Home Ownership Is Completely Overrated

Reply to the comment left by "Yvonne Francis" at "20/08/2016 - 20:41":

I get all of that and whilst I doubt you will like my idea, here's I would do if I were you.

I'd sell the house and lend the million to NewCo.

I'd then borrow £2 million in NewCo to buy £3 million of rental property yielding say 10% gross, ie £300,000 a year. The profit on that after interest costs and all other expenses would be around £150,000 a year.

I could rent an incredible property, fully furnished to my taste, in an awesome location in pretty much any country for £30,000 a year. I would draw the money to pay the rent from the company tax free over the next 33 years as repayment of the million loan I'd made to the company.

I'd have three times as much value of property appreciating plus £120,000 a year of profit taxed at low rates of corporation tax.

If I needed extra money I could accelerate the repayment of the loan to the company or pay tax on dividends. As a resident of Malta I'd pay only 5% tax on any dividend income.

I'd put the shares of the company into an offshore trust for the benefit of my loved ones, registered in a tax haven for IHT purposes obviously.

Yvonne says
`` I have lived for forty years in a beautiful unique house in a wonderful parkland setting with an extensive woodland garden. Can life get better than this?``

Mark says

``I’d sell the house ( Yvonnes`s) and lend the million to NewCo.`` I’d then borrow £2 million in NewCo to buy £3 million of rental property yielding say 10% gross, ie £300,000 a year. The profit on that after interest costs and all other expenses would be around £150,000 a year.
I’d rent my dream home in pretty much any country for £30,000 a year.``

This isn`t really about making money. You both are pretty wealthy. You just want different things out of life. Some people are more nomadic than others. Some people don`t need or want roots as much as others. A dream home means different things to different people.

For me living in a rental home will by definition never be my dream home simply because i don`t own it . Its a house not a home
Roots are important to me. I`m not naturally nomadic. Some people are and thats fine.
Therefore for me my happiness factor which is more important than my wealth can never be fully fulfilled if I rent (however luxurious the house is) simply because i could be section 21`d at any time
.

Hear Hear Jonathon ha ha.
Same as me, somewhere your own, somewhere nice, your kitchen you've designed etc.

Years ago for me, it was the money, now it it's the time & happiness. Although I've still not good enough ruddy time.

Fair comments Jonathan, it's taken me a long time to realise that I'm nomadic. 13 weeks a year of holidays abroad for the last 20 years were probably the clue.

I wonder how many more people there are like me who are homeowners because that's what society tells them is "normal".

It is breaking free of "normal" which has made me happier than I ever though possible, like a caged wild animal having been set free.

Reply to the comment left by "Mark Alexander" at "21/08/2016 - 08:28":

I think there would be a healthy split. Property Investors are probably better placed than many to work out what type of personality they are ( nomad or home bod) by the nature of our `job`.
We are financially fortunate in that we can experiment if we like by investing in a property, going and try living there but if it doesn't work out just rent it out and nothing is really lost. The majority of the population do not have that luxury. To them it would be a massive gamble to sell up their main residential home and rent or vice versa. Once done it would hard to go back. You must I guess have been very confident of your Malta choice as if there had been any doubt you could have rented your Norfolk pad out for 6 mths just in case you became homesick and wanted to return. Hats off . It was a big leap of faith which takes courage

I have a much better place than the place i live in only a mile away from me . Lovely views, bit of land etc . Fell in love with it in 2007 . The plan was to rent it out for a bit then build a decent extension , move there and absorb the tranquility of it all and all that it offers. I never got around to it though. It was a loss leader yield wise all that time. The tenant has just left though after 9 years and i could move there tomorrow if i want to. I went up there had a mooch around, sat in the garden toyed with the idea but eventually said Nah I like where i am

.Because I kinda like my tired old place with its 1980`s decor and the way its set out internally with every nook and cranny serving a purpose. The familiarity gives comfort to me. Family and friends are situated near by and the shops are close but not too close and the river walk is a few hundred yards away with my own `contemplating about life` spot when i walk the dog. I like that.

Like Yvonnes unique woodland oasis mine is unique to me for a variety of different and sometimes seemingly irrational reasons. I accept it would not be unique to anyone else though . If they ever moved in ( over my dead body) that orange wallpaper would just have to go!.

I am 100% with you on decluttering though. I have done that recently and the joy that brings me is immense.

So the question maybe now is why are some people nomadic and some people just home bods?
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THREAD DRIFT ALERT

The prospect of a Section 21 notice being served has now been cited in this thread by several landlords as their main reason for tenant insecurity.

I have served them myself, as many landlords have. However,I have only done so because the alternative section 8 and associated legal process in England and Wales is so damn useless. How many good landlords commenting here have actually served section 21 on a good tenant who respect the property they live in, respects their neighbours and pays their rent on time?

Outside of England and Wales, there is no such thing as a section 21 notice. They don't even exist in Scotland these days!

If the threat of no fault eviction is such an emotive issue for landlords, how must tenants feel about them?

If my tenants raise section 21 as a concern I offer them a Deed of Assurance. In an ideal world, where A And English or Welsh tenant could take possession easily for a defaulting tenant, why would section 21 even need to exist?

Take a look at the new tenancy rules in Scotland, they are much better. Here in Malta a landlord can take possession within 7 days if a tenant defaults. That doesn't worry me as a tenant because I'm not planning on defaulting, and if I do then it should not be up to my landlord to accommodate me should it?

On the flipside, here in Malta I can have a five year tenancy but walk away at any point and pay only a months rent (or any other anount by pre-tenancy agreement) to the landlord as compensation for early surrender. Now isn't that fairer?

Reply to the comment left by "Jonathan Clarke" at "21/08/2016 - 09:23":

Hi Jonathan

Back to the original thread.

When I first wrote this blog it was a follow up to one I'd written as a strategy for frustrated first time buyers. Our son falls into that category.

I appreciate that a complete lifestyle change for a person of my age is inconceivable for most people. It was never my intention to motivate my peer group to follow my lead, more to point out that it is OK to challenge what is considered to be "normal" and to think hard about what our kids and their kids might Do to secure their own futures.

What's surprised me is the number of people who have contacted me offline due to feeling much as I did and being motivated by the details I've shared about what I've done about it. There may well be quite a large Property118 ex-pat community here in Malta in a year or two. I have already found three other British couples here who were way ahead of the thinking of my wife and I. They've been living here in rented properties and living off UK rental income for years.

Returning to the discussion about mindset, when my parents purchased their first home in the early 1970's the rest of my family looked upon their decision as being as incredibly radical, high risk and a bit weird. They couldn't get their heads around it at all. I suspect, for them, the general reactions they witnessed were much the same as those of many people who are analysing the decisions of my wife and I now.

My family all rented houses from the Council until Maggie T convinced them otherwise. And that came a decade after my parents purchased theirs.

When I first got into BTL in 1989 and stated my goal to be £1 million in debt secured against rental property that was so radical that it took a further seven years for phrase "BTL mortgage" to be invented!

So maybe being nomadic isn't what this is all about, maybe it has something to do with evolving mindsets too?

Just to look at this from another angle - if I won £1 million on the lottery would I say to my children.......I have just spent the whole amount on a house for me to live in - you can all share in my good fortune when I die?

Reply to the comment left by "Mark Alexander" at "20/08/2016 - 23:21":

Hi Mark

Thank you for your valuable advice. However i could not avail myself of such advice as i'm far too elderly and arthritic to even begin moving let alone buying more property.

What i would question is what happened to the idea you took loans out on your own house.
I bought, like your parents my first property in 1970. i bought a derelict cottage from a small inheritance, passed on to me on condition I worked in and turned around my deceased fathers bankrupt business. This cottage within 18 months was worth three times i had paid for it without lifting a finger. I gradually renovated it and lived in it until I bought my present house. By hard work I tuned my fathers business around and dumped it in favour of a clothes business I was developing. I was very successful. I got loans at a nod and a wink at Barclays Bank. I gave up this business for personal reasons in 1980 but during my business years I took loans in the form of overdrafts to buy commercial properties we were using. I took the loans in January and had paid them back by Christmas. I was female, five foot nothing, looked like a teenager but bank managers fell at my feet. I went with my shop takings in one hand (metaphorically speaking) and even more importantly the deeds of my cottage. Those deeds unlocked doors with ever increasing value (up 3 times in 18 months). Gradually after 1980 my commercial properties were sold and reinvested into residential properties. These home deeds were the making of me.

i could tomorrow live in France. I have an even bigger and fascinating property with even more land which i have owned for 25 years. But I feel like death there.

I have always realised that the capital i have tied up in my present home which really is the nub of your argument is probably more than it should be. But I have a very good income and actually worry over what i do with my money rather than obtain it or heaven forbid any more.

i envy you in your conviction but there are other things going on in my brain to work to my advantage. My home is just out side Bicester. Bicester is the hot spot for housing development. Its at the hub of the M40 junction to Europe and a development town to keep development from the historic town of Oxford. A new development the size of a small town is a stones throw away from me with an Eco town planned nearby. Perhaps my two acres garden will yield the fortune you think i could make, by simply doing nothing and in the waiting enjoy!

Reply to the comment left by "Yvonne Francis" at "21/08/2016 - 21:14":

You have clearly been very shrewd to put yourself into such an enviable position Yvonne, congratulations.

My wife and I might want to settle down a bit by the time we get to our parents age too. Meanwhile, we are still trying to be as shrewd as you have obviously been, so that when we get to that stage in our lives money will be the least of our worries too, albeit via a different route and strategy. We are very comfortable financially now and we would like to think our strategy will allow us to continue to live a comfortable lifestyle for the rest of our lives.

If you were mid to late 40's now, with everything you have and everything you own at the moment, what might you do differently?