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waferthin

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Just sold my house - well, SSTC, but they are cash buyers, no chain either way, so it's relatively unlikely to fall through.

3 bed terrace in a fairly nice area of Berkshire. I bought in 2006 for ~£180k. Listed it for EA valuation of £200k, in my head I expected 10% less, but thought I might get lucky. After a few weeks and a couple of viewings but no offers, we decided to drop the price. Sold for £180k two days later. Looking at Property Bee that seems to be the pattern in our area: drop ~10%, sell house instantly, though most vendors seem to wait months before twigging that they need to drop. I possibly could have dropped less and still sold, but I am glad to be out of the market - plan to rent for a while and monitor the market.

The buyers are planning to rent it out. At first I thought I was "dealing with the enemy", but given that they are paying cash they are not fly by night overleveraged morons sustained by low interest rates; I got the feeling they are just a middle aged couple trying to get a decent return on their savings - though of course its entirely likely that they have such a large amount of savings after downsizing a boom inflated property. They should be able to get a decent enough yield, though given I am an HPCer, I didn't discuss my real feelings about their investment in case they decided they agreed with me!

The speed with which it was snapped up after the drop did unnerve me a bit, gave me doubts, but one sale does not make a trend, and what did I want, not to sell? Need to remain resolute and be patient.

Now looking for the best place to put the c.£75k equity, savings rates are pretty shocking at the moment, which also raises a tiny demon of doubt - ZIRP is a double whammy - propping up the overleveraged and punishing savers. Bit worried that if it is a slow inflation driven real-but-not-nominal crash, then I am going to be no better off than if I'd stayed put. Still, only need a fairly small nominal drop to stay ahead, so I am generally comfortable with my new position.

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Now looking for the best place to put the c.£75k equity, savings rates are pretty shocking at the moment, which also raises a tiny demon of doubt - ZIRP is a double whammy - propping up the overleveraged and punishing savers. Bit worried that if it is a slow inflation driven real-but-not-nominal crash, then I am going to be no better off than if I'd stayed put. Still, only need a fairly small nominal drop to stay ahead, so I am generally comfortable with my new position.

Have you thought about putting a percentage of your savings into gold to guard against negative real interest rates (due to inflation), currency devaluation and possible future bank collapse?

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Have you thought about putting a percentage of your savings into gold to guard against negative real interest rates (due to inflation), currency devaluation and possible future bank collapse?

Can't help but think I have missed the boat on gold, and there has to be a risk it will go the way of oil - in 2007 they were talking about $200 barrels the way people talk about $2000 ounces now. Not sure the missus would go for it, she will see it as gambling. Which it is, to an extent.

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Have you thought about putting a percentage of your savings into gold to guard against negative real interest rates (due to inflation), currency devaluation and possible future bank collapse?

you c an get 3% before tax with post office and nationwide instant access online 1 year deal. about 2.4% net

what about putting some into zopa?

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you c an get 3% before tax with post office and nationwide instant access online 1 year deal. about 2.4% net

what about putting some into zopa?

Of course, your cash should be in the place where you can get the best return on it, even if it still is a negative real interest rate (which these are - RPI = 4.6%, CPI = 3.1%, officially!?!?), in order to mitigate your loss of purchasing power from inflation.

Personally I'm not convinced by Zopa. Surely, you are going in to the loan business when the professionals (the banks) are pulling up the draw bridge (and with good reason).

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Personally I'm not convinced by Zopa. Surely, you are going in to the loan business when the professionals (the banks) are pulling up the draw bridge (and with good reason).

They're still lending, just at high rates (look at 15% APR on credit cards etc)

FWIW I'm getting 9.3% (pre tax) on Zopa

Edited by exiges

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Can't help but think I have missed the boat on gold, and there has to be a risk it will go the way of oil - in 2007 they were talking about $200 barrels the way people talk about $2000 ounces now. Not sure the missus would go for it, she will see it as gambling. Which it is, to an extent.

Personally I see leaving your savings solely in sterling as gambling. The government is purposely pursuing an inflationary policy (name one thing that has got cheaper in the last 2 years - flat screen tv's aside) to shrink govt. and bank liabilities. This comes at the expense of savers. Essentially they are stealing your wealth to cover their debts and they plan to carry on doing so, do not believe the nonsense on the frankly laughable spending cuts.

Anyway, while I am a gold bull and in gold to the extent of 66% of my savings and thereby looking to make decent speculative gains on top of protecting my savings, I am only talking about hedging risk for someone such as yourself. By that I mean putting perhaps 10% of your cash in gold. If you did that and everything went back to normal and gold crashed to half it's price, you've lost £3,750. In reality it doesn't move overnight like that, there is time to pull out of a down trend without incurring losses this big, but we'll assume a worst case scenario where you forget to check the value of your gold holdings for 6 months, for example and lose 50%.

However, if you decide not to buy gold and we have inflation for another year at 5% (govt. says 5%, but reality is more like 10%) then you have lost £3,750 from the purchasing power of your savings after 1 year. If in a savings account paying 3% you'll offset this loss only have lost £1,500 quid. But remember, govt. inflation figures are under-reported, I have seen price rises of 10% on some items this year, so your real losses will likely be higher.

Of course with 10% of your savings in gold a 10% rise in gold (to compensate for a 10% loss of purchasing power in sterling) will not fully compensate you for your inflation losses. However, other forces are at play, namely investment demand in gold, as it is a safe haven from this type of loss. As losses from inflation (and currency devaluation) mount, more people will flee sterling (and other currencies suffering the same fate like the dollar and euro) for gold, thereby driving up investment demand for gold. This means gold's value will increase over and above inflation, providing the holder with greater gains than a simple inflation offset. This is how it is possible to take a small low risk position in gold that will give you a decent amount of protection from the risks to your savings from inflation/devaluation.

I still see prices today as underpriced, mainly due to fundamentals behind the markets and also due to inflation-adjusted prices for gold, the all time high adjusted for official inflation figures (deliberately manipulated lower) is around $2200, and the long term average price is $1650, making today's $1360 price look cheap in comparison.

I had similar thoughts about gold being overpriced when I bought in Jan '09. Boy, am I glad I took the plunge, it's now over £200 quid an ounce higher. Or in other words, each ounce I own will by me an extra 40 bottles of my favourite wine than it did in Jan 2009 (despite the wine increasing in sterling terms by 12.5% in the same time frame). How's that for deflation? ;)

Edited by General Congreve

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Of course, your cash should be in the place where you can get the best return on it, even if it still is a negative real interest rate (which these are - RPI = 4.6%, CPI = 3.1%, officially!?!?), in order to mitigate your loss of purchasing power from inflation.

Personally I'm not convinced by Zopa. Surely, you are going in to the loan business when the professionals (the banks) are pulling up the draw bridge (and with good reason).

I agree.

If you have say 100K to invest, putting 1-2K of it with Zopa is going to make bugger all difference to your income from it.

But putting 50K into Zopa is a risk too far with your life savings, IMHO.

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Thanks for the post.

Out of interest, how much do you expect it to rent out for? What sort of maintenance costs do you think the house would need on average in a year?

Will it be very easy to rent? i.e. near station and/or good school?

Just interested what sort of yield the BTLetters are looking at compared so say a Saga 4.5% 5 year bond which comes with absolutely no hassle compared to voids, broken boilers etc..

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Just interested what sort of yield the BTLetters are looking at compared so say a Saga 4.5% 5 year bond which comes with absolutely no hassle compared to voids, broken boilers etc..

IME numpyies aren't looking at five year bonds.

They just see the 0.2% that they get from their IA deposit account and think: 5% yield on a BTL, much better than I can get elsewhere and toddle off to the EA to look for one!

There are places where you can significantly beat 5%, but in most areas this is still the best that you can expect (for a non HMO)

tim

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Fair enough, that's not bad. Any problems with bad debtors? How long you been doing it?

2yrs so far, only 1 bad debt, 2 late (but not written off).

But putting 50K into Zopa is a risk too far with your life savings, IMHO.

Perhaps he could put £10k in ? The one thing with Zopa is that a £10k investment would be spread across about 1000 borrowers, so your eggs aren't in 1 basket.

Edited by exiges

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  • 246 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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