The countrys’ desire to own ones’ own home is a major driver behind the country’s economy , of that there is no doubt. Property generally accounts for an extraordinary segment of the country’s wealth and the industries that it spawns off account for a huge proportion of the country’s economy. It looks to ber only reasonable that We Buy Houses as more than just dwellings, normally taking into account that We Buy Homes with an eye to a future improvement in the property price. But is it therefore entirely natural that we should be quite so heavily invested in the UK housing market on a personal level?
Well I shall play devils advocate here and say “Actually , no it isn’t”. Heresy, I hear you shout but please hear me out.
I am overly invested in the property market in the UK. Well if you call four flats , a cottage , all rented out, and a semi detached house which I actually live in , heavily invested then that’s me. All of the properties have finance against them and currently all but the one I live in are let out. Aside from a tiny pension fund the whole lot represents my entire capital within the UK at the moment and, unless I win a massive sum on the premium bonds, (an unlikely event as rates have gone down and I don’t have more than a few bonds) , then that’s probably all I will have to rely on for my retirement. The situation I envisaged was that I would Sell My House as I approached retirement and downgrade thus releasing some money from my residential home, and then continue to obtain income from the rental properties
It sounds like a great plan doesn’t it? But in a real situation it has a possibly fatal flaw. I am hopelessly over exposed to the current state of the housing market at any time. If there is a massive housing price crunch then all my capital and equity in the rented properties may be wiped out forcing me to Sell My House in order to finance the rented out properties, if there are sizeable periods when they are not tenanted. A hike in interest rates could finish me off altogether . If I had invested in a different number of products then I would be in a position to rent accommodation of my choice secure in the knowledge that all my eggs are not in one basket and that if one sector take a nose dive, another may well come good thus securing long term profit.
It has been a bit traditional that when We Buy Houses in the UK , we expect them to be solid investments that will increase in value in the medium term and even produce quite spectacular gains all leveraged by finance , usually in the form of a mortgage from a bank or building society. But when We Buy Homes with finance it’s almost always a given that we take a short term view of the interest rates – and this is encouraged by overly generous discounts or fixed rates from seemingly caring financial institutions who claim to have our interests at heart.
Pretty rarely do we give a thought to the downside in that we have invested everything we have into a market that we are unable to control and have leveraged the purchase with cash from institutions that , in contrast to their smiling friendly TV advertising, have hearts as black as jet[/spin] and managements that would pickle their own aunties if they thought they could sell them in jars at a profit.
No there has to be a better way, a different way. Given my time over I certainly would not have invested all my available money into high value items that are difficult to shift on the down times. I would have divorced my needs for housing from my investments strategies and maybe had a small investment in a single rental unit and put the rest into stocks, bonds, gold, commodities, well whatever the smart money was doing at the time.
And I would have rented a property rather than buying one as when the bad times came , I would have been able to up sticks and move at will and save hard earned money .
But that’s just playing the devils’ advocate here. Or is it?
Tags: home, homes, houses, property, Real Estate