Happiness Is Cash And Shares Not Property..study Reveals

[sPinwheel]

£135,000? Can I borrow a fiver?

[crashmonitor]

I've been reading this topic with some interest as I'm not sure about what to do with my own financial situation - what do the posters think of this plan?

The situation:

- 31 year old single bloke

- £135,000 savings in cash

- £2500 a month income after tax - secure job that I'm happy in but no promotion prospects

- rent an apartment for £500 a month all in - perfect for me as a single person, costs nothing to heat, near my job and city so no commute costs

- don't own a car

....I can happily live on far less than my monthly wage; and while I'm by myself (which could be forever of course!) my one bedroom apartment is perfect. But it annoys me that my money is doing nothing; so I'm thinking that the only thing worth doing with it is to buy a £200k-ish family home, and rent it out to a family until such a time as I want to move in with someone and/or have a family of my own. So with the rental income and the surplus from my own wages I should be able to get the mortgage cleared within 10 years, and I'd be planning to buy a house that was nice enough that it's the first and last house that I'd ever need to buy (I'm not a 'keeping up with the Jones' type). I could live in it as a single bloke, as someone who was cohabiting, or as someone who has kids. All bases covered.

I love apartment living, but they're overpriced for what they are and I've seen other blocks 'go bad' so I think owning one would be a risk. Does this plan make sense or does it sound like a terrible idea?

Well one thing is for sure you have won in your first decade. Gold stuck at 2009 levels with zero yield and costs, the UK equity market at 1998 levels (barring yield) and northern property suffered a complete melt down and is still sub 2007 peak.

You backed the winning horse which is why you have gotten 135k, who knows what the next decade will bring, may be equity, gold or property will get its day in the sun. If you had bought a house in 2007 you would now be worth very little. Good job you went for renting and not the dead money option of buying.

[bearwithasorehead]

Getting to the point now when for me the stash I've saved towards a (bigger) house (bought small house in 2006) looks like a complete waste if I blow it on a deposit to move up.

Where I am it will be another 200k for an extra bedroom, a bit more space downstairs and a nicer garden.

And this is in the W Mids, ffs!

[TheCountOfNowhere]

Getting to the point now when for me the stash I've saved towards a (bigger) house (bought small house in 2006) looks like a complete waste if I blow it on a deposit to move up.

Where I am it will be another 200k for an extra bedroom, a bit more space downstairs and a nicer garden.

And this is in the W Mids, ffs!

Crazy.

What's the average wage ? 24k maybe ?

[JoeDavola]

But, seriously - why is this route appealing? If it's because, as you say, the cash isn't doing anything then it's worth recognising that it is "doing something" - it's giving you massive flexibility and security.

I have to admit that it's partially fear. Fear that despite the fact that house prices did crash here in Northern Ireland, that they are now appear to be rising faster than I could possibly save, so even if I save say £1000 a month, the house that I will eventually buy is increasing in price at a faster rate than that. I don't know what on earth is funding these rises, as most people don't have the saving power that I do.

House went on sale for £250K the other day that I remember being £175K no more than 3 years ago. A house identical to the one my parents bought for £180K a couple of years ago is now up for £220K. I'd like to think this is a 'dead cat bounce' but I fear it isn't.

Also fear that everything will inflate over the next decade and £135K will be worth next to nothing.

If it were not for these fears, and the housing market were not so irrational, I would adopt the attitude that it makes sense never to live or own in a house that is bigger than what you need at the moment. So my one bed flat, which is a decent size for a 1 bedder and is a 10 min walk from everything I need, and has no heating bills at all even in the depth of winter cause it's so freakishly well insulated......is perfect.

It's a good point that the cash isn't 'doing nothing' - that I do have some security and options from having cash.

[TheCountOfNowhere]

I have to admit that it's partially fear. Fear that despite the fact that house prices did crash here in Northern Ireland, that they are now appear to be rising faster than I could possibly save, so even if I save say £1000 a month, the house that I will eventually buy is increasing in price at a faster rate than that. I don't know what on earth is funding these rises, as most people don't have the saving power that I do.

House went on sale for £250K the other day that I remember being £175K no more than 3 years ago. A house identical to the one my parents bought for £180K a couple of years ago is now up for £220K. I'd like to think this is a 'dead cat bounce' but I fear it isn't.

Also fear that everything will inflate over the next decade and £135K will be worth next to nothing.

If it were not for these fears, and the housing market were not so irrational, I would adopt the attitude that it makes sense never to live or own in a house that is bigger than what you need at the moment. So my one bed flat, which is a decent size for a 1 bedder and is a 10 min walk from everything I need, and has no heating bills at all even in the depth of winter cause it's so freakishly well insulated......is perfect.

It's a good point that the cash isn't 'doing nothing' - that I do have some security and options from having cash.

Sounds like Northampton.

Dont know who ius stupid enough to buy them.

Woudl you pay £100K for a VW sciroco ( 25K last yera ) this year just because you can get cheap credit ?

This country is really sick and Cameron's/Osbornes/Carneys actions regarding pumping up prices NEEDs to be investigated by the fraud office.

[JoeDavola]

If you're happy in a £500/month place, then what's the rest for? Put it to work:

£100k invested productively leaves you an ample £35k float. Invest in mainstream shares or funds if you don't have any better/more specific uses (like starting your own business or "angel" investing in someone else's).

And invest at least half of the £2k/month you have remaining somewhere useful. I guess you fall a little short of higher-rate tax?

Then one day you'll have a pot to spend on something you really want. Do the mid-life-crisis thing and buy some extravagence according to taste, or sponsor some exciting event. Or even [whisper] buy a house.

I've long thought that £20K would be an ample float; I have no plans to stop working any time soon and I like taking a few holidays a year so that provides enough of a fund to meet all those needs.

The question is and has always been what to do with the rest, if not putting it into a house. Everything else just seems like a gamble; I've been a member of this board for the best part of a decade and watched all the ups and downs of gold, oil, and the stock market over that time. I'm assuming by 'mainstream' shares you mean something like Pharma companies and the like? i.e. the essentials.

Since I breached the £100K mark I had been thinking of looking into Vanguard as I know they give a very low management rate if you invest £100K with them.

[JoeDavola]

Well one thing is for sure you have won in your first decade. Gold stuck at 2009 levels with zero yield and costs, the UK equity market at 1998 levels (barring yield) and northern property suffered a complete melt down and is still sub 2007 peak.

You backed the winning horse which is why you have gotten 135k, who knows what the next decade will bring, may be equity, gold or property will get its day in the sun. If you had bought a house in 2007 you would now be worth very little. Good job you went for renting and not the dead money option of buying.

Thank you, doesn't feel at all like I did win for some reason! I think I felt like I'd won a couple of years ago when prices in NI were on the way down - I still thought they had some more to go before they were actually affordable to ordinary people, but it appears the market thought otherwise.

I've been renting a flat for 5 years. When I started renting it, an idential one was on for £200K. Three years later a repo was on for £90K. Recently one was listed for £120K.

For 5 years, my rent stayed the same, and only went up for the first time, by £25 a month, this year.

Interesting to see how the buying market is so irrational compared to the rental one...

Edited September 9, 2015 by JoeDavola

[Venger]

If you exchange your currently strong, trouble free, and flexible position to become a leveraged landlord, I reckon you need your bumps feeling. IMO, it'd be mental.

But, I recognise I'm an outlier when it comes to this sort of thing!

But, seriously - why is this route appealing? If it's because, as you say, the cash isn't doing anything then it's worth recognising that it is "doing something" - it's giving you massive flexibility and security.

Exactly.

VonLöwe

Paradoxically one of the symptoms of deflation is inflation. In certain assets, where old era expectations meet new era interest rates

23 Aug 2015

Many of the 118ers have been 'dead-money' savings types, now finding themselves looking at a financial squeeze after the tax move. Yes house prices have shot up even higher, but all I can do is keep saving and expect price correction.

Oh, and the 'dead money savings' types can't come back later, as the values fall, and claim they're hard done by.. wanting other peoples cash vs their falling asset values. They can't have it each and every way. I'm already reading some push it as the answer. Mortgage debtors power together and refuse to pay, keep the houses, equity rich at top keep their homes, and renter savers to be wiped out.

March 2013

When I say growing cash pile, I don't mean having it sat there looking at me earning 2% as that means it's growth will be stunted,and like our children it needs to be lovingly nurtured to grow big and strong. I mean doing BTS to help it grow quicker. Investing in BTS, from purchase to getting the cash back is usually less than 6 months. I can't see anything changing that quickly that a 6 month or even 12 month timeframe is that critical. I have lots of empty credit cards for such emergencies as well as a bit of cash and a large overdraft. Or I could get a large loan to tide me over. I think we all have different views on what a cash pile means. I suppose for most people this is cash in an account. To me, it means if the winds change then in a reasonable timeframe I will also be able to have my cash sat in an account if I so wish, but in the meantime continue to invest it to grow it. I'd rather buy 5-6 houses with cash with £300k and have the income, which will be far greater than the savings on the mortgage. I'd then consider 75% of this as available cash as it would only take a few weeks to remortgage and have access to it.

I think the key thing here is a BTL mortgage is an unregulated product. Yes a broker can advise on the best one available for an investor but the person taking the product out is responsible. If I take out a cash ISA (not that I would) and the bonus rate drops after a year then I should know that and I shouldn't rely on a broker or a comparison website.

[Venger]

I've been reading this topic with some interest as I'm not sure about what to do with my own financial situation - what do the posters think of this plan?

The situation:

- 31 year old single bloke

- £135,000 savings in cash

- £2500 a month income after tax - secure job that I'm happy in but no promotion prospects

- rent an apartment for £500 a month all in - perfect for me as a single person, costs nothing to heat, near my job and city so no commute costs

- don't own a car

....I can happily live on far less than my monthly wage; and while I'm by myself (which could be forever of course!) my one bedroom apartment is perfect. But it annoys me that my money is doing nothing; so I'm thinking that the only thing worth doing with it is to buy a £200k-ish family home, and rent it out to a family until such a time as I want to move in with someone and/or have a family of my own. So with the rental income and the surplus from my own wages I should be able to get the mortgage cleared within 10 years, and I'd be planning to buy a house that was nice enough that it's the first and last house that I'd ever need to buy (I'm not a 'keeping up with the Jones' type). I could live in it as a single bloke, as someone who was cohabiting, or as someone who has kids. All bases covered.

I love apartment living, but they're overpriced for what they are and I've seen other blocks 'go bad' so I think owning one would be a risk. Does this plan make sense or does it sound like a terrible idea?

Just don't come back complaining in a HPC, and wanting other people's dead money savings.

Maybe some of that has been going on already. Dead-money worries buying at ever higher bubble prices, to rent out.

I know what side I'm on, and I will wait it out.

[TheCountOfNowhere]

Just don't come back complaining in a HPC, and wanting other people's dead money savings.

Maybe some of that has been going on already. Dead-money worries buying at ever higher bubble prices, to rent out.

I know what side I'm on, and I will wait it out.

+10

[JoeDavola]

Just don't come back complaining in a HPC, and wanting other people's dead money savings.

I'm a staunch believer that high houses prices are a bad thing for society. I'd support and be happy at drops, the bigger the better, even if I did own.

[Guest]

I have to admit that it's partially fear. Fear that despite the fact that house prices did crash here in Northern Ireland, that they are now appear to be rising faster than I could possibly save, so even if I save say £1000 a month, the house that I will eventually buy is increasing in price at a faster rate than that. I don't know what on earth is funding these rises, as most people don't have the saving power that I do.

House went on sale for £250K the other day that I remember being £175K no more than 3 years ago. A house identical to the one my parents bought for £180K a couple of years ago is now up for £220K. I'd like to think this is a 'dead cat bounce' but I fear it isn't.

Also fear that everything will inflate over the next decade and £135K will be worth next to nothing.

If it were not for these fears, and the housing market were not so irrational, I would adopt the attitude that it makes sense never to live or own in a house that is bigger than what you need at the moment. So my one bed flat, which is a decent size for a 1 bedder and is a 10 min walk from everything I need, and has no heating bills at all even in the depth of winter cause it's so freakishly well insulated......is perfect.

It's a good point that the cash isn't 'doing nothing' - that I do have some security and options from having cash.

I don't have 135k but this is what terrifies me - that continued inflation will make the deposit I have managed to save worthless.

The minimum/living wage looks to be increasing by about 50% over the next five years. MPs just got a 10% rise. Government appears to want more inflation rather than nominal falls.

But I haven't had a wage rise in four years.

I dread reaching 2020 and finding everyone has had a pay rise except me, my savings haven't earned any interest, and I still don't have a house. If that happens, what on earth have I been working for, for the last decade? I'd end up with nothing to show for my efforts at all.

I have a lot of friends who are buying houses because they need space for the kids. Somehow their tolerance for debt is much much higher than mine - and managing to couple up in their 20s means they have a big advantage over singleton me.

This house price madness has gone on for far too long. I might have (some) cash rather than property but it certainly hasn't made me happy.

[JoeDavola]

what on earth have I been working for, for the last decade? I'd end up with nothing to show for my efforts at all.

This is my big fear. That I could end up in that situation at age 40 after 20 years of slog, and be at risk of throwing myself off a bridge.

[Venger]

I dread reaching 2020 and finding everyone has had a pay rise except me, my savings haven't earned any interest, and I still don't have a house. If that happens, what on earth have I been working for, for the last decade? I'd end up with nothing to show for my efforts at all.

I have a lot of friends who are buying houses because they need space for the kids. Somehow their tolerance for debt is much much higher than mine - and managing to couple up in their 20s means they have a big advantage over singleton me.

This house price madness has gone on for far too long. I might have (some) cash rather than property but it certainly hasn't made me happy.

Well, can only hold position for a HPC then. Some of your friends may find they don't have happiness over the longer-term with the market decisions they've taken. You can only position yourself and your own family. I'm hopeful what with Tax Relief changes on BTLers / CGT trap. Pre HTB in 2012 had one opportunity to buy a house at a price I would have been happy with. Inheritor seller who cut into cool market and accepted a low offer from FTBs. 2-bed small house, bit on the ugly side, but would have been happy with it, and could have used tricks to get 3rd or even 4th bedroom. Now I've watched more Kirsten Dirksen / faircompanies on YT, got more ideas on how to make most out of small homes.

If the price halved then I probably wouldn't be able to buy the house I live in, but I would certainly be able to buy a flat that meets my needs.

The London lottery win was a one-off event. The boat has sailed.

I'm 31 and I moved to London four years ago. I earn a good wage, although I'm single. I don't have a million pound house. I live in a flat share. Prices were already crazy when I arrived and they're even more out of reach now. With prices rising 60k a year I literally cannot save enough to keep up.

My friends and colleagues have either:

• Bought seven or eight years ago.
• Moved out into the commuter belt.
• Given up and moved North.
• Are taking a gamble on shared ownership.

People may have worked hard and made something of themselves, but I'm sorry, it's not hard work that has increased your housing equity.

How many of the winners could do the same again, were they to arrive in London today? Where's the millions of pounds going to come from to buy these houses, when the time comes? I certainly can't pay it.

[TheCountOfNowhere]

Well, can only hold position for a HPC then. Some of your friends may find they don't have happiness over the longer-term with the market decisions they've taken. You can only position yourself and your own family. I'm hopeful what with Tax Relief changes on BTLers / CGT trap. Pre HTB in 2012 had one opportunity to buy a house at a price I would have been happy with. Inheritor seller who cut into cool market and accepted a low offer from FTBs. 2-bed small house, bit on the ugly side, but would have been happy with it, and could have used tricks to get 3rd or even 4th bedroom. Now I've watched more Kirsten Dirksen / faircompanies on YT, got more ideas on how to make most out of small homes.

There's little point in doing anything else.

By all the trolls accounts, it's crazy out there and you can'tr buy a house for love nor money.

[WideAsleep]

Three years ago I was all in cash and looking for a house aiming for a 30% down payment. First one I put an offer on, the solicitor found an undisclosed local occupancy clause that meant we couldn't buy it after all. Second house offer we were out bid by someone paying over asking after we had an offer accepted and had set the solicitor working again. Third house we were getting desperate but we were too late with the offer. We offered 6 grand higher than asking but someone was already in the process of buying and the offer was rejected. It was a repossession you see and as it meant more time for the repo company they were happy with less money more quickly.

Then two years ago I found this site and stopped looking to buy a house. Three times we tried to commit ourselves to a lifetime of debt slavery without really understanding the financial situation beyond 'can we afford it'. We really were those 'just wanted a house' people. Thank god for the good solicitor, gazumper and the repo company wanting a quick sale.

I am not as much in cash as I was, mostly in shares and gold. But the deposit is still sitting there keeping up with inflation. I would say though, that it is not the cash, shares or gold that effects my happiness (maybe the shiny gold a little bit). It is being free from soul crushing debt. I feel particularly lucky that I did not take on 5 times my earnings worth of debt to part own an ex council house, even the last one which had quite a big garden.

[porca misèria]

I have to admit that it's partially fear. Fear that despite the fact that house prices did crash here in Northern Ireland, that they are now appear to be rising faster than I could possibly save, so even if I save say £1000 a month, the house that I will eventually buy is increasing in price at a faster rate than that.

If that's a concern, why not invest in a basket of stocks tied to housing? It's higher risk than a balanced portfolio, but lower than a physical house (other than one that's your actual home). And if HPI happens, your portfolio will go up with it.

FWIW, in the time since joining HPC, and on a net income around 20% above yours for most of that time, I've saved enough to buy a middling house around here for cash. The high-income part of the portfolio (20% of it in total, or 50% of the non-pension part) has paid the rent in full with something to spare since 2013, which is kind-of financially equivalent to saving a deposit and paying off a mortgage all in five years.

I guess the moral is, if you have spare money (as you do), think and behave rich, and you'll get richer than you thought.

[porca misèria]

This is my big fear. That I could end up in that situation at age 40 after 20 years of slog, and be at risk of throwing myself off a bridge.

BTDT. At age 40 I had very little indeed, as proprietor of a business that wasn't making enough to pay the rent, let alone keep up with rampant HPI.