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Anecdotal - Friend Cant Sell For What Its "worth" So...

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A very good friend is moving his family to the US. He has already put in an offer on a place over there. He had tried to sell his house in Coventry for £370k, but go no interest (strange, with average wages probably £17k for the region).

He has now decided to remove all the equity from the place, rent it out and pay cash for the US place.

He is gonna be renting it for gross £950 a month! Thats 3% gross!

Taking a reasonable yield of 7% would price it at about £165k.

So he's paying around 5% to the bank and gets 3% back minus maintenance, voids etc.

A while ago he accused me several times of being a doom monger so I'm not gonna even bother to put these figues in front of him....he's a clever enogh bloke to work it out for himself.

JP.

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A very good friend is moving his family to the US. He has already put in an offer on a place over there. He had tried to sell his house in Coventry for £370k, but go no interest (strange, with average wages probably £17k for the region).

He has now decided to remove all the equity from the place, rent it out and pay cash for the US place.

He is gonna be renting it for gross £950 a month! Thats 3% gross!

Taking a reasonable yield of 7% would price it at about £165k.

So he's paying around 5% to the bank and gets 3% back minus maintenance, voids etc.

A while ago he accused me several times of being a doom monger so I'm not gonna even bother to put these figues in front of him....he's a clever enogh bloke to work it out for himself.

JP.

MEW is free money :)

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hes going down.

he should have lowered the price accordingly to get the sale. even if it were £300k.

oh i forgot. he probably has £360k of debt tied into it.

poor chap.

is this an average type 4 bed house on an ordinary street (circa 2001 135k ?) or something really special ?

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(strange, with average wages probably £17k for the region).

Now the manufacturing big plants are going 17k looks appealing, average more like 12k to 14k for the manual un skilled worker

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You think he's paying nearly $600K to buy a house in the US - very unlikely unless he's in a couple of select areas.

Even if he has MEW'd a chunk of money, he is only paying 3% interest on it - you forget he's paying cash in the US, so he does not have a mortgage cost there - suddenly it' cheap money, isn't it ? And he gets to keep the asset - in effect he's gambling that long term price will rise or he will be able to liquidate at that.

Not that daft a deal in my book - a bit of hedging and his exposure is in the country where they can't take his UK assets and he's offsetting that burden.... - of course he could lose value in the house in the UK, but having taken say 95% out then he can watch the prices fall back 30% and he's just under £90K in the free money and the bank's on the hook as he'll just let it go if it's costing too much. Who's the fool ?

Sorry, edit to make that clear, he thinks house is only worth £250K ish post-crash. So he remortgages now at top whack and takes out £330K plus in cash. Moves it offshore. He finds a tenant to offset the interest payments (int only will be about 4.39%) to cover just about 75% of that risk. In effect he's taking a 1% a year gamble that prices will fall - it's only costing him 1% to have £330K of cash to do what he wants with - allow £200K for a US house and he can get more than that 1% on the £100K plus he has spare. Of course, if the value rises, he's in the upside and if it falls, then he can afford to let it go or simply keep meeting the 'small shortfall' for a long time before being out of the cash....

Smart cookie.

Edited by Rachman

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is this an average type 4 bed house on an ordinary street (circa 2001 135k ?) or something really special ?

Sold for 173k mid 2002. He's done a lot of work on it as when he bought it it was used as offices. It's spacious and depending on configuration has 4 bedrooms.

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when i contemplated moving to the US I was shocked at how much HPs were in areas i could get a job ...

If you go to Kansas or Nebraska it's cheap alright but try getting a job there and would you want to live there anyway??

West Coast urban, Connecticut , Massachusetts, New Jersey , up state New york .......also Maryland were the only places the work was and the only places i considered living in and guess what....British prices unless you 're prepared to do a long commute.

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Could the Peugot site redundancies have an effect on HPI in Coventry? Could this be the tip of the ice-berg, and therfore is the risk that HPI will rise still worth taking?

As well as the Ryton Plant in Coventry, there is a Peugeot sub assembly/powertrain plant in the Stoke area of Coventry. Its quite a reasonable size plant employing a large number of employees. This will be also efected i should imagine. No reporting of this plant in the National toilet rags is there.

Maybe they will carry on, i doubt it. This 2300 number is vastly underestimated by the Blair and Brown spinning machine.

Manufacturing in Coventry/Midlands is dead. This area of the country is the dumping ground, the only thing propping up the local economy is the low wage call centres, SME's paying very low wages, pound shops and two Universities which bring valuable income to the city.

Two up Two downs go for around 100k to 120k, rents yield less than 5% (450 to 500pcm max). This ripple effect will be felt elsewhere. I spent some time in the city a few years ago, its a gloomy place, prices in the city will be hit very hard, should base rates rise in line with expectations. These two up two downs were fetching around 36k to 43k in 1997, a big increase for pre world war one properties which require ongoing maitenance etc etc.

How many other cities in the UK will follow i do not know, but something must give, prices are too high, wages are too low, and real inflation can be felt increasing month after month by the man on the street.

He cuts back, spends less, only spends on essentials, this must be a common pattern across the country, very bleak.

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when i contemplated moving to the US I was shocked at how much HPs were in areas i could get a job ...

If you go to Kansas or Nebraska it's cheap alright but try getting a job there and would you want to live there anyway??

West Coast urban, Connecticut , Massachusetts, New Jersey , up state New york .......also Maryland were the only places the work was and the only places i considered living in and guess what....British prices unless you 're prepared to do a long commute.

So try Texas or Illinois then - cheap as chips for good spacious houses on decent lots (I lived in both recently). Plenty of high paying jobs in professions and manufacturing..... and commutes are sensible - you can also live downtown for not much - plus if he's moving to the US, he's probably already got the job and a rental subsidy to move there....

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He has now decided to remove all the equity from the place, rent it out and pay cash for the US place.

So he's going to buy right at the very top as the American housing bubble is bursting.

And keep his massively over-valued UK home as well.

I hope he has a VERY high paying job or a large inheritence waiting, otherwise he's looking at a lifetime of financial misery.

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So he's going to buy right at the very top as the American housing bubble is bursting.

And keep his massively over-valued UK home as well.

I hope he has a VERY high paying job or a large inheritence waiting, otherwise he's looking at a lifetime of financial misery.

You are assuming he has to sell in the US and assuming he's spending all his cash. If he's done his sums, he could happily lose 25% on a US home and still be way in the money as he's paid $400K for it and has managed to lose less than his free money from the UK one... - the American housing bubble has less to fall because prices ARE so much lower (apart from the tiny bits of downtown major cities and odd 'celeb' places' - plus taxation is lower and you can offset mortgage interest so you don't need to earn so much....

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You are assuming he has to sell in the US and assuming he's spending all his cash. If he's done his sums, he could happily lose 25% on a US home and still be way in the money as he's paid $400K for it and has managed to lose less than his free money from the UK one... - the American housing bubble has less to fall because prices ARE so much lower (apart from the tiny bits of downtown major cities and odd 'celeb' places' - plus taxation is lower and you can offset mortgage interest so you don't need to earn so much....

I think he's buying in Florida for about $550k so somewhere around £315.

He has spent the last few years building up a business and now will hand it over to others to manage and take an income only. He plans to try to set up the same business over in the US.

Dont know how much exactly he earns, but prob has been £50-£70k for the last couple of years gross.

He has a family of 4 and a dog to feed.

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You think he's paying nearly $600K to buy a house in the US - very unlikely unless he's in a couple of select areas.

Even if he has MEW'd a chunk of money, he is only paying 3% interest on it - you forget he's paying cash in the US, so he does not have a mortgage cost there - suddenly it' cheap money, isn't it ? And he gets to keep the asset - in effect he's gambling that long term price will rise or he will be able to liquidate at that.

Not that daft a deal in my book - a bit of hedging and his exposure is in the country where they can't take his UK assets and he's offsetting that burden.... - of course he could lose value in the house in the UK, but having taken say 95% out then he can watch the prices fall back 30% and he's just under £90K in the free money and the bank's on the hook as he'll just let it go if it's costing too much. Who's the fool ?

Sorry, edit to make that clear, he thinks house is only worth £250K ish post-crash. So he remortgages now at top whack and takes out £330K plus in cash. Moves it offshore. He finds a tenant to offset the interest payments (int only will be about 4.39%) to cover just about 75% of that risk. In effect he's taking a 1% a year gamble that prices will fall - it's only costing him 1% to have £330K of cash to do what he wants with - allow £200K for a US house and he can get more than that 1% on the £100K plus he has spare. Of course, if the value rises, he's in the upside and if it falls, then he can afford to let it go or simply keep meeting the 'small shortfall' for a long time before being out of the cash....

Smart cookie.

You're assuming he's paid off the mortgage already. He could also have bought in 2004 and have only a few ££k in MEW equity, in which case he still needs to mortgage in the US and the UK downside is more risky.

Meanwhile, if your assumption is right, he could also take the hit on the price and sell in the UK. This would leave him riskless over here and in a similar cash position as the MEW scenario. The question is whether he feels the ££k extra from MEWing at the top is worth the % in interest payments given the downside risk ("he thinks the house is only worth £250k post-crash"). Long term there are upsides, of course, so it depends on the situation.

Edited by Nijo

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You're assuming he's paid off the mortgage already. He could also have bought in 2004 and have only a few ££k in MEW equity, in which case he still needs to mortgage in the US and the UK downside is more risky.

Meanwhile, if your assumption is right, he could also take the hit on the price and sell in the UK. This would leave him riskless over here and in a similar cash position as the MEW scenario. The question is whether he feels the ££k extra from MEWing at the top is worth the % in interest payments given the downside risk ("he thinks the house is only worth £250k post-crash"). Long term there are upsides, of course, so it depends on the situation.

True, but we are told he's paying cash in the US. So he had $550K available. In which case, all he's done is take the risk on UK prices falling so he loses his remaining UK equity and he's already hedged that by taking as much as he can out. If UK house prices rise, he wins.

[Though I would not have thought Florida is the best state to buy in, it's got a good chance of not suffering the most in a downturn because it's awash with people with real money who want to move there for climate reasons]

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You're assuming he's paid off the mortgage already. He could also have bought in 2004 and have only a few ££k in MEW equity, in which case he still needs to mortgage in the US and the UK downside is more risky.

Meanwhile, if your assumption is right, he could also take the hit on the price and sell in the UK. This would leave him riskless over here and in a similar cash position as the MEW scenario. The question is whether he feels the ££k extra from MEWing at the top is worth the % in interest payments given the downside risk ("he thinks the house is only worth £250k post-crash"). Long term there are upsides, of course, so it depends on the situation.

Of course he could always just walk away from it in the UK if it goes down the pan. Declear bankrupt, keep the house in US.

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Of course he could always just walk away from it in the UK if it goes down the pan. Declear bankrupt, keep the house in US.

What he can take out a big loan, and run to a foreign country, and the lender can't do anything to reclaim the money from him if it really goes t*ts up?

Billy Shears

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Many Real Estate Agents in Florida are openly talking about a 30 to 35% correction in prices. He will be going over on an L1 visa. He will also find the cost of living over there about the same/ more expensive as UK. There is no state income tax in Florida (there is Fed income tax) but there's many hidden costs to living/doing business there. If he thinks there's a lot of paperwork and government interference in the UK he's in for a surprise. It appears about 1 in 4 Floridians works for the city, county, state or fed government and boy do they like paperwork and regulations. You need a licence/qualification/governing body bond and insurance just to sneeze. Truly the land of the free. I hope he's done his home work as it's an extremely unforgiving place, even for extremely experienced and switched on people. What business is he in and what business is he setting up in Florida?

How do you make a small fortune in Florida? Arrive with a big one! There are plenty of people there willing to help you make them rich.

Been there done it set a business up from scratch and sold it on and I’m glad to be back on the Dorset Riviera!

Pablo Silver or Lead?

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What he can take out a big loan, and run to a foreign country, and the lender can't do anything to reclaim the money from him if it really goes t*ts up?

Billy Shears

Basically yes! its called repossession.

Edited by zag2me

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A while ago he accused me several times of being a doom monger so I'm not gonna even bother to put these figues in front of him....he's a clever enogh bloke to work it out for himself.

Corrrect. He would not thank you for doing so.

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What he can take out a big loan, and run to a foreign country, and the lender can't do anything to reclaim the money from him if it really goes t*ts up?

Billy Shears

Seems were thinking along the same lines Billy!

His business is to design and build exhibition stands.

I'd say he's pretty good at it.

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agree that houston is dead cheap

great houses availalable for 120k usd in crosby, baytown, etc

lots of jobs, great standard of living

close to beaches (galveston area)

not bad at all...

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agree that houston is dead cheap

great houses availalable for 120k usd in crosby, baytown, etc

lots of jobs, great standard of living

close to beaches (galveston area)

not bad at all...

ive been to houston and it has no soul.

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Guest Winners and Losers

He has a family of 4 and a dog to feed.

It's always the dog that has to go first. :(

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Mortgaging assets in the UK to fund a business/life in the US does not absolve you of the responsibility for any personal debts on your UK property. It would be very easy to lien his assets in Florida if the lending institution in the UK needed to recover any shortfall on their loan, should he default and they reposes!

Pablo Silver or Lead?

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  • 301 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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