Saturday, 24 May 2014

Our Previous House is Sold !

Yesterday we finally exchanged contracts on the sale of our previous home, after it being on-and-off the market for the last three years, so I suppose some sort of celebration is in order - or is it ?

The buyers first viewed the property on 22 February, so it will have been a fourteen-week long process from start to finish, i.e. at completion next Friday....

Even though the market has supposedly been rising recently, we eventually agreed to sell it for only 81% of what we paid at the top of the market in the summer of 2006 (you'll already have guessed that this house isn't in London if we're selling for a much lower price than eight years ago !).    We'd had previous offers, but they were generally very speculative and derisory and we weren't distressed sellers, we always had a positive equity-to-loan value even at the depths of the fall, and so were prepared to hold out until we could get what we thought was a reasonable price.

I suppose we could always have rented it out in the three years since we bought our current house, but I've already been there & done that many years ago on another property, and this time around I simply didn't want the hassle involved.  It's maybe fine if you've several rental properties and run them as a part-time business, but it would just have been a millstone around my neck - I've already all the interesting and stimulating work I want without having to put up with additional boring shit like domestic property management.  

And to put it into perspective, and in monetary terms rather than in terms of percentages-of-capital-employed etc, in just a couple of good weeks at the office I can probably make the same return as would be possible from renting out the house for a whole year.

So, after paying off the outstanding mortgage, solicitor's and agent's fees etc, we'll walk away with a lump-sum equal to around 33% of the selling price, which will certainly help to bolster the finances.  And even after losing 19% of its original purchase value, if we'd paid rent on a similar house for the last eight years then we'd likely still be ahead of the game if we added everything up - it's only really the mortgage and maintenance payments we would have saved by renting, all the other major bills would still have needed to be paid.

However, I still can't help wondering if we did the right thing by selling now, and not waiting for a major housing recovery several years hence which is bound to come along eventually, even this far north....  

So I've been trying to weigh up the pros and cons of getting rid of the house now.

On the positive side...
  • the lower property values over the last six years or so also enabled us to snap-up our current house three years ago for a much lower price than would have been possible before the crisis
  • we'd been fortunate that our mortgage interest rate remained very low for a long time, but I don't think this will continue long into the future, which would mean that our expenses to keep the house could have risen considerably.
  • I'm absolutely and totally debt-free, for the very first time in my adult life - I've been paying a mortgage on some property or other since I was 21
  • the house sale gives me a lump-sum to add to the savings pot
  • it also frees-up a substantial monthly sum to add to the savings pot going forward, comprising the combined value of the previous mortgage, council tax, water rates, gas & electricity bills, insurance, maintenance etc
  • it's a major relief to be free of the worry of the upkeep of a second property with cleaning, mowing the lawns, tending the gardens etc
  • on a similar theme, I've previously worked abroad for very long stretches and I still hope to get at least one more major role in a multi-billion dollar overseas project under my belt, when a particular industry sector recovers a little, and so the absence of a second property will give us one less thing to worry about when we're away
  • the significantly-reduced total monthly outgoings also reduces the need in the future to work so much  (although I don't particularly want to reduce my average annual workload, at least not just yet - I already have a lifestyle I enjoy which very much includes working, but much more on my own terms these days)
  • therefore, it's one significant step closer to financial independence

On the negative side....
  • we exchanged a tangible and physical asset, the future value of which will always be determined by whatever someone is prepared to pay, for a wad of cash, the future value of which will be set by the policy of the government of the day
  • it was a useful pied-a-terre in the largest market town in this neck of the woods - handy for staying overnight for theatre trips etc, although we didn't use it very often
  • I'll never again have the opportunity to borrow large sums of money at such low interest rates as have prevailed for the last six years

However, I think it was the right time to just cut our losses and all future commitments to this house, and simply walk away.   

On reflection, just the feeling of not owing anyone any money at all significantly outweighs the negatives ....  and so if there aren't any problems before completion, then next Friday evening we'll crack open a bottle of champagne (well, Cava anyway, let's not get too carried away !)


  1. Congratulations! To be honest that list of negative reasons is pretty short - and after all

    1) investing/buying gold/tins of beans/whatever reflects you view of the future is the answer to that government policy to the currency

    2) you can probably buy a lot of hotel stays with the cost of servicing the house

    3) There's only point in borrowing money if you can make it work harder.

    And isn't being 100% debt-free great? It was an illogical move on my part to clear the mortgage because it gives me an income suckout, but it just feels so good. Some slimeball landlord/bank and The Man has always had a hold over me ever since I started work and it feels to to cut these punks off at the knees ;)

  2. Hi. Yes, it does feel very good being debt-free ! I need to think carefully what do do with the resulting free cashflow every month, and the lump-sum in particular. Get the £15k 2014-2015 ISA allowance loaded up first I suppose, but I usually leave this ISA fill until March every year, i.e. I do it at the end of the tax year, not the beginning...

    Share valuations still seem quite high to me at the minute, and so maybe best first to use part of the lump-sum in topping-up the premium bonds, pro-temp - the maximum holding increases to £40k from this Sunday, and I always find this a useful place to hold cash, it's quick and easy enough to get it out to invest elsewhere whenever there's a dip in the stock markets.

  3. If you're heart is not in property/tenant maintenance then you're best off out the game. From my experiences a negligent property owner/landlord is one that usually ends up losing out in the long run.

    Are you looking to invest for income or capital gain? It sounds more like capital gain (i.e.avoid income tax) if you don't need the income now??

    1. Hi. Avoiding income tax is not too much of a problem - we've always got my wife's ISA allowance too, if necessary. The prospect of significant capital gains seems unlikely at current share price valuations, unless you buy into small caps which are mostly very risky (I hold a few already), but I'm in no hurry at all - we'll see what happens over the next few months - the market's been treading water for quite a while now, surely it has to break out one way or the other...

  4. Well done on being debt free!