Jump to content
House Price Crash Forum

Became An Str Today Based On This Site


Recommended Posts

Rakno – Bobbins sounds like a bit of a nut – don’t take too much notice. Some of the other comments are rather lacking in intellectual rigour too.

Your experience sounds almost identical to mine – saw the last boom and crash, reckoned the conditions looked similar so decided to sell – now renting a more expensive house for less than the net interest earned on sale proceeds.

The fact is that house prices are so far out of kilter with incomes that they simply cannot continue to rise – I’ve made the same observation as yourself – someone following in my career footsteps 20 year behind me simply could not afford to buy the house I bought 20 years ago. So something’s got to give.

Sure, the safe option is to stay with the house you can afford, then if prices rise, you still own the house you could and if they fall, ditto. The risk of STR is that prices run away from you and you end up having to buy a lesser house for your money.

But you’ve probably felt that feeling that I had – and still have – seeing all that cash in real money in a building society account and wondering what sort of idiot takes that much cash and gambles it on a huge investment at or very near the top of the market.

Once you’ve broken with the feeling of ‘security’ that owning a house gives you, ie stopped feeling insecure about not owning a house, you can look at it rationally. The biggest problem then is persuading your friends and family that you are not (a) going mad or b. suffering acute financial problems that forced you to sell…

The only real risk is that the government allows inflation to take off, so incomes rise to meet prices, but under present arrangements, this would involve a loosening of the BofE targets – otherwise IRs would have to rise and that would trigger the crash. So the warning sign to look out for is a loosening of the inflation target set for the BofE.

Stock markets are widely believed to be a bit ‘toppy’ currently – Fidelity’s top fund manager is predicting a bit of a weak period ahead. As for taking your money to the casino rather than a good building society – anyone who seriously gives such advice deserves to be ignored.

The one thing to consider is splitting the cash up into numerous accounts with no more than £35k in each – that way if the worst happens, and one goes broke, you get almost all of it covered by the FSA scheme – above £35k you could lose it if the bank goes under.

One other thought – consider going for annual interest to shift the income into a later tax year – this may save tax and it will delay the impact of any higher rate tax by a year.

Edited by Bidin'matime
Link to post
Share on other sites
  • Replies 57
  • Created
  • Last Reply

Top Posters In This Topic

Listen,

Life is full of gambles. When gambles pay-off we generally hear about them. When they go tits-up they tend to get swept under the carpet. GAMBLING IS RISKY. But as people have pointed out - NOT SELLING UP is also a GAMBLE. Your £320K house may only achieve £240k in 12 months. On the other hand it could make MORE than £320K but the house you are buying is ALSO MORE EXPNSIVE. Either way CRASH OR BOOM - The Banks and the government are in a WIN-WIN situation.

The ideal scenario for everyone is to buy a house or move up the ladder with as little debt as possible so it is manageable. We also have to factor is WHAT PEOPLE WANT FROM LIFE? I am 38 and getting close to that (40 + 25 year mortgage = 65 retirement) pinnicle of life. Then I see this shithouse government we have and think - Hold on my house is going to make more money over 25 years and then these b@stards with take Inheritance Tax from my children. This is the same government that will probably give me £25 a week pension coz Gordon Brown STOLE the rest of my fund. My view now??? Why own a house to make these shits' some money???

Given a choice - I would have £320k in the bank - get your rent paid via interest and have all your salary to enjoy life. The when I was feeling bold - would buy a few properties at ROCK BOTTOM price near the trough and then make my money.

ENJOY LIFE - AND SLEEP AT NIGHT KNOWING THAT YOU ARE COMFORTABLE FINANCIALLY.

LIFE IS FOR LIVING - NOT FOR OWNING A FEW BRICKS AND MORTAR

TB

* Housing is destroying the social stature of this country imho. It's just not worth it!

Link to post
Share on other sites

Let you tell me my parent's tale:

They bought a house in Harrogate in July 1988 (just about the absolute peak) for £162,500 against an asking price of £155,000 in a bidding war, with a £115,000 mortgage. A few years later when IR were homing in on double figures, he was STRONGLY advised to sell and hence had it valued, at £107,500 put it on the market but there were no takers for what once was an ultra desirable and genuinely sought after house/street. He thought "b*gger this, I'm just going to live like a hermit and pay it off", which he did by 1996. In 1998 his job moved to Abu Dhabi and I STRONGLY advised him to sell and bank the money, on the basis that the then valuation of £350,000 was crazy and he could bring that money back in 3 years and pick up a bargain after the crash. So, he was going to but problems with my younger tearaway sister staying at home caused him to keep it, and it was convenient for when he popped back over, but he thought he was about to see the value plummet.

Last week it was valued at £800,000..........

Didn't they do well, bought in 1988 for 162.5K markets peaked around 90 at a guess. I knew a builder in Addingham nr Ilkley [same affluent area of Yorkshire as Harrogate] had row upon row of brand new 4 bed exec houses in 91 stood with no takers, same houses flying of the shelf a year earlier. And the drought of buyers only got worse along with achievable prices. But I was doing well, and I bought a superiour all stone built house in another nearby village with what was then considereded all the trimmings, three car garage with remote control garage doors , jaccuzi baths etc etc. In 98 I sold it for 15K less than I bought it for eight years earlier, mind you I negotiated a good deal with another local builder struggling to shift his houses in 98. In fact you could pick up an immaculate 15 ensuite bedroom hotel with owners 2 bed attached apartment at the top of Skipton Road in Harrogate for 250k in 97/98.

So all considered your parents did very well going from 162.5K to 385K in the same time the rest of the market was experencing a down turn, either that or your just talking complete b@ll@cks.

Link to post
Share on other sites

Didn't they do well, bought in 1988 for 162.5K markets peaked around 90 at a guess. I knew a builder in Addingham nr Ilkley [same affluent area of Yorkshire as Harrogate] had row upon row of brand new 4 bed exec houses in 91 stood with no takers, same houses flying of the shelf a year earlier. And the drought of buyers only got worse along with achievable prices. But I was doing well, and I bought a superiour all stone built house in another nearby village with what was then considereded all the trimmings, three car garage with remote control garage doors , jaccuzi baths etc etc. In 98 I sold it for 15K less than I bought it for eight years earlier, mind you I negotiated a good deal with another local builder struggling to shift his houses in 98. In fact you could pick up an immaculate 15 ensuite bedroom hotel with owners 2 bed attached apartment at the top of Skipton Road in Harrogate for 250k in 97/98.

So all considered your parents did very well going from 162.5K to 385K in the same time the rest of the market was experencing a down turn, either that or your just talking complete b@ll@cks.

It was valued at £107,500 in early 91, was £385 in 1998. It's an art deco house near the stray, not an exec house. On Queen Parade in fact, houses have done far better, well into 7 figures from being a similar value in the early 90s. But thanks for your opinion

Link to post
Share on other sites

Surpised and possibly £50-100k out of pocket

My advice is remortgage your house for another £100k, take it down to the casino, and put it on black or red.

That's exactly what your doing by STRing. I hope your hunch turns out to be right

What a load of tosh!

Buying when houses are way above the long term averge as they are now is like betting on each and every number on the table (bar the 00s, as they could still increase) but getting 2:1 odds.

A fantastic bet - one which everyone should take!

Link to post
Share on other sites
  • 1 month later...

Congratualtions on selling your house.

As much as people are giving you a bit of a hard time - nobody has said that the person who bought off you made a smart move.

While 385k in the bank is a safe option - and gives you a secure rate of return.

Holding on to the house is a greater risk - in the medium term.

Long-term you can always buy a house again at a time of your choosing - but having ready liquid cash means that you have greater flexibility.

Most people are looking at BTL property for either retirement or capital appreciation.

385k would buy you a decent annuity - there is nothing wrong with quitting while ahead.

In general those who don't quit while ahead tend to chase losses.

Link to post
Share on other sites
  • 2 weeks later...
The buyer is not selling his own house, but remortgaging it and taking out a further mortgage to buy my house. He seemed to be in a panic about buying as much as he could as soon as he could. Good luck to him.

1) I'm sure you are making that bit up about the buyer seeming to be in a panic.

2) With 385 sticking it in low risk accounts making 3% is the most pathetic way of investing I can think of. You can afford a very nice house and ride out the very small risk of a correction with no financial pain to yourself. What on earth are you worried abnout property will outperform any other investment a low risk investor such as yourself will make in the long term.

I am so frustrated for you I wish I could grab by the shoulders and scream stop being a wussy tightwad!!!

Link to post
Share on other sites
1) I'm sure you are making that bit up about the buyer seeming to be in a panic.

2) With 385 sticking it in low risk accounts making 3% is the most pathetic way of investing I can think of. You can afford a very nice house and ride out the very small risk of a correction with no financial pain to yourself. What on earth are you worried abnout property will outperform any other investment a low risk investor such as yourself will make in the long term.

I am so frustrated for you I wish I could grab by the shoulders and scream stop being a wussy tightwad!!!

You are joking.

I take it you have just left school. "the very small risk of correction"

Christ give me strength no wonder this country is going to the wall.

Listen son if you were around in 89,90,91 you would have seen for yourself how damaging a "risk of correction" actually is. People I knew saw £350k houses drop in value to £150k. Small risk of correction my ar*e.

If I was next to you now i'd slap you round the face with a wet fish and send you off to bed with no milk.

Link to post
Share on other sites
2) property will outperform any other investment

If that's true, How can property create money from itself entirely to enable it to Outperform? A Business all by itself?.

It needs to generate cash.

Not forever-increasing Debt levels to increse its value A kind of Pass-the-debt-parcel monetry system

Ever-Increasing Debt transformed into Ever-Increasing Hpi.....

Link to post
Share on other sites
If that's true, How can property create money from itself entirely to enable it to Outperform? A Business all by itself?.

It needs to generate cash.

Not forever-increasing Debt levels to increse its value A kind of Pass-the-debt-parcel monetry system

Ever-Increasing Debt transformed into Ever-Increasing Hpi.....

Its the miracle economy, get with the program.

I understand David Blaine is going to be GB's new chancellor when he is made PM.

Link to post
Share on other sites
I completed the sale of my house today at close to the asking price of £385k. (I bought it in 1995 for £125k, when the original vendor had paid £150k in 1991). The buyer is not selling his own house, but remortgaging it and taking out a further mortgage to buy my house. He seemed to be in a panic about buying as much as he could as soon as he could. Good luck to him.

I sold it in anticipation of buying another house, but that vendor was asking too much, (in my opinion), and wasn't willing to negotiate. He also has decided to rent it out rather than lowering the price. If he finds a tenant he will be getting a return of gross 3% - ignoring void periods and maintenance cost.

I have decided to rent and deposit the £385k into risk free investments, earning a gross of around 5%, which is enough to pay my rent and other expenses.

The reason for becoming an STR, is that I keep getting deja'vu. I was there when the last property bubble burst, and just before it, everybody was behaving exactly the same way. Those without anything, panic buying. Those with houses, refusing to believe market prices, instead the EA who came up with the biggest number. When these two meet, you get HPI, which encourages and reinforces this behaviour.

BUT sooner or later, the economic facts catch up. Lets see what happens.

You will need a mighty crash to pull this off.

Assuming you paid 1.5% agents fees plus VAT (£6,800) to sell, £500 legals and £1,000 moving fees you are already over £8,000 down. If you pay tax at 40% and use the remaining interest to finance rent and deposit etc your money will erode by at least the official rate(s) of inflation each year.

If inflation is 3% then after 12 months your £385k is now worth £374k. After 12 months you have managed to cost yourself £19,300 in fees are eroded capital. :o

If prices crash 20% then you would pay £308,000 to buy the house back. You also have to pay stamp and legals and moving costs etc etc which will be at least £10,000.

If you buy in 12 months at a 20% reduction you will have made £47,700 (or actually £46,300 on account of the time value of money). This would be a good result.

If you wait 2 years and prices tank 15% you make around £18,000 (or actually £17,000).

If prices simply stay static for 3 years you lose £40,000 and still have to spend 10k to get back into the house if you bought it back. This always assumes there is no increase in stamp duty - which ironically many argue in favour of as a way of cooling the housing market.

Big risk.

Link to post
Share on other sites

I think your your analysis is a bit flawed - you need to look at this to get the true profit of taking the sell decision over the stay put decision.

Lets say he buys back in one year

His costs are

Selling fees (1)

Rent for one year (2)

Repurchasing fees (3)

Reduction in released capital due to inflation (4)

His income is

After tax income generated for year from released capital. (5)

If he stays for one year his costs are

Mortgage payments (6)

Repair/running costs on house (7)

Reduction in equity due to inflation (8)

Therefore 4 and 8 cancel and should be out of the equation to give the correct profit or loss from the decision after one year.

Link to post
Share on other sites
I think your your analysis is a bit flawed - you need to look at this to get the true profit of taking the sell decision over the stay put decision.

Lets say he buys back in one year

His costs are

Selling fees (1)

Rent for one year (2)

Repurchasing fees (3)

Reduction in released capital due to inflation (4)

His income is

After tax income generated for year from released capital. (5)

If he stays for one year his costs are

Mortgage payments (6)

Repair/running costs on house (7)

Reduction in equity due to inflation (8)

Therefore 4 and 8 cancel and should be out of the equation to give the correct profit or loss from the decision after one year.

If he takes £385k to the bank and spends the after tax income then as we both say - his capital sum erodes by inflation. Only if his house remained at £385k value after a year of inflation would your (4) and (8) cancel each other out. My envisaged scenario was that his value would remain static - ie it would neither rise nor fall in real terms but would increase only in line with inflation.

Assuming his house rose with inflation (remained static) then he suffers no reduction in equity and his costs are as i described.

Link to post
Share on other sites

In that case the 15 and 20% reductions you show are real not nominal falls. If thats the case its fine. So these are actually 12% and 17% nominal falls.

This next line simply doesnt make sense then

"If prices simply stay static for 3 years you lose £40,000 and still have to spend 10k to get back into the house if you bought it back. "

Unless again you clarify that in fact this only occurs if house prices keep up with inflation i.e rise by around 10% over the three year period, which is alot different.

Also your time vaue of money argument is a bit off as well.

Link to post
Share on other sites

I'm with Pelican on this one. Inflation is only relevant if the asset you are going to spend the money on is rising in price - otherwise it is a red herring. If house prices stay level, the money put by to buy a house will still buy the same house in a year’s time, even if a basket of bread and DVD players etc has risen in cost. If house prices fall 10%, you get 10% more house for your money, even if the cost of petrol has doubled.

Link to post
Share on other sites
Surpised and possibly £50-100k out of pocket

My advice is remortgage your house for another £100k, take it down to the casino, and put it on black or red.

That's exactly what your doing by STRing. I hope your hunch turns out to be right

Don't be silly. The risk of STR'ing is exactly the same as the risk of buying or staying put! You seem to be suggesting that price rises or steady prices are more likely than falls. Last year you would have been right; this year I think the pendulum has swung the other way.

Link to post
Share on other sites

I'm with Rakno. I haven't sat down and done the math, but my gut feeling was now was the time to sell. I went through the last crash, and was paying a variable Endowment Mortgage when interest rates hit, what, 15% (?), double the rate that I took the loan out.

I know things aren't like that yet, but the similarities between then and now are uncanny.... rush to buy, overstretching to get a mortgage, interest rates rising, FTB's priced out etc.

My gut feeling is based on fundamentals. If you have to borow 6.5 times your gross to buy an average house, you're on a hiding to nothing and sure of financial heartache in the future.

So I sold. I got exactly three times what I paid for the place, exactly 6 years ago. I had a straight repayment mortgage this time, and was pleased that I'd paid off more capital than I'd expected, so I made quite a tidy sum. I am debt free, not worried in the slightest if interst rates go up as it will boost my savings, and feel, somehow, as if I've abandoned a sinking ship in the nick of time.

Time may prove me a fool, but it can't take away the sense of peace I have today!

Link to post
Share on other sites
  • 1 month later...
IMHO unless you're pretty rich, this approach is idiotic.

It's great if you can call the top of the market, sell your house and buy back in at a cheaper price. However, the risks are huge, in that you gambling with your biggest, and in most cases peoples only asset. You have in effect made a £100k gamble, because price could rise or fall that much.

You maybe right prices maybe about to fall, but we are in a bubble and all logic goes out of the window, and you just may be selling at a point of a further strong upsurge in demand.

I'd always consider the implication of being out of the market, and house prices rises a further £100k. I guess that would financially crush you.

It did me - I sold in Jan 2006 and am £100k down (and I didn't even STR in the way everyone understands).

Don't get me wrong, I'm a bear and am astonished at what's going on, but most families shouldn't play the market with their house, as they would with £500 on the stock market or a tenner on the horses.

If you can't afford to lose it, then you shouldn't be gambling with it.

With figures out from the RICS and Haliwide showing the SE us still booming during March 07, you should have took my advice (above), you pratt. Advice from someone who had is fingers burned by rises in the housing market. There's no point gambling with your home.

I reckon that with stamp duty and all fees, it'll cost you have to find an additional £30-40k to buy your home back (that is, if it came up for sale).

I did the opposite to you, and bought back in at the beginning of the year. It looked like a mad decision at the time, but in hindsight the value's risen a further 10% since the start of the year.

You're a single-minded kretin.

Bet your not so cocky now, hey.

Link to post
Share on other sites
With figures out from the RICS and Haliwide showing the SE us still booming during March 07, you should have took my advice (above), you pratt. Advice from someone who had is fingers burned by rises in the housing market. There's no point gambling with your home.

I reckon that with stamp duty and all fees, it'll cost you have to find an additional £30-40k to buy your home back (that is, if it came up for sale).

I did the opposite to you, and bought back in at the beginning of the year. It looked like a mad decision at the time, but in hindsight the value's risen a further 10% since the start of the year.

You're a single-minded kretin.

Bet your not so cocky now, hey.

Can someone save this post for the rest of us to enjoy post-crash? I would not take pleasure in the financial suffering of ordinary people, but I will make an exception for the writer of that cringeworthy post.

Edited by tara747
Link to post
Share on other sites
Guest Cletus VanDamme
Can someone save this post for the rest of us to enjoy post-crash? I would not take pleasure in the financial suffering of ordinary people, but I will make an exception for the writer of that cringeworthy post.

Yeah, might be worth reading in 5 years time when we finally get the downturn and prices return to 2006 levels.

Link to post
Share on other sites

Interesting statement that. Less than a year ago, people were talking of things returning to 2001 levels, post crash. Shift in sentiment? An admission that those who have bought pre 2006 knocked it off?

Just wondering. :unsure:

Edited by billy-g
Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 440 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.