Pwoperdee Advice

Situation as follows.

- First-time buyer.

- Married, no kids, renting in London.

- ~£50k for deposit.

- Very possibly leaving the country to live overseas (far lower tax jurisdiction) next year. Would stay abroad for at least 2 years and more likely for 5+

- Were planning to buy in burbs before overseas move became realistic prospect.

Do we:

(1) buy in burbs and hope we can rent it out for enough to cover mortgage.

(2) Buy flat in best bit of London we can afford and rent that out while we are away.

(3) Keep the cash for now and keep saving so when we do come back to UK we have a hopefully far bigger wedge (would expect to be able to have savings of at least £100k in 5 more years)?

Shower me with your opinions. 

Wouldn't be buying until Brexit is sorted one way or another.  

I had thought of that Blue, but prices have already come down a bit in London and are pretty attractive now. Would expect value of anything we buy now to have risen in 6 years (one more here and at least 5 overseas). 

Not that arsed about making money off the property to be honest. 

Are you buying as an investment or as somewhere to live (or if both, which is more important)?

Well if you are determined to buy then I would suggest as close to central London as you can get. There will always be demand close to town but the 'burbs is less certain.  

Not absolutely determined to buy. Do wonder if there is anywhere else to stick the money without losing money to inflation though. 

You can at least reduce the loss with a fixed income/term account.  

What about buying overseas?

Congratulations on being appointed Chief Magistrate of St Helena. cool

 

Thanks Marshall Hall. I will keep those uppity locals in their place. 

Blue Iguana, honestly, because I am a bit scared of doing so. If move works out well we are not against staying forever or at least until retirement in principle. I think we would wait until first 5 years are up before buying overseas.

Is putting all the cash in a stocks and shares ISA a stupid idea? I expect that to always be a good bet long term (e.g. over any given 10 years you will be up), but obviously there may be times when it is down and if you need the cash desperately at such a time then you could be fucked.

 

You need to do your sums carefully and factor in the fact you'll need to pay someone to manage it as you won't be able to nip round with a plumber if there's a leak.  Given London rental yields you may be looking at a small loss every year by the time you've paid the mortgage and the agents and period redecorating, etc.

If you're not UK resident then you're not entitled to an ISA so put your cash in before you go.  I'd go for cash or binds rather than shares ISA if you don't want the risk.  

HD charge 10% + VAT for fully managed service but you need to pay for repairs and suchlike yourself (they will organise it).  

The big advantage is that if you're not a UK resident then your rental income will be taxed at the bottom of your earnings (assuming no other UK income) rather than on top of your salary, etc., and you get all your allowances.  I would say worth renting out UK property only works financially if you are a non-resident. 

Hiuse in commutable burbs you might want to live in once back ( maybe with kids?) wouldnt worry about schools yet though.

Yields are shit in London, especially with the tax relief changes, plus house prices are only going one direction. That's before you even start on stamp duty.

You might as well stick that £50K in some kind of investment vehicle and get a 3-5% return without any of the hassle.

oh and £50k? are you buying a house or a modest watch [/rof]

@Zero Gravitas, a place to live. If we moved back ahead of schedule we would live in it. 

Would only rent it out to avoid having to pay a full mortgage AND rent in new place. 

Great points about repairs and other costs and tax status.

In principle, not against having to pay a small amount more than rental income, we would just think of this as money we have "saved" as ultimately the mortgage is getting paid off and we are gaining equity slowly but surely. 

Does sound as if keeping the money is the best bet for now though. 

If you cease to be a UK tax resident, what happens to money already in the ISA? Does interest just stop becoming tax free i.e. it essentially ceases to be an ISA?

Stays in the ISA, if you take it out it's out, and you cannot put more in.  

If it's a buy to let mortgage it's most likely to be interest only so you won't be gaining equity.

Remember you would still need to cover voids, which are more likely in a random suburb in Zone 6 that a fashionable part of Zone 2.  

Yes, I would rather own a house in the burbs, but am worried that rental income and voids would mean we would be quite likely to lose a lot of money as it would not pay its way. 

Hmmm. Okay, think the most sensible thing to do is to put into an investment of some sort. 

@Wellers, the most expensive watch I own is a Casio. Truly pathetic I know. I don't even stand to inherit one. Tut tut at me. 

I’d keep the money in cash. Not worth risking in equity all in one go right now might need it in the next five years. 

Failing that, if you buy a house in a good location that isn’t an overstretch on the mortgage and in which you could reasonably likely still live if it all came crashing down the go for it, but probably only in those circs. £50k probably isn’t enough to do that.

*if you might need it

also to add, this isn’t money you can afford to lose so be careful what you put it into. 

Half in premium bonds.

Rest on Tyrell Hatton to win The Open @ 130-1

Receiving  income from property whilst being tax resident in another (low) tax jurisdiction can be a right pain in the arse; not only does it unncessarily keep you in HMRC's spotlight, you may get taxed on the all or a good part of the income in both jurisdictions.

Good job I'm in a tax free jurisdiction then!  I think the OP said she's off to a low tax jurisdiction as well. 

 

 

I am thinking of doing similar except my deposit is about £80k. Also I am almost certainly going to Hong Kong or ahanghai (for various reasons). I assumed buying here then ducking off for a bit was a sensible idea but people here seem to think it’s a bad move?

 

what other investments would be more sensible? Say if you were assuming you would be away for five to seven years?

I'd sock it away in a stocks and shares ISA to make the most of your allowance, since you seem to have no particular utility for the property now and your wants/means in 3-6 years are likely to be substantially different (which would then mean transaction costs on trading out of the old house and into the new one, having squandered your first time buyer discount on stamp duty). 

With 50k banked, you can spread that easily between your and your wife's allowances (assuming you stay here into the 2020/21 tax year) with room to add more as you save. Even if you can't add to it while you're away, if you're somewhere like Singapore or Hong Kong (guesses as low-but-not-no-tax jurisdictions popular with lawyers), neither taxes investment income so you can build up a war chest overseas and not worry about the tax on your ISA either.

As an added bonus, if the £ tanks further after Brexit, your foreign savings will be worth a lot more in the UK property market, and your ISA holdings will probably have done well out of it due to the majority non-£ revenue of most diversified portfolios meaning that the £ value of their shares should increase in that scenario. 

Of course, Brexit could be a huge success and the pound and London property prices could appreciate, which would invalidate my assumptions, but I don't really think that likely. The bigger risk is that geopolitical shenanigans fuck everything, in which case both proposed asset classes do poorly. At least ISA assets are liquid and easier to get out of if you need cash or the market is turning.

For providers, Plum looks pretty good (I have only used their automated savings product, which I like, and the all-in fees on their ISAs are dirt cheap). I use Nutmeg for access to a LISA and the attendant government bonus, but you're probably going to exceed the £450k price ceiling that would make that worthwhile. The closest analogs to Nutmeg would be Moneyfarm or Wealthify, but if you don't need a LISA and want a little more flexibility than Plum I'd probably go straight to Vanguard, who have an ISA wrapper of their own plus notoriously low fund fees. 

Make a £50k contribution to a SIPP if you are a higher rate taxpayer and have carry forward allowances available. You'll then get £10k back through your tax return so it only cost you £50k, have £62,500 in your pension anyway even if you get zero growth, can invest in the same things as you'd have a stocks and share ISA in, and will probably make enough cash back to never need to worry about funding a deposit when you get back if it is a tax free jurisdiction. 

I recommend not putting your money into stuff like Nutmeg where they take a big chunk of your cash to put it in a crappy Blackrock fund. Vanguard is a better idea, or just an ETF through a platform that doesn't charge for holding shares other than the trading cost. 

So you guys are suggesting he put his entire savings he might need in the next five years into a stocks and shares isa (and, I note, in fact a pension in one case too)?

When compared to illiquid property that he has no practical need for in an uncertain London property market, sure! I'd still keep a decent cash buffer though (I'm about 20% with less money overall, but will taper that down as my assets grow because I just don't have that much of a cash need).

I agree that trying to max out pension contributions isn't the thing to do either at this point, although possibly a good thing to do with excess cash on his return from overseas.