For many of us, our property is our greatest asset, and as house prices have soared over the years, many of us are sitting on – as well as in – a small fortune. If your pension is not keeping pace with inflation, savings are dwindling, or you could do with a lump sum to fulfil a long-held dream, a bit of lateral thinking can pay handsome dividends.
Prepared to move?
If you’re asset rich but cash poor, you could rent out your now-too-big house and rent somewhere smaller in a cheaper area and be quids in. A house in London can bring in £4,000pcm in rent, and you could live in a maisonette in Perthshire for £650pcm. This has the advantage of allowing you to try before you buy, if you’re considering a move to the country.
Or you could sell your house and buy a flat in the city to rent out and a home for yourself somewhere cheaper. This gives you the option of moving back at any stage, if circumstances change. A house in Cambridge (worth £448,000) could be traded for a flat in the city (£190,00), plus a cottage in Cornwall (£250,000).
Have less to spend? If your home is worth the UK average of £228,384, you could buy a flat (£60,000) with a rental value of £450pcm and a bungalow in Rhyl on the north Wales coast.
If you dream of living abroad, you could sell your large house in the UK, buy a smaller one in a less desirable neighbourhood to rent out, plus a place for yourself in a cheaper town, so you still have a base in the UK. Your rental income could then cover annual rent on a flat in the Canaries (from around €450pcm), say, and you’d have the best of both worlds, able to come and go as you please.
Stay put and use equity release
One way to make money from your home is through equity release, selling some of your home, known as home reversion, or borrowing against it, called a lifetime mortgage. In both cases, you remain in your house until you die or go into long-term care. In 2017, £3.06 billion was released to home owners, a 15-year high, according to the Equity Release Council.
With home reversion, you sell your property to the equity release firm at below market value; the older you are, the higher the percentage of the value you receive. This particularly appeals to those who own more expensive homes. Lifetime mortgages are secured on your property and attract interest; they come as lump sums or drawdowns in which you take the cash when you wish and pay interest only on money withdrawn.
A new product, Saga Regular Drawdown Lifetime Mortgage, offers a lump sum of £10,000 or more, then monthly payments of at least £200 to those aged 60-80 with a property worth at least £150,000. There is a ‘no negative equity’ guarantee and no-obligation advice.
‘We commissioned research with our customers, who helped us design the new product,’ says Jeff Bromage, managing director of Saga Personal Finance. ‘Austerity has put pressure on households. Some need to supplement their incomes by only a few hundred pounds a month, to pay bills or for a treat that is vital to them, such as keeping their golf club membership going.
‘With pension freedom, many are drawing their pension pots in full and spending them sooner. There was a need for a further product to give them more choice. Customers said they would use the £10,000 lump sum to help their children, take a once-in-a-lifetime holiday and so on.’
How much will equity release cost?
Retired publican Ray Greenwood, 72, took out a lifetime mortgage to pay for £40,000 of improvements to his conservatory, a new fence and replacing carpets and blinds. ‘I wanted a new garden room with patio doors to enjoy now, which could be a downstairs bedroom if needed later.
‘My wife died five years ago and I could hear her voice saying we should leave our money for the children. I felt guilty [about taking out the loan] but they were very happy for me to go ahead.
‘I settled on Saga and its advice service was very straightforward. Now I use the room all day long and love it. I think my wife would have loved it, too.’
Is Equity Release right for you? Find out more here
Build in your garden
While most people keep an eye on the value of their home, few realise that there is huge development potential in the land that comes with it. Last year, Alex Harrington-Griffin set up TrustedLand, introducing landowners, ‘typically ordinary home owners’ to buyers and professionals such as estate agents with experience in land sales.
‘The most common piece of land to sell is anything at the rear or side of your property,’ says Alex. ‘An agent can advise if it has planning potential. For example, detached garages situated at the back of properties can often be developed, even if only into bungalows, as long as there is access, obviously.’
Any land is likely to be worth more if sold with planning permission. You also need to do an internet search on potential purchasers. ‘We only work with people who have a solid business profile and the funds to do the project,’ says Alex. ‘Land over a certain size may attract capital gains tax, so speak to an accountant. The challenge is to find an agent who is going to give you an honest perspective.’
Retirees Susan and Peter Jameson, now in their mid-seventies, were struggling to sell their detached home with seven acres in the Home Counties in 2012. Instead, a one-and-a-half acre paddock was sold for £750,000 to a developer. ‘We went from feeling very stuck to being very happy,’ says Peter.
Convert your home
There is a growing trend for converting family houses into flats to sell or let, and it can be lucrative. But beware – you may not even get to the planning stage. ‘If the council has highlighted your street as a perfect family area, they may only allow 5% of the houses to be converted into flats,’ says Jeremy Wiggins, director at architects Gpad London.
Involving an architect or surveyor early on is wise. ‘It can be daunting for the non-professional to work out how to use the stairwell or enter a room,’ he says. ‘Once you get to the construction point, you will need guidance on how steep stairs should be, fire regulations, acoustics and the like.’
7 things to think about before moving into a granny annexe
Neighbours should be kept on side. ‘If you have more than three complaints, your planning application will go to a local council committee and councillors often have it in their heads that they don’t want flats.’
Draw up a contract with the builder using forms provided by the Joint Contracts Tribunal (jctltd.co.uk) and you may include penalty clauses for going over deadline.
For added peace of mind, Jeremy suggests retaining the architect for site visits. ‘It won’t greatly push up the fee.’ It will, however, guard against the likelihood of cowboy builders.
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Holiday home funds art gallery
Susan Eyres, 55, an ex-IT worker and her husband Richard, 49, who works in finance, own a holiday let in France. The proceeds have enabled Susan to run the Gateway Gallery in Hale, Greater Manchester.
‘I’d always loved art, buying prints, then originals. I purchased a painting at one gallery, but the owner was useless at paperwork and I kept going back in to ask for it. I loved the environment and, three years ago, we became business partners. We worked together until his death last year.
‘I’ve found what I want to do in life. It’s so rewarding to find an artist I really believe in. I met painter Olga Geoghegan 20 years ago, and I’m now her representative in the northwest. She paints figurative and still-life works, often recalled from her childhood in Russia.
‘Seeing the excitement on the faces of people who wander aimlessly into the gallery and then find a painting they love is wonderful. It’s great conversing with people who love art.
‘Having the money from the holiday let has given me the liberty to invest in paintings I love. My husband enjoys researching the backgrounds of the paintings we sell. When he retires, we plan to run the gallery together.'
Buy to let paid for sailing dream
John Vearncombe, 53, a former IT consultant, and his wife Bronwen, an ex-banker, mortgaged their home in Winchester to buy a second property to let, five years ago. They then invested in a high-end multiple-occupancy property, which produced a high cash flow, allowing them to expand their portfolio. They now have eight rental properties, a holiday let and three B&Bs. John decided to spend £50,000 of the money doing the year-long Clipper 2017-18 Round the World Yacht Race.
‘I’d only ever sailed from Scotland to Northern Ireland and didn’t ever think the Clipper Race was a possibility until that loan on our house enabled us to start a whole new business. It was the opportunity to do something extraordinary, to be so far away from land, and sail in conditions that varied from flat calms to hurricanes.
‘My favourite point was battling hurricane-force winds in the North Pacific, the boat heeled over to a 30-40° angle. By then, we’d already sailed 25,000 miles and I knew the boat was robust. I had to go on deck to change the sail with 15 metre-high waves rocking the yacht from side to side. But it was the experience of a lifetime.
‘We rented out our house for the year, so it helped to pay for the trip and Bronwen met me at each port, taking part in charity events along the way. Now we’re planning a more conventional global trip – by plane.’
Other ways to raise cash
1 Improve your home
A loft conversion adds 21% to a home’s value, an extension 11%, a second bathroom 5%, and a conservatory 5%.
2 Film and photo shoots
You need to register with a location agency and most take a 20% commission. But you can earn between £500 and £2,500 a day.
3 Rent out your driveway
This is in demand if you live in a city or near an airport, railway station, etc. Earn £200 a month through a parking website.
4 Look out for special events
If you live near a major sporting venue, or literary or arts festival, you can make big money by renting out your property, and house-sitting somewhere else.
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