YOU DON’T NEED TO LIVE IN THE HOUSE YOU OWN
Published 4 March 2022
Although the average house price in our region is nowhere near as high as it is in London, for many people the dream of owning a home remains just that – a dream. And yet there is a more affordable way to get on the home-owning ladder and lock into increasing house values (and hence increasing equity); it just takes a little learning from our continental cousins.
In Europe, if your work is in an area where you can’t afford to buy a property, it is relatively common for people to go ahead and buy a home in a cheaper part of the country and rent it out, while themselves living in a rented home.
In a nation where owning your own home is something of an obsession, this might seem like an unusual step, but it is a good way of getting on the property ladder and benefitting from a rising market.
We already see people based in London doing this here in Norfolk, and there is no reason at all why those based in our county who can’t afford to own their own home here couldn’t purchase a property in, say, the northeast (where the average house price is more than 40% cheaper than in the east of England).
As their career progresses, there is nothing to stop them upgrading that home to something bigger in just the same way they might if they owned their own home, increasing their rental income and boosting their equity.
Then, when the had accumulated enough equity, or perhaps even when they were ready to downsize, they could finally buy their own home here in Norfolk (many of those Londoners investing here in Norfolk plan to retire to the county anyway – and of those, a good proportion come originally from Norfolk, before pursuing a career in London).
Yes, the upfront costs of buying a home to rent are slightly higher than buying a home to live in, but bear in mind that first-time buyer homes in cheaper areas will often have a price under the stamp duty limit, reducing costs in the first place.
And as long as you only own one property, there are no worries over capital gains tax on any increase in value.
For such a move to succeed, you have to buy with your head and not your heart, as you might if you were buying your own dream home. You are purchasing what is in effect a business proposition, so you need to put yourself in the shoes of potential tenants, whose needs and aspirations might be different to your own.
This kind of strategy may not be perfect, as most of us still hold onto the dream of living in the home we own. But for many people living in relatively expensive areas, it could be the only viable route to (eventually) realising that dream, and is certainly worth considering.
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