Real Estate: Sell your house

Today's Financial News - Posted January 9, 2008

"Selling to rent has made some financial sense for some years now in cash flow terms… But now that the chances of making a capital gain on owning a house look pretty low, it seems to make more sense than ever." — Merryn Somerset Webb.

Blogger's note: Money Week editor Merryn Somerset Webb wrote this article as part of her free weekly personal finance series Money Sense. She makes some very good points about the current real estate market, whether you're in London, New York or Boise, Idaho. And I thought you'd appreciate a look. You can find the entire article here or read on for more.

by Merryn Somerset Webb, Money Week

Baltimore and London – (TFN): We’ve heard that 41% of people paid for some part of Christmas on their credit cards, that more people than ever before will go bankrupt this year, that repossessions are likely to keep rising all year, that mortgage rates are going to keep going up even as base rates fall, and that the average person only has enough cash to last 12 short days should they leave their jobs.

Hot on the heels of this has come a plethora of articles telling us what to do about it. Anyone who doesn’t know how to consolidate their loans, find an interest free credit card, cut their utility payments, create a budget spreadsheet (you can download one here) and get a cheaper mortgage by now clearly hasn’t been listening to the personal finance experts properly or spending enough time on the Moneyweek website.

But reading – and writing - all these money makeover articles this month, I’ve been beginning to wonder if for many people the best way to survive the credit crunch and free up a lot of cash in a hurry might be to stop bothering with financial micro managing, dump their mortgages altogether and rent somewhere to live instead.

Real Estate: To rent or to buy

Selling to rent (STR as it is now known) has made some financial sense for some years now in cash flow terms – i.e. rents have been generally cheaper than mortgage payments on most properties. But now that the chances of making a capital gain on owning a house (the only reason to have bought over the last 3 years) look pretty low, it seems to make more sense than ever.

Have a look at Primelocation.com (or Realtor.com in the U.S.). Here you can see the rental and sale prices of hundreds of thousands of houses. It makes for very interesting reading. One example sent in by a reader from Wales makes the point very clearly. He points to a nice looking ‘executive’ four-bedroom house with views over fields to the rear and close proximity to several excellent schools. It is both for sale and for rent. The sale price is £315,000 (at least 12 times the local average wage). Read on here to learn why you should sell your house and rent instead of buy.

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