negotiate a better price and to get in quickly when we do want to buy.

[Optobear]

I am not a financial advisor, DYOR, etc.

All your savings, in cash, in banks is not risk free!

What are your timescales?

Does DYOR mean "do you own research"? What a thoughtful and helpful comment Cisco.

As to cash in banks not being risk free you might like to search for some of my posts during the financial crisis, particularly on the FSCS. As an ex banker I have a pretty good understanding of those issues.

[Meat Puppet]

Without going into personal specifics too far...

before we complete on the sale, the majority of assets we own are in the property - with most of the the rest in saving accounts - mostly ISAs, but also equities (also held in ISAs) and some other stuff - some gold, some antiques. Also a fairly substantial chunk in pension scheme.

once we complete, we'll have a large additional chunk of cash, and we probably had more than sufficient cash anyway. That is why I'm asking.

But the issue is more about timing. Purchased the gold in 2007 - ditto with quite a lot of the equities - so some pretty significant gains. Continuously buying into equities on a monthly basis - on the grounds that you do better that way. Less clear that buying gold or shares is such a good plan at the moment?

So the difference is the single, one-off, shift from having a portfolio that was dominated by property - with smaller amounts of the others - to a portfolio which will be very dominated by cash.

Well, now it gets interesting. I suppose the laziest thing to do, other than nothing, is put the cash to work in the same proportion as you have your other assets assuming you are happy with that allocation.

But as you mention you lose the benefits of pound cost averaging and everything now is either at multi month or multi decade highs. Other than how quick you want the money to buy another property, its the same rational decision as I have in keeping my allocation of assets that I have grown for the last 20 years, but rationality is trumped by emotion when investing all at once rather than accumulating a portfolio over a couple of decades.

Good luck!

[abbot26]

I am not a financial advisor, DYOR, etc.

All your savings, in cash, in banks is not risk free!

What are your timescales?

Money split into different institutions paying monthly interest with instant access. I can't see a more risk free way of keeping money but I'm not an FA either. I am looking for my next home but not in a rush to blow everything I've worked hard for.

[Cinzano Bianco]

Does DYOR mean "do you own research"? What a thoughtful and helpful comment Cisco.

Yes it does... and it is a disclaimer, not an order.

As to cash in banks not being risk free you might like to search for some of my posts during the financial crisis, particularly on the FSCS. As an ex banker I have a pretty good understanding of those issues.

I don't think I was replying to you in this instance.

I am not an ex banker, but I also know what the FSCS is and I am very happy to hear you do to. Having all your savings in cash in banks is not a good investment strategy in these troubled times (for example currency devaluation/ inflation), but as an ex banker I am sure you are aware of that.

All in all, I'll be sure not to bother responding to a thread asking for advice/ ideas by you again. As an ex banker, I am sure you won't miss me.

[“Nasty Piece of work”]

I was (I am) in an identical position (STR in 2007). Keep all your cash in instant access accounts (for flexability / quick movement if need be). Buy when target is "good" value (that is why I am still looking (2013?). I have a decent rental, and home ownership does not shine whatsoever, I would rather MUCH have the money in the bank.

[tomwatkins]

Joined here in Jun 2007.

Finally going STR (exchanged contracts last week after months of messing around). Found somewhere okay to rent, but much more expensive than having a mortgage.

Plan to buy sometime fairly soon:

Questions are:

1) Where to put cash? shares, savings, bonds, gold?

2) When to think of buying again?

Odd anecdotal is that although nothing seems to be selling, and chains appear to be breaking locally, the removal firms are very busy!

Optobear

Don't listen to anybody on here is my advice. Think of it, anybody with serious money don't hang around on a site like this (even though I love it personally). Make your own mind up and READ FFS.

[Meat Puppet]

Don't listen to anybody on here is my advice. Think of it, anybody with serious money don't hang around on a site like this (even though I love it personally). Make your own mind up and READ FFS.

No one except LuckyOne. Wait to hear what he says.

[small_stakes]

I was (I am) in an identical position (STR in 2007). Keep all your cash in instant access accounts (for flexability / quick movement if need be). Buy when target is "good" value (that is why I am still looking (2013?). I have a decent rental, and home ownership does not shine whatsoever, I would rather MUCH have the money in the bank.

Similar story. STR in London in '09. Got a decent long term rental (rent is approx 60pc of IO mortgage on full value of house). Will need to buy somewhere in 2011/2012 (pressure from mrs stakes), but not finding places we like (wrecks sell v quickly, renovated houses are v expensive & not been to our taste so far). Cash in bank (+ equity funds &c).

One question for the gold bugs who say banks aren't safe and so buy gold instead: who do you think acts as the custodian when you are buying physical gold or acts as the counterparty to your gold derivative trades? The very same banks who you say aren't safe places to deposit cash. (I'm not arguing about returns on cash vs gold, just the counterparty risk).

If the situation is so bad that (for example) depositors are told to take haircuts on cash savings in banks (either because the FSCS doesn't have enough cash or the BoE tries an Argentina-style pesofication of bank assets), then someone with a gold derivative or physical position (in a custody account) is surely at risk of taking the same sort of haircut.

[exiges]

One question for the gold bugs who say banks aren't safe and so buy gold instead:

Gold was certainly a good buy in 2007, and many people said so. My view is that so many people have fled to it as a safe haven it's become a bubble in itself.. and like all bubbles others are seeing how much the price has shot up and think they'll have a piece of the action too. Like any pyramid scheme, timing is key.

I don't think it's increased value reflects the devaluation of GBP/USD.

[Optobear]

Similar story. STR in London in '09. Got a decent long term rental (rent is approx 60pc of IO mortgage on full value of house). Will need to buy somewhere in 2011/2012 (pressure from mrs stakes), but not finding places we like (wrecks sell v quickly, renovated houses are v expensive & not been to our taste so far). Cash in bank (+ equity funds &c).

One question for the gold bugs who say banks aren't safe and so buy gold instead: who do you think acts as the custodian when you are buying physical gold or acts as the counterparty to your gold derivative trades? The very same banks who you say aren't safe places to deposit cash. (I'm not arguing about returns on cash vs gold, just the counterparty risk).

If the situation is so bad that (for example) depositors are told to take haircuts on cash savings in banks (either because the FSCS doesn't have enough cash or the BoE tries an Argentina-style pesofication of bank assets), then someone with a gold derivative or physical position (in a custody account) is surely at risk of taking the same sort of haircut.

Seems to me that gold plays two roles

1) As a commodity that is readily traded - but is a very speculative punt.

2) The ultimate insurance against a collapse in paper money - but you need it physical in your pocket to use.

To be clear, my gold has a picture of Paul Kruger stamped on one face, and is meant to act as 2). I don't have enough - or would want to have enough physical to be a serious option for putting house equity into it. Plus if you buy more than (about £8k?) you have to tell the government - wouldn't want to do that as it would reduce its use as 2).

[nixy]

DYOR is the most helpful comment you could hear, and you won't hear it from any financial advisers or fund managers. It means read as much as you can from Peter Schiff, Marc Faber, Bob Pretcher, Jim Rogers, Mish Shedlock, John Nadler, Max Keiser, Karl Denninger, Garth Turner, Ambrose in the DT, etc etc etc.

Lots of opposing views in there, all with very credible arguments for deflation, inflation or stagflation. At the end of the day you'll have to put faith in your own ability to see where were headed go with your instincts.

Good luck

I think the phrase 'let the trend be your friend' can be very helpful..... Another one might be 'ignore fundamentals at your peril' .

??

[Optobear]

I think the phrase 'let the trend be your friend' can be very helpful..... Another one might be 'ignore fundamentals at your peril' .

??

Sadly the trend in the UK is for people to borrow insane amounts and buy over priced property. Based on the idea that the government will act in the interest of the majority - then doing what the majority do is "safe". I'm already well outside the mainstream by going STR.

As to the fundamentals... well along with many others here I've been thinking a crash will happen for 3 years - and still no real sign. Interest rates of zero are a pretty strong indicator that the fundamentals of economics are seriously awry- for example the old staple that money is a scarce resource that banks need to attract by paying interest to offset risk appears to have disappeared.

So very much uncharted territories, and why I'm seeking views.

[nixy]

Sadly the trend in the UK is for people to borrow insane amounts and buy over priced property. Based on the idea that the government will act in the interest of the majority - then doing what the majority do is "safe". I'm already well outside the mainstream by going STR.

As to the fundamentals... well along with many others here I've been thinking a crash will happen for 3 years - and still no real sign. Interest rates of zero are a pretty strong indicator that the fundamentals of economics are seriously awry- for example the old staple that money is a scarce resource that banks need to attract by paying interest to offset risk appears to have disappeared.

So very much uncharted territories, and why I'm seeking views.

Sorry, I was referring to a trend of a graph..... where the areas above a below the trend are roughly the same over a few years.

And the new fundamentals are money creation........ even more now than ever.....and its' effects.

??

Seems the Mod has deemed this off topic ........... nothing what ever to do with housing OR economics apparently.

[Optobear]

I think the phrase 'let the trend be your friend' can be very helpful..... Another one might be 'ignore fundamentals at your peril' .

May be good advice

or it could prove a

disaster to follow

slavishly the trend

certainly looking at fundamentals

entertains the possibility of

numerous lines of thought

some of which could

override conventional approaches and lead to a

reinterpretation of

economic fundamentals and

deeply held beliefs

the best approach might be to consider

how the economy is likey to develop

internationally and then come to a

sensible view

Cheers Nixy

[Optobear]

I was (I am) in an identical position (STR in 2007). Keep all your cash in instant access accounts (for flexability / quick movement if need be). Buy when target is "good" value (that is why I am still looking (2013?). I have a decent rental, and home ownership does not shine whatsoever, I would rather MUCH have the money in the bank.

Without prying too much. Do you thnk going STR has worked out better than going STR now? I know there are factors beyond financial - like is your new rented better than the old owned. But while it has been possible to put cash into forex, then back into sterling, buy gold, sell that, buy the stockmarket, buy BP at the bottom, etc, and return 250% on your STR, my guess is that few did that, and that most STRs have stayed largely in cash?

As I say, I'm not trying to pry or in any way be critical, I've a gut feeling that I should have sold earlier - and that I've missed out, so I'm keen to know your experience of being an earlier adopter of the STR route.

Optobear

[“Nasty Piece of work”]

Agree - STR has allowed me to "re-index" or "bank" the "gain", whilst giving me the oppotunity to play (badly) in equities. I would not have done so without STR, the benefit is I am unmarried, as a result, I can please me, without any distraction. If the market takes off again, (VERY unlikely) I can always think again.

[Optobear]

I sold to move in late 2006 at the time I thought I would be buying again in a couple of months in the new area I moved to. I rented and it feels like I have been on holiday for this time since I did not unpack boxes of stuff and only used essentials. It has been liberating not having to worry about repair bills or re-decorating and having the cash to pay basic living expenses from the capital I had. Now interest rates are lower but I was able to put a huge chunk of my money in index linkers and guaranteed income bonds when they were available and that has paid my rent with a bit left over. I've been able to buy shares when they were lower and sell at a comfortable profit.

So I would say that STR in late 2006 enabled me to invest my money in a bigger choice of ways than at present.

I do like the sound of no re-decorating. Getting into index-linked NSI (which I guess is what you've got) would have been a big advantage.

Sounds as though STR has been a winner for you.