Are We Being Too Clever For Our Own Good When We Deposit All Our Capital Into Our Properties ?
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 generates account for a massive 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 gain in the property price. But is it therefore so 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 “Well , no it isn’t”. Heresy, I hear you cry but please hear me out.
I am overly invested in the property market in the UK. Well if you call two flats , a bungalow , all rented out, and a semi detached house which I actually live in , heavily invested then that’s me. All of the properties have loans against them and currently all but the one I live in are let out. Aside from a miniscule 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 so many 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 get income from the rental units
It sounds like a great plan doesn’t it? But in the real world it has a potentially fatal flaw. I am hopelessly over exposed to the present state of the housing market at any time. If there is a true housing price crunch then all my capital and equity in the rented properties could be wiped out forcing me to Sell My House in order to finance the rented out properties, if there are extensive 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 ensuring long term profit.
It has been a bit traditional that when We Buy Houses in the UK , we expect them to be sound investments that will increase in value in the medium term and even produce rather spectacular gains all leveraged by finance , usually in the form of a financial product 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 finance rates – and this is encouraged by generous discounts or fixed rates from outwardly caring financial institutions who claim to have our welfare at heart.
Pretty rarely do we give a thought to the flip side in that we have invested all the capital we have into a market that we cannot control and have leveraged the purchase with cash from institutions that , in spite of their happy friendly TV advertising, have hearts as black as jet[/spin] and managements that would boil down 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 disconnected 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 move on at will and save money .
But that’s just playing the devils’ advocate here. Or is it?