Philosophy John on 06 Jan 2009 03:51 pm
Never Sell A House
I’m quite different from most property investors, well most people for that matter, as I get excited when property prices fall, because, to me, falling property prices is great news. Many people find that odd, after all I own a few properties - surely I’ll be losing a lot of money? Well yes you could argue I’ve lost money when the property prices fall, but my personal financial philosophy is that a house is a business/asset (in that it is capable of producing a cash flow) and as such that I plan never to sell a house - at least not one that is capable of producing a positive cash flow, which should be all of them if I’ve done my due diligence before buying.
My “never sell a house” approach applies to my own homes too, when buying a house (as a home) I consider not just it’s suitability for my family, but also the potential to rent it out in future/when we move on. Again the reasons are relatively simple, if we sell the house we’ll almost certainly end up doing so through an agent (we don’t have time to sell privately) which will cost between 1% and 2% of the price achieved, we’ll also probably have to pay a fee to close the mortgage (probably a couple of hundred pounds). In return we’ll get a pot of capital (our equity) to invest elsewhere, or to use as a deposit on the next house.
If instead however we kept the house (assuming we’d brought with consideration to the rental possibilities) we could rent it out and receive an income from the property. Admittedly the income is likely to be relatively small initially, but it will grow over time as rents rise and in the long term property prices are also likely to rise, so any capital gain is likely to increase. In short if you don’t need the deposit for your next home, then I believe you should never sell your house. Instead rent it out.
