Letting / Tax query...

Sure, but if I bought that same house for only £100k down then I'd have a tidy net profit of £1m after only ten years. That's, oohhhh,

1000% return on capital invested. With considerably less risk than buying a greenfield site in the hope of rezoning, or putting £1m into Gartmore.

(I'd have moved to NZ by then to retire on my CGT-free profit....)

Shano

That is exactly the same as putting your money on red or black on a roulette table, the result goes one of two ways. You think houses are risk free, my generation used to think that until we saw the damage house price crashes can do.

Surely we are *near* or *at* or *just past* the peak in this crazy house price cycle, how can you possibly advise anyone who is able to sell a property and realise most of that gain to "take a long term view", "hang on to it for ten years" or whatever it was you advised the OP?

"Troy Steadman" wrote

"Exactly" ??!

You'd expect the roulette table to be set so that the probablity of red is

50% & probability of black is 50% (ignoring the green zeroes). However, due to the nature of house price inflation (see below), the relevant probabilities for house prices are greater than 50% chance of going up, and less than 50% of going down!!

"Troy Steadman" wrote

As we've decided that wage inflation exceeds general price inflation (eg RPI), and that house prices are inextricably linked to wages - then we are deciding that in the long-term houses do in fact increase (on average over time) at a greater rate than other general price increases.

"Troy Steadman" wrote

People have been saying that throughout the past three years or so!

In message , Troy Steadman writes

Crashes only cause damage if you cant afford to wait until they have ended.

If you can afford to keep paying your loan, then you can ignore the crash completely.

All a crash does is to make selling your house difficult, (or impossible).

Same thing with a stock market crash. If everyone who sold and took the loss in the late '80's had waited, they would be well above where they were at the time.

Errm no the exact opposite is true, if we are at a high point in a cycle (which I'm sure you don't dispute, quibble if you may whether we are at the *highest*) the probability is that it will go down.

Luckily for you Tim I don't think house price risea are linked to wages, I think they are linked to immigration, undocumented wealthy people arriving from abroad being being prepared to squeeze more tightly into properties.

It is the "gearing" that people like Shano are building into their calculations that worries me. He's thinking (he will no doubt correct me):

"If I put £100K down on a £1M house and it goes up 5% a year and I cover all my outgoings I make £50K+ a year and get my deposit back in

2 years"

I'd be thinking:

"If I put £100K down on a £1M house and it goes down 5% a year I'm losing £50K a year and my entire life will be totally @&*cked!".

:)

Complete nonsense Richard. Take the last boom, everyone thought dotcom companies would go on rising forever, their "price/hope" fractions were admired and anyone who was sensible sunk their money into them and made a fortune. But the only way to *realise* a fortune is to cash in your chips every now and then.

In 1999 we sold our BT, BP and Cable and Wireless shares in the middle of the dotcom boom to buy a house. BT & C&W went up 50% in the following year and we were mortified. Now they trade at 10-20% of what we sold them for.

Were we right to sell or wrong to sell?

If you think that is a possibility, then you buy through an entity (like a limited company or an IoM LLC) that can be abandoned. Or if you can't get a non-status mortgage that way, through somebody who is judgment proof.

Bankruptcy, or an insolvent estate, writes off your debt and your heirs collect all the assets from your offshore trust fund. Tax free, if you arrange your affairs and your domicile correctly...