Sell Up, Rent & Invest?

[Scrooge]

Here's the scenario:

We've been on the imaginary ladder since 1996 moving house 3 times. During this time we've got married, had 2 children & are now occupying a failry modest 3 bed semi - (typical 1930's - pebble-dashed, large gardens etc).

We've been pretty careful financially after being in the red in our early care-free days (& boy did we pay for it) but I'm not a real scrooge as my avatar implies. We do enjoy the finer things only because we are careful, I guess I'm lucky too, to have a wife who doesn't do credit unlike many of her friends . - We have around £100K equity tied up in the house.

Looking around in the local villages (North Oxfordshire) there is a frustrating sense of never being able to afford to move 'out in the sticks' or at least buying something without having to live on baked-beans for the rest of our lives, which I really want to avoid.

The truth is we're both itching to break free from the norm, in that we want to use this equity & invest. Although we feel that renting seems to be 'dead-money' there are other tempting benefits:

1. We will no longer be in any debt at all (this to me, is the clincher)

2. No worries about keeping up property maintance (boilers, walls, Fences etc...)

3. Being able to live somewhere where we could never afford to buy

4. If there is going to be a slump over the next few years, then all the better to be sat in rented accomodation

Investments will be mainly in Stocks & Shares but under no circumstances would we touch more than 20% of our equity. We are tied in with a fixed rate until the end of the year otherwise we have to pay £2.5K for the privelage. Hence, trying to get the ball rolling now & doing a little research where I can.

We looked at alternative methods of saving money, like interest only mortgages but although we will save a few hundred per month, we still require a hefty mortgage in the first place to move to one of these villages & the equity will still be tied up, so that went out the window.

So in saying all that, here are my questions:

1. Is there anybody who has experience in this, who have sold up & done the same?

2. Is renting really dead-money or is being 'mortgage-free' well worth it?

3. is the risk of another housing boom to great to rent right now ( sorry couldn't resist!)

4. Can anyone recommend selling privately cutting out unnecessary estate agent fees

Any advise warmly recieved

[VeryMeanReversion]

So in saying all that, here are my questions:

1. Is there anybody who has experience in this, who have sold up & done the same?

2. Is renting really dead-money or is being 'mortgage-free' well worth it?

3. is the risk of another housing boom to great to rent right now ( sorry couldn't resist!)

4. Can anyone recommend selling privately cutting out unnecessary estate agent fees

Any advise warmly recieved

1. I sold to move (rent) in 2003-2010. One kid at the start, now two.

2. Whilst savings interest more than paid the rent [not true any more], it was worth it. I could build up a nice pension in the meantime

3. My guess is nominally flat prices, real term falls for many years

4. I was outbid on one house that went on a free-listing site (dont remember which), no fees involved. So it can work.

However, after 7 years with two kids in tow, I was fed up having to ask permission to paint the walls, put up pictures, get a pet, and the landlady would come around and work on the garden whenever she felt like it so no real privacy.

I can't see how STR makes sense any more unless you can get a guaranteed inflation busting return on your equity. I have a 6-figure pension sum and wouldnt go anywhere near them at the moment.

[silver surfer]

1. Is there anybody who has experience in this, who have sold up & done the same?

I've STR'd twice.

First was during the 1989-95 crash when eventually it paid off very well but It was pretty miserable along the way. We had young kids plus it was surprisingly difficult, even as cash buyers, to find the place we really wanted. The really choice properties were the first to get withdrawn in a soft market, so EA windows were full of sh1t properties at a cheap price. In fact it was so difficult to find a genuinely good house that we eventually took on a big redevelopment property, not what we'd wanted with young kids, but there wasn't any other choice. Eventually it paid off massivel,y and you tend to just look at the bank balance and forget all the problems.

This time I STR'd in 2005. So far it's working out okay, but no better than okay.

First issue was that I got out too soon, I should have waited until 2007. Then there were some sleepless nights during 2008 when the financial markets were melting down and I was sitting on cash deposits, I spread them around as much as I could but it still added up to way too much exposure. Thirdly, house prices in the south east haven't really fallen enough (yet) to fully justify STRing. And finally I'm now seeing the same problem I saw during the 1989-95 crash, the really plum properties are becoming rarer and rarer, and the purpose of STRing isn't to get an average price cheap, it's to get a great house for a decent price. What made it worth while however was having a pot of money to invest just as stock markets were exceptionally low, but that was just dumb luck and if I'm honest was never in the original plan.

Would I STR right now? Probably not. My guess is 2011 will be a big year for price declines, but by the time you get your current house sold you'll probably have to include a lot of that decline into your asking price, then of course you've got the transaction costs to consider. And as for investing the proceeeds, well I'm an equity bull, but you have to remember that the FTSE is already up 70% from it's recent lows. I think there's another 15-20% to go, but by any objective measure the real stock market gains have already happened.

[MattW]

So in saying all that, here are my questions:

1. Is there anybody who has experience in this, who have sold up & done the same?

2. Is renting really dead-money or is being 'mortgage-free' well worth it?

3. is the risk of another housing boom to great to rent right now ( sorry couldn't resist!)

4. Can anyone recommend selling privately cutting out unnecessary estate agent fees

Any advise warmly recieved

1. As my sig suggests, I STR'd in August 2010 (much to my family's and friends' dismay). Was in and out of work and I was afraid of my ability to pay my mortgage so rather than risk losing my flat to the banks, I sold up. I now have £ in the bank, a few small debts and a loan from the Bank of Mum & Dad paid off and I feel much more content.

2. I don't consider renting as 'dead money'...as Ms. Allsop likes to call it. Renting is more of a convenience thing for me. I rent on a private basis with a Housing Association, who are very efficient in addressing problems. They foot the bills for the repairs required and block management charges so I have no concerns other than just pay the rent. Not having a mortgage around my neck for the next 18+ years is very nice, too.

Can't answer points 3 & 4. However I wish I had the courage to give selling privately a go as I found Estate Agents to be some of the most arrogant c***s I have ever come across in my life. :angry:

[Scrooge]

Thanks all for your inputs.

I guess it's a mixed message & one that I could have expected really. I mean there only seems to be the two options in life:

The 'play it safe' & stay in the market option (Ball & chain method, boring, retire having JUST about paying off the mortgage if I don't get lucky beforehand)

or

Go for gold, rent & invest the equity (with a potential disaster of losing all if either there's another housing boom again in the next 10+years or I get over-excited on a share)

But as highlighted by Silver Surfer, there may be not much more room for manouvre on the stock markets at the moment. I was thinking more of playing with fire in the 'day traders' game - I've had a few flutters recently which came up trumps especially in the Mining Sectors at the moment. I know it's all too easy to get sucked into the "If I just put a few more thousand in that one & if it goes up by 30% today" etc..etc... I guess that's the inevitable gamble. Besides, I'm not sure what this sector is going to be like this time next year so probably would be better off in something more long-term & safe'r' (although ISA's seem a complete waste of time at the moment).

It doesn't help the fact that my other-half keeps showing me these wonderful properties in our 'preffered' villages list that are £150 cheaper per month than what we're paying at the moment.

Oh & I was reminded yesterday that I must get the front garden wall replaced this year (falling down) to the tune of £1.5K - Houses, what a pain in the ars*....

What to do

Edited March 2, 2011 by Scrooge