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Put 200k in stocks or London property?

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returningstowaway
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Put 200k in stocks or London property?

#95369

Postby returningstowaway » November 13th, 2017, 3:51 pm

Hi guys. New posting, but not lurking :lol: :lol:
After a years in Asia, I'm back in London with nearly £200k in savings, mainly cash. Given London prices, not sure I can afford something somewhere I would like. Now I have thought of putting it all in stocks and living on dividends. (Not living, naturally, but paying rent from it. :oops: ) How should I decide the best course of action?

Trying to see if I'm missing something. Great to have a discussion about it and be schooled :) Thanks.

Alaric
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Re: Put 200k in stocks or London property?

#95373

Postby Alaric » November 13th, 2017, 3:57 pm

returningstowaway wrote:How should I decide the best course of action?


You have a choice of spending £ 200,000 on a property or having a budget of perhaps £ 8,000 to spend on rent (assuming a 4% yield/withdrawal rate). I doubt either is enough on its own to finance living in London.

returningstowaway
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Re: Put 200k in stocks or London property?

#95383

Postby returningstowaway » November 13th, 2017, 4:31 pm

Alaric, yes. For property I'd have to get a mortgage, maybe 150k if I can. So I'd be paying mortgage instead of rent.

Clitheroekid
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Re: Put 200k in stocks or London property?

#95485

Postby Clitheroekid » November 13th, 2017, 11:18 pm

Even for £350k you won't get much for your money in London - a crap property in a decent area or a decent property in a crap area!

The general consensus (FWIW) is that London prices have not only peaked, but are likely to fall. Mind you, the same could be said of the stock markets - it would be a brave man to invest £200k when the UK and US markets are virtually at an all time high.

Do you really have to live in London? If not, prices get a lot more reasonable outside and may well be more stable - and who knows, you may also find it's a much more pleasant place to live ;)

FredBloggs
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Re: Put 200k in stocks or London property?

#95499

Postby FredBloggs » November 14th, 2017, 12:35 am

Even in Manchester, it is getting more difficult to find a good city centre two bed apartment within a GBP 200k budget in a good area. I guess in London GBP 200k buys a parking space? Manchester has been/is being transformed and is widely tipped as "the new London". Perhaps not an entirely good thing, Manchester, IMHO, is a far nicer place to live.

arty
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Re: Put 200k in stocks or London property?

#112759

Postby arty » January 23rd, 2018, 11:07 am

If I can piggyback on this thread - I have an almost inverse situation, but with many similar questions at play.
I'm moving to Asia, currently have a flat in South London, easily rentable.
Not sure how I'll be away, but likely a good few years.
Can't decide whether to sell up, put the proceeds into a basket of REITs or other property linked investments, or rent.
Main aims are to take some income and have enough upon return to buy a similar property (obviously no need if I rent the place). During previous periods abroad I've rented the flat, and it's been, at times, a monumental pain in the proverbial. So I'm keen to avoid a lot of hassle, for the capital to remain broadly in line with UK residential property, and to receive an income in the meantime.
Any words of wisdom from the board?
Any of you have long/medium term experience with REITs? How well do they track residential property in reality?
How much of a hemmering did income take during the financial crisis?

I guess the average yield is slightly lower than the rent I'd receive if I kept the flat, but offset against the reduction in hassle and the fact that I'd lose a chunk of the rental income to agents and would need to keep a fair portion in reserve to cover maintenance/voids.
Any suggestions for ITs or other investments that track residential property, as most I've looked at seem to be commercial property?

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Re: Put 200k in stocks or London property?

#113163

Postby tieresias » January 25th, 2018, 12:47 am

@arty Assuming you can rent the flat out at a profit, net of mortgage, agent's fees, etc., and presumably you will be working in Asia and therefore have an income (?), then why not rent out the flat, so you at least keep your position in the UK housing market and hopefully have some income from that, and then in parallel put your savings into a general stock market tracker (or whatever non-property-specific equity investment floats your boat)?

During the financial crisis, reports from the Motley Fool boards were that equity income took rather less of a hammering than capital values and recovered rather more quickly.

arty
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Re: Put 200k in stocks or London property?

#113192

Postby arty » January 25th, 2018, 8:24 am

Thanks.
I hope to be working part time, but limiting it as much as I can, so will need some income.

RE income vs capital during the crisis - I was referring specifically to REITs rather than the wider market - and I wouldn't be too worried about capital value if they were, at least loosely, tracking residential property, as any losses would be offset by drops in house prices so repurchasing somewhere should be OK.

There's no mortgage, so definitely some income, but in my area house prices seem to have skyrocketed to a greater extent than rents in recent years, and looking at the likely sale/rental prices, it seems I'd get a significantly better income even with REITS on yields of 3.5%, and many seem to be paying significantly more than that. But if the capital values didn't keep up with local residential property I'd risk having to move back to a worse flat or worse area.
Maybe I'm being too conservative with the income allocated (mentally) to estate agents, building management agents, maintenance and set-aside for void periods, but it's so hard to judge these things when it's just the one flat.

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Re: Put 200k in stocks or London property?

#114624

Postby DiamondEcho » January 31st, 2018, 5:21 pm

arty wrote:If I can piggyback on this thread - I have an almost inverse situation, but with many similar questions at play. I'm moving to Asia, currently have a flat in South London, easily rentable. Not sure how I'll be away, but likely a good few years.


When you head off on an expat relo it can be hard to predict. Maybe you'll do your expected stint and return, maybe you'll later get x-posted to another country, or do as I did and expat>/x-post and/or return, over and over, for 25+ years. My point is that people who get up and expat don't seem to only do it once, it becomes a lifestyle, with apparent perpetual opportunity ahead. Then you 'marry local', perhaps buy a place abroad, start a family etc. The first posting is often the start of a very long journey, even if the individual has no sense of that possibility the time (IME).
I know several people who've gone to do one 'expat tour' and never returned home, from a former US Army pilot who started out being conscripted to Vietnam who is still living in Asia, to a Brit who runs an underwater photo/filming agency in SE Asia.
So my point is it's very difficult to know how long you will be away, especially if you start out open-minded, with no absolutely clear duration when you HAVE to be back home.

arty wrote:Can't decide whether to sell up, put the proceeds into a basket of REITs or other property linked investments, or rent.
Main aims are to take some income and have enough upon return to buy a similar property (obviously no need if I rent the place). During previous periods abroad I've rented the flat, and it's been, at times, a monumental pain in the proverbial. So I'm keen to avoid a lot of hassle, for the capital to remain broadly in line with UK residential property, and to receive an income in the meantime. Any words of wisdom from the board?


This is a very difficult question. If you keep your home and rent it out you really need to have an agent you can trust, or it might end up a nightmare from start to finish. I started with a great agent that I knew well and trusted, and that went well for years. Then they got bought out by a firm of absolute rogues (with a 'respectable' high profile name) and it's been almost open warfare ever since. It's very hard to fight such wars from the other side of the world. Especially if you are holding down a demanding day-job.
Of the 3 times I've left London homes to work abroad, on each occasion I've kept and let the flats. There is some attraction in having 'your old home' to return to; and there are also CGT benefits to expatting, and later returning full time to your former home.
On the flip-side, you and your life will possibly quite dramatically change as a result of expatting, so your former home may no longer suit your future needs at all. Do you then sell up and buy elsewhere, buy elsewhere and keep your former home and become an 'accidental landlord' for the longer term...?

arty wrote:Any of you have long/medium term experience with REITs? How well do they track residential property in reality? How much of a hemmering did income take during the financial crisis? I guess the average yield is slightly lower than the rent I'd receive if I kept the flat, but offset against the reduction in hassle and the fact that I'd lose a chunk of the rental income to agents and would need to keep a fair portion in reserve to cover maintenance/voids. Any suggestions for ITs or other investments that track residential property, as most I've looked at seem to be commercial property?


Can't help you with this piece, never owned REIT's; used to own Berkeley Homes shares but prop shares seem in part a ride on the economy/strength of govt/planning law and so on, so perhaps not usefully related to the tracking the value of one's own home?

returningstowaway
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Re: Put 200k in stocks or London property?

#116915

Postby returningstowaway » February 9th, 2018, 3:23 pm

Jumping back in.

arty, spent some time in that part of the world. i can say that most people i met in similar positions to you had kept their "home" flat. downside - there's a loss in flexibility, because you're "tied" to the UK
upside - you're not taking as much of a risk in the early years. let's say you dislike it, then you can come back easily and pick up your old life.

diamondecho makes some good points. expat life is unpredictable, and people approach it differently.

why not try it for a year or two? if you spend some time looking for a good lettings agent, it can be worthwhile. if it's not working, you can come back for 3 months and sell up.


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