Should I sell and rent for a while ? (05-06-2008)

angela59

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Re: Should I sell and rent for a while ?

Hi Camel,

With rent you are paying the landlord's mortage with interest on a mortgage - you are paying the bank but you also get relief on your mortgage and you can decorate your house whatever way you choose you have more control - with renting the rent can be increased and it is never going to be your own home - the idea of a mortgage eventually you will own it so you will have an asset - with rent you will never have anything to gain in the longterm.
 
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Guest117

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Re: Should I sell and rent for a while ?

Sangster

i agree with most of other posters

IMO it's a bad idea to look at the family home as an investment. An investment is usually something you can afford to speculate with and if you lose it you won't be destitute. Don't know your situation but for me ( few kids now ) I will never put family home at risk and never move family from a happy home in the hope of making a few quid
 
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eamonn123456

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Re: Should I sell and rent for a while ?

IMO the sums don't stack up, never mind the less tangible stuff.

Do the sums first. Ideally, share them on this thread so we can all understand the situation better.

If it still looks like it makes sense, then consider the hassle factor, the risk factor and the other stuff that has been mentioned.
 

Afuera

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413
Re: Should I sell and rent for a while ?

with renting the rent can be increased
More specifically, the rent can be set at the market rate. With the build up in inventory it does not look like tenants are going to have to worry about increases for the next while.

BTW, I agree with the majority of the posters; speculating with your family home is not to be advised.

The only reason I would advise it is if you were already considering trading up. If there are reasons you want to move out of your current property (long commute, too small, etc) then now is as good a time as any to offload it. All the arguments about the transaction costs, hassle etc will have to be faced at sometime anyway.
 

angela59

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Re: Should I sell and rent for a while ?

Afuera,

Thats all very well what you say but there is a family involved here - hand on heart if I had known the way the property market was going to turn about 1.5 years ago I wouldn't have bothered trying to sell and move. Lots of people are staying put now and extending and making use of what they have. Put your house on the market even at a reduced price and potential purchasers will still want a further % cut and also potential purchasers are not being approved for mortgages with the credit crunch. It is not just down to financial issues there is a lot of stress involved and it does affect the whole family also - if you don't need to sell in the current climate - don't is my advice!
 

Afuera

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413
Re: Should I sell and rent for a while ?

It is not just down to financial issues there is a lot of stress involved and it does affect the whole family also - if you don't need to sell in the current climate - don't is my advice!
Fair enough, nobody said it would be easy under the current climate. It wouldn't be wise to ignore the financials completely though; the possiblity of losing another 100k in equity by staying put is not to be sneezed at. As I said before this only really applies if the OP already has plans to move out anyway. If they are happy in their current property then they should stay put. At the end of the day if they're happy there it won't make a blind bit of difference what their house is worth so long as they can afford the mortgage.
 
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lightswitch

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Re: Should I sell and rent for a while ?

I am in a similar position to the op. I have reached a point where I want to move house but am not fully decided on exactly where I want to move to, as in I like a few areas. I was thinking along the same lines as my home has also decreased in value by at least 100k. I dont see my home as an asset but it does have a financial value, which cant be ignored. IF, I can sell it, I will rent for six months to a year. LS.
 

DerKaiser

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1,442
Re: Should I sell and rent for a while ?

Not sure on this but I think Paddy Power used to take bets on the PTSB house price index. If you're out for a punt cut out the costs and hassle of moving by lobbing €50k on whichever direction you think things will go
 

eamonn123456

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483
Re: Should I sell and rent for a while ?

Yep, if you are just out for a punt, DerKaiser's suggestion makes sense.

If you need to move and are not just doing this whole thing for a punt, then that puts a very different perspective on it (as Afuera has said).

One advantage of selling now and buying later is that you would not be in a chain and therefore would have more bargaining power. If the market dropped in the interim that would be a bonus.
 
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lightswitch

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Re: Should I sell and rent for a while ?

Yes Eamonn, that is exactly the way I see it. Also get to "try before you buy" with a new area.
 

eamonn123456

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Re: Should I sell and rent for a while ?

Yep, that's a good idea, something I have done before (renting in an area before buying) and it makes a lot of sense. Just make sure you buy again before property rises again ;-)
 

camel

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Re: Should I sell and rent for a while ?

With rent you are paying the landlord's mortage with interest on a mortgage - you are paying the bank but you also get relief on your mortgage and you can decorate your house whatever way you choose you have more control - with renting the rent can be increased and it is never going to be your own home - the idea of a mortgage eventually you will own it so you will have an asset - with rent you will never have anything to gain in the longterm.
Angela59. That's all correct. That's why I put in the note 'all other things being equal'.

I just think sometimes people forget that the interest paid out every month does not contribute towards ownership of your property. It's the banks cut for providing you with money. In a similar way rent is the landlords cut for providing you with a roof. At a very basic mathematical level, compare one against the other.

By the way, in a falling property market a property could be considered a liability. not an asset.

All that being said, if I was the original poster I'd stay put. I'm buying a house myself at the moment.
 

eamonn123456

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483
Re: Should I sell and rent for a while ?

Agreed, and that is why the OP needs to identify all the costs versus the possible gains, and reduce the whole thing down to a single figure - otherwise there are too many variables flying around - and get to the bottom line. Then decide.

Right, I am going to try to stop adding to this thread, I've said my piece ;-) Up to the OP now.
 

angela59

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594
Re: Should I sell and rent for a while ?

Hi,

Your main residence shouldn't be treated as a commodity it should be treated as a home!
 

Sangster

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Re: Should I sell and rent for a while ?

Thank you all for your replies, I'm not sure that my post last night was especially clear.

My wife is very keen to move house and we have both agreed that we will move 'at some stage'. This has been a great house and our 2 sons were born here but even when we bought it we knew this was not going to be our final rung on the property ladder. So I don't have the sentimental attachment to it that I have, say to my parents house.

My logic behind the move is that if I can sell the house in a falling market, bank the cash, rent for a year or so (as long as the market continues to drop) and get back in as a cash buyer I should be able to get more house for my money.

The bottom line I suppose is that I think the market has a long way to go to before it reaches the bottom. Even when it starts to recover it won't come back to 20% growth overnight so it should be relatively easy to spot the upward trend if and when it returns.

Even if the house is now worth 600k, another 10-15% drop this year and I could be looking down the barrel of 500k offers. Selling now gives me an extra 100k(less rental expenses) for the deposit on the new place. All the other expenses I will incur when I sell the house anyway so I can't avoid them.

I don't understand the Paddy Power thing - is there somewhere I can bet that house prices are going to fall ?
 
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Camry

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Re: Should I sell and rent for a while ?

The bottom line I suppose is that I think the market has a long way to go to before it reaches the bottom. Even when it starts to recover it won't come back to 20% growth overnight so it should be relatively easy to spot the upward trend if and when it returns.
All the objective facts point glaringly in that direction.
 
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IFT

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Re: Should I sell and rent for a while ?

I think you are looking at it logically and I agree with your analysis. Whilst i agree with others that a home should not be viewed as a commodity , that has not stopped many using the equity or the 'perceived wealth' affect from borrowing more on the asset.

Its not beyond doubt that you have 'lost' money in the last year. Maybe close to 100K. That is a sizeable chunk of money.

I personally would suffer the stress of selling now to minimise any future losses. A couple of months of hassle may save you 100K more. And if you count in the hours required to sell your house, that is not a bad return.

Good Luck , whatever way you decide to go.

Thank you all for your replies, I'm not sure that my post last night was especially clear.

My wife is very keen to move house and we have both agreed that we will move 'at some stage'. This has been a great house and our 2 sons were born here but even when we bought it we knew this was not going to be our final rung on the property ladder. So I don't have the sentimental attachment to it that I have, say to my parents house.

My logic behind the move is that if I can sell the house in a falling market, bank the cash, rent for a year or so (as long as the market continues to drop) and get back in as a cash buyer I should be able to get more house for my money.

The bottom line I suppose is that I think the market has a long way to go to before it reaches the bottom. Even when it starts to recover it won't come back to 20% growth overnight so it should be relatively easy to spot the upward trend if and when it returns.

Even if the house is now worth 600k, another 10-15% drop this year and I could be looking down the barrel of 500k offers. Selling now gives me an extra 100k(less rental expenses) for the deposit on the new place. All the other expenses I will incur when I sell the house anyway so I can't avoid them.

I don't understand the Paddy Power thing - is there somewhere I can bet that house prices are going to fall ?
 

eamonn123456

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Re: Should I sell and rent for a while ?

I'm not saying you are doing the wrong thing, given that you want to move anyway. Basically it mostly depends on your confidence in your prediction that prices will continue to drop significantly, plus the additional leverage gained from not being in a chain when you decide to buy again.

However, two points arise from your last post:

1. Unless the market drops hugely, or you trade down (which I don't think you plan to) you will not be a cash buyer.

2. There is nothing easy or obvious about spotting the turning point in a market e.g. when the trend turns upwards, as you hope to do.
If you can do that, you should give up your day job.
The fact that you didn't spot / act quickly upon the turning point on the way down proves the point.

Finally, if you wait for the market to turn, there will be more people trying to buy, which may make buying more difficult and expensive.

Many people, myself included, are open to the idea of buying in a falling market, because you can often actually drive a harder bargain and have no-one else bidding against you.

It's up to you, but there is nothing simple or clear-cut about timing the decision as to when to buy.

The Warren Buffett quote in a previous post applies.
 
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DerKaiser

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1,442
Re: Should I sell and rent for a while ?

I reckon the most valid point for renting for a period is as follows:
You can drive a hard bargain on selling your old place and then buying the new place as you will be in no rush for either transaction.

A second benefit is that it doesn't look like prices are going to pick up anytime soon, so it's unlikely you'll lose by not having property exposure.

I wouldn't, however, count on making a gain. You really don't know how much your own place will fetch until you've completed the sale. What if the best offer is €550k after 6 months on the market?

Also price movements are not uniform between areas or types of house. You might find the value of the type of house you intend buying holds up pretty well over the next couple of years. An example might be that underlying demand for 3/4 bedroom houses will hold up pretty well possibly due to a backlog of people riding out the credit crunch waiting to move out of two bedroom apartments.
 

angela59

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594
Re: Should I sell and rent for a while ?

Hi,

I'd agree with the last post and I wish you the best of luck but you still have to sell your house - you seem pretty confident you will do this - there is a glut of houses out there for sale, competition is stiff, banks are not giving out mortgages like sweets any more - if you think you can beat all these negative points - fair enough. You could sell your house after 1 viewing or you might not get viewings you could be waitning for 1 year to sell your house - there are also a lot of ifs and buts - if other houses around you have sold quickly that is a good indication. As I say I've had mine for sale for quite a while with price drops and similar other houses also the same.
 
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