Should I use inheritance to buy first house?

froger

Hello,

First post on boards.ie just looking for advice on what I should do. I recently received inheritance of over €230,000, which for me is a lot of money. I have been a renter for the last five years as I didn't really want a huge mortgage to buy a house.

I have started looking at house but as I never thought I would be looking for a house a few months ago, I don't really know what I want. I have viewed a house that is within my range, but am not entirely sure if I like it.

The problem I have is with the markets/euro/banks problems should I be looking at putting the money into a house to live in even if it is not really what I want, just to protect against any possible bank/euro collapse and losing the cash or could I hold out for a year or two to get the right house?

the_syco

Since you have €230,000 I wouldn't spend more than €130,00 of that on a house. Remember: you'll need to buy things, but the way the market is nose-diving, you can forget about any return on the house if you sell it later on.

Are you looking for a home as you don't like renting, or because you have a good reason to buy a house?

ShadowHearth

It's a big sum.

You are not in a rush to buy. You got enough mome to rent too.

I wouldn't be rushing. Who knows what will happen in future. Maybe your current workplace will change or your family will expand.

You don't have worry about getting mortgage. You will allways have that money in account. You said that house is not perfect for you too. Wait for something that is perfect!

Good advice above too. Don't blow all your cash on property.

froger

the_syco wrote: »

Since you have €230,000 I wouldn't spend more than €130,00 of that on a house. Remember: you'll need to buy things, but the way the market is nose-diving, you can forget about any return on the house if you sell it later on.

Are you looking for a home as you don't like renting, or because you have a good reason to buy a house?

The only reason I feel I have to rush into buying a house is because I fear the euro/banks issue will come to a head and I will be left with less money and no secure house or home.

noxqs

If you genuinely believe the euro will crash, buy gold - buy bonds in another currency. The Swiss Franc is 60% gold backed.

You could buy Japanese bonds, US T-Bills, gold certificates, corporate bond funds (distributed risk), oil futures, anything.

But a house; Especially in the Irish market, is the least wealth preserving thing you can do. Anything else will be better for your money.

Personally - I'd buy a mix of corporate bonds in funds who specialize in it. And some foreign currency like Brazil/Japan government bonds.

Gold is probably the best bet - while its in a 'bubble' of its own its actually because the _real_ value of money thru quantitative easing (printing more paper) has dropped relative to gold.

But if the Euro collapses, a few ounces of real gold into punt nua or whatever, will probably still secure you a house here.

Edit: I'd probably declare the cheque at the airport on my way to Switzerland where I'd open a Swiss Franc account with the cheque on the spot. Most Swiss banks have excellent online services and you can transfer money within 24 hours back to Euro in an Irish bank. Also online trade of stock/bonds etc is available much cheaper than comparable Irish financial institutions.

They can't stop you from flying to switzerland with a cheque like that, just remember to declare it filling in the form before you leave.

mari2222

In your circs I would buy a house - whatever you now pay in rent is the "yield" of the house to you : if you leave the money in a bank you might get interest of €7000 per annum - there is no point having it there if you are paying rent of around that amount.

Some commentators think gold is the next bubble. Other currencies could have troubles too. At least a house will continue to provide you with "shelter" - something you would otherwise have to pay for.

foxy06

mari2222 wrote: »

In your circs I would buy a house - whatever you now pay in rent is the "yield" of the house to you : if you leave the money in a bank you might get interest of €7000 per annum - there is no point having it there if you are paying rent of around that amount.
.

What if he spends 200k on a house and its worth 150k in 2 years?

MagicMarker

mari2222 wrote: »

In your circs I would buy a house - whatever you now pay in rent is the "yield" of the house to you : if you leave the money in a bank you might get interest of €7000 per annum - there is no point having it there if you are paying rent of around that amount.

Some commentators think gold is the next bubble. Other currencies could have troubles too. At least a house will continue to provide you with "shelter" - something you would otherwise have to pay for.

If he'd get 7k a year in interest then that will cover his rent while he waits for house prices to fall and he'd save a bucket load of cash when he eventually buys in a couple of years.

Sounds like a no brainer to me, you'd be crazy to buy a house now when you can effectively live rent free until you find a bargain.

the_syco

foxy06 wrote: »

What if he spends 200k on a house and its worth 150k in 2 years?

This only matters if he intends to sell the house in 2 years.

Snakeblood

the_syco wrote: »

This only matters if he intends to sell the house in 2 years.

It matters because he's asking if he'll get better value in the future or now.

fleet

the_syco wrote: »

This only matters if he intends to sell the house in 2 years.

Common misconception.

If he buys the house now for say 130,000 and it's worth 100,000 in two years then it DOES matter. Look at what happens to his cash in the bank.

1. If he buys now he will have 100k (plus interest) in the bank in 2 years.

2. If he buys in 2 years he have 130,000 in the bank (plus interest, less rent).

No brainer. Never buy in a falling market.

goldenhoarde

Froger If you find the house that ticks all the boxes and you can see yourself there for the long hall then by all means go for it But if the place you seen doesn't do it keep looking

All the boxes include

location,transport schools (one day you might have a family if you haven't already), amenities for adults and kids, traffic etc

Diarmuid

I would echo the comments about buying bonds but I would strongly suggest that buying gold is a risky move. The standard deviation on gold is up around 20%. It's a very volatile asset.
Buying a house in a falling market, when you don't know what you want and seem happy renting, would be a bad decision IMHO.

mari2222

fleet wrote: »

Common misconception.

If he buys the house now for say 130,000 and it's worth 100,000 in two years then it DOES matter. Look at what happens to his cash in the bank.

1. If he buys now he will have 100k (plus interest) in the bank in 2 years.

2. If he buys in 2 years he have 130,000 in the bank (plus interest, less rent).

No brainer. Never buy in a falling market.

2. He will have 130k but unlikely to be euros - probably new irish punts (NIPS)
3. So all those who bought in a rising market are sitting pretty?

fleet

mari2222 wrote: »

2. He will have 130k but unlikely to be euros - probably new irish punts (NIPS)
3. So all those who bought in a rising market are sitting pretty?

The news rooms LOVE drama. There is very little expectation that we'll be forced to leave the Euro. Even if we had too it would be far better to be in a liquid position in order to leave the country.

Don't twist my words. Buying in a rising market can sometimes burn you too if you don't exit on time (say 03-06), but buy in a falling market with no prospect of a bounce and you'll always take a hit.

froger

Thanks for all the replies, I am not concerned with losing value in any house I buy, if I can get a house without the need for a mortgage. As long as I am working then I will be able to save some of what I now pay out in rent. After all the primary reason for a house/home is to live in, not as a means to make money, thats how we got into this mess in the first place.

My main issue is should I jump at the first place I think is half okay, as if the euro where to collapse would our new currency be worth anything and could I still get a house, would we be allowed access our money, but I suppose that is the one millon dollar question.

Zamboni

froger wrote: »

Thanks for all the replies, I am not concerned with losing value in any house I buy, if I can get a house without the need for a mortgage. As long as I am working then I will be able to save some of what I now pay out in rent. After all the primary reason for a house/home is to live in, not as a means to make money, thats how we got into this mess in the first place.

I will never understand this reasoning.
These statements appear too often on this forum.

froger wrote: »

My main issue is should I jump at the first place I think is half okay, as if the euro where to collapse would our new currency be worth anything and could I still get a house, would we be allowed access our money, but I suppose that is the one millon dollar question.

I understand your concerns in relation to the Euro but if you want to buy a property have you considered moving abroad? Is it an option?

desertcircus

OP: if you're worried about holding the money in a bank account in case the euro melts down, bear in mind that if that happens, the value of your house will collapse through the floor - and probably fall a lot harder than the euro. Deciding whether to buy now or in, say, two years, should be the simplest decision imaginable. Buy a house now for 230k, and in two years you'll have a savings account with two years' worth of rent in it and a house that's worth maybe 150k. Hold the money somewhere safe, and in two years you'll have 240-250k minus two years' worth of rent and the opportunity to buy the same kind of place for maybe 150k. And if the market is still tanking and prices are still falling, you can opt to wait for longer, earn more interest, and look at getting a far better house for the same money in four or five years.

froger

Zamboni wrote: »

I will never understand this reasoning.
These statements appear too often on this forum.

I suppose it is how you look at it, if you want a house just to make money then of course you dont want it to lose value. But if you want a house for a home, then who really cares if the value goes down a bit, the primary function of a house is a home after all, of course if you go into negative equity land then that is a problem.

Zamboni wrote: »

I understand your concerns in relation to the Euro but if you want to buy a property have you considered moving abroad? Is it an option?

Not at the moment, I am comitted to Ireland for the time being, at least I have a decent job.

MagicMarker

froger wrote: »

But if you want a house for a home, then who really cares if the value goes down a bit

Any sane person? If you were offered a house now for 200k, but told that if you wait 2 years you could have it for 170k, would you even consider buying it now?

edellc

if I received inheritance that meant i could buy a home then I would

Raskolnikov

I am a bit disturbed at just how readily people are recommending gold. Remember, gold has been in a ten year cycle, just how much legs has this bull market got? Also, when people recommend government bonds, do you realise that 10 year treasury yields are at historic lows?

Personally, I don't think cash is going to be a bad place to be for the next year.

froger

MagicMarker wrote: »

Any sane person? If you were offered a house now for 200k, but told that if you wait 2 years you could have it for 170k, would you even consider buying it now?

Of course if there was a guarantee that your money would be safe and that in 2 years time I could get a house then I would wait. I suppose it is the uncertainty to it all that is the problem.

At this stage I have decided to not pursue the house that I saw which was only okay, at to keep on looking. The only problem is that there is nothing new coming on the market at the moment.

karl tyrrell

land about 5 acers still money left over for the house then you can do anything with land for the future this is your chance in life dont buy a house in a built up area.

froger

Raskolnikov wrote: »

I am a bit disturbed at just how readily people are recommending gold. Remember, gold has been in a ten year cycle, just how much legs has this bull market got? Also, when people recommend government bonds, do you realise that 10 year treasury yields are at historic lows?

Personally, I don't think cash is going to be a bad place to be for the next year.

I am not that much into gambling so would be keeping the cash over buying gold, in the face of it gold should not be worth as much as it is. There are other better bets that you could gamble on.

Fighting Irish

the_syco wrote: »

This only matters if he intends to sell the house in 2 years.

or he could save 50,000 and wait 2 years

Fighting Irish

fleet wrote: »

Common misconception.

If he buys the house now for say 130,000 and it's worth 100,000 in two years then it DOES matter. Look at what happens to his cash in the bank.

1. If he buys now he will have 100k (plus interest) in the bank in 2 years.

2. If he buys in 2 years he have 130,000 in the bank (plus interest, less rent).

No brainer. Never buy in a falling market.

.

froger

karl tyrrell wrote: »

land about 5 acers still money left over for the house then you can do anything with land for the future this is your chance in life dont buy a house in a built up area.

I know it is hard to put a figure on it, but how much per sq/ft is would you be looking at to build a house now a days?

Squall19

Put the money in a decent savings account and rent something nice while we the poor are struggling:D, like has been said 7k a year interest on your 230k would allow you to rent a class place for free almost and have no worries.

That inheritance should set you free not be your ball and chain.

Buying a house now just because you can is a little crazy imo.

froger

Squall19 wrote: »

Put the money in a decent savings account and rent something nice while we the poor are struggling:D, like has been said 7k a year interest on your 230k would allow you to rent a class place for free almost and have no worries.

That inheritance should set you free not be your ball and chain.

Buying a house now just because you can is a little crazy imo.

Yeah that is what I am thinking of doing for the short term anyways, if the right house comes at the right price I will take it though, you can't take money with you

antoinolachtnai

A house to live in is most likely a good investment, providing you really like it, want to stay in it, and get a reasonably good deal.

To find the right house for you, the most important thing is to educate yourself about property and the property market and find out what you really want from your future home.

argosy2006

Would the interest on 230,000 per week not pay to rent a very nice house,
? So you keep the 230,000 and get house you like, with no risk of it losing value?

froger

argosy2006 wrote: »

Would the interest on 230,000 per week not pay to rent a very nice house,
? So you keep the 230,000 and get house you like, with no risk of it losing value?

But with the all this euro and market turmoil I may lose my savings and be left with zero, there are a lot of traders out there hedging their bets on a market crash and willing it on.

Maybe I shouldn't be paying attention to the outside markets and have the faith that if anything like this was to happen that savings would not be wiped out, but history says otherwise.