Housing – Page 7 – FIRE v London

Housing, pt 6: to sell or to rent?

2016-01-012016-01-01 FIRE v London4 Comments

Somewhat unexpectedly, I’ve bought a Dream Home. I’ve managed to do this without selling my Former Dream Home. My intention has been to sell the Former Dream Home shortly after moving, but a recent comment on my blog has had me considering my options. Is selling really the right strategy or should I rent it out instead?

@divorcedff

2016-01-01 at 7:14 AM

Thanks for sharing your 2016 goals. I don’t think that selling a house to pay out your mortgage will be good idea (in my point of view), better to rent the house and with that to pay the mortgage.

Happy new year

Sharon – Divorcedff

Thank you, @Divorcedff, for your suggestion.

My initial position was that I don’t fancy turning the Former Dream Home into a rental property, for three reasons:

It would leave me too exposed to premium London property. I would have over half my net worth in London property, and that is too high for me
Property is a hassle. I view property as very unscaleable, expensive, illiquid, frustrating and stressful to manage. Compared for instance to owning a Vanguard ETF.
Rental yields are too low. I consider a 4% rental yield, pre costs, to be pretty good. For high priced London properties yields are generally lower. And this is before costs, which are significant and unpredictable. In fairness, a typical equity ETF would also have yields of perhaps 3%, but with no costs.

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Housing, pt5: The liquidity rush

2015-12-282016-01-01 FIRE v London5 Comments

Avid readers will know I’m in the process of buying a Dream Home. This event has not been pre-planned and is happening at speed. This means I’m not yet selling my previous home, but instead I am frantically liquidating my investment portfolio. This is quite a bizarre thing to do in a hurry and is taking a lot of time and energy.

The housebuying process in the UK involves two key steps: exchanging contracts (at which point a 10% deposit is paid), and subsequently completing the transaction (at which point keys are handed over, the 90% balance is paid to the seller, and property taxes are paid to the government). In my case I exchanged contracts a few days before Christmas (shown on the lighter green triangle below) and I complete the purchase at the end of January (shown as the yellow/dark green triangle).

Having managed to rustle up the 10% deposit in a few days, I now have about a month to find a further 100% of the purchase price – enough to pay the 90% balance and the ~10% property taxes (stamp duty).

After a week of doing more Sell Orders than I’ve done in the last two years combined, my bank account remains depressingly modest. While some of this is because money is in transit, it has led to me mapping out in detail what I need to find the money to complete at the end of January. My action plan has no fewer than 62 steps in it, 24 of which have happened already.

I’ve plotted below my notional target trajectory for liquidating funds.

2015 12 dream home liquidation timetable

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Housing, pt4: we bought our Dream Home!

2015-12-232016-01-01 FIRE v London11 Comments

Amidst the Christmas mania, we managed to exchange on the Dream Home yesterday. Gulp. This makes this an appropriate post to answer hawkipa’s question about how I get my head around stamp duty.

We had to up our offer by a bit to secure the deal. It had become clear the vendor was very motivated by exchanging pre Christmas but it wasn’t clear whether he’d risk taking the £30k (!) lockout non-refundable deposit he was being offered by a rival bidder. In the end I reasoned that the difference in my bid was sufficiently small that I would never forgive myself if we lost the house for this reason, so we coughed up.

But with the purchase now contracted, I thought I’d answer @hawkipa’s question:

“Enjoying reading this as my wife has just found a new ‘forever’ home and the issues are quite similar. How did you get your head around the stamp duty as that is such a big blocker for me right now?”

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