Family finances and property
Apologies for the delay between posts, I got hit by a cold and have been pretty groggy for the past week.
Last weekend I received a call from my younger sister, She’s a couple of years younger than me and in almost the exact same position of life as I was at her age.. Living in rented accommodation with her partner and desperately trying to save a house deposit whilst seeing the money disappear in rent. She was calling to tell me that they had found a property to buy and had their offer accepted. I knew they had been looking for awhile as I’d recommended our mortgage broker to them and so also knew the financials would be solid.
She excitedly told me about the place and I asked her to email me a link to the listing so I could take a look. Later that evening I clicked through and my heart literally sank as I saw a computer generated mock-up for what was to be a newly built 1st floor apartment priced at £15,000 MORE than the 3-bedroomed semi-detached with garage that I’d bought a year ago. When I first heard they were house hunting, my only piece of advice was to steer clear of new builds. They’re universally over-priced and small.. leaving you far more likely to need to move sooner when you begin a family and with the potential to be in negative equity. Of course I should have known that only a new build would have been good enough for her. The glossy magazine style images of a perfectly laid out ‘family room’ (Read: combined kitchen/diner/living rooms) are designed to appeal to young buyers with no forward thinking plans about how they’re going to manage to get a push chair up the stairs to the front door.
All this went through my head as I looked over the images and I gave her a ring back;
ERG: So I took a look through the listing..
Her: Well? What do you think?
ERG: Looks lovely! Very modern.
And that was it. No rant about negative equity.. no questioning about where they would store all their possessions in the cramped rooms.. no comments on the inevitably huge snag list that was be revealed. Because although I knew all of these things would be a problem, I also knew how hard they had to worked to save up to reach this point. I knew they’d been through a decent mortgage broker who would have diligently ran the numbers to ensure it was affordable, and I knew they were as excited as I was a year ago to be buying their first property. They’re both still mid-20s with decent jobs and plenty of time to save up, pay off and move houses later if they wish. I thought it best to let her have this excitement and joy despite knowing myself that financially it probably wasn’t the wisest move.
Which brings me to my point, and perhaps a conflicting one given the nature of this site; That sometimes perhaps encouraging the best move financially isn’t always the best course of action. Sometimes we need to let and even support others to do things we ourselves wouldn’t recommend. Sometimes people need to make their own mistakes so that they can learn from them and be stronger in the future.
Have you supported someone through something you thought was financially wrong? Did it work out okay or do you wish you’d have said something to stop it in the beginning?
13 thoughts on “Family finances and property”
Really interesting perspective, and really thoughtful and empathetic towards your sister’s hopes and dreams. It’s really hard for me to watch other make financial mistakes, although in your sister’s case it’s not so much of a mistake, as a less good option than what she could do, in your opinion. New builds aren’t always overvalued, in fact, everyone I know who’s ever bought a new build has seen substantial price appreciation. There is always a market for people who want new builds, since the properties have a 10-yr NHBC, which gives a lot of peace of mind to buyers, especially first-timers. Some new builds are also not tiny, a friend of mine just bought a really good new build – it actually had high ceilings! Something you literally NEVER see these days, and which is quite depressing if you live in a low-ceilinged house. Moreover, your sister will have to learn to be frugal with her possessions if the flat isn’t too big, that’s a good thing I think. We have quite a large house and I am actually wanting to downsize, as it will force my husband to think long and hard about accumulating all those possessions that he never uses in the first place.
As I said, I find it hard to support people with certain decisions, but if my sister did this, I wouldn’t be unsupportive. If she rented a quarterhouse in a pricey area when her husband was only a student and she had a small baby, I wouldn’t support it. If she had her groceries from Ocado whilst having 2 children and no job, I wouldn’t support that either. If she ran out of money before the end of every month, I wouldn’t be happy about that either. Each of these 3 things my sister has done, and in the last case, is still doing. Count your lucky stars! At least your sister has some financial sense and with your decent mortgage broker, she won’t be overstretching herself :) Plus, it’ll bring her a lot of happiness.
Hello M,
I take your points about the new build NHBC etc.. Although I strongly suspect that has not even entered my sister’s mind ;) Hopefully the small space will encourage her to stop accumulating so many flashy possessions. We shall wait and see!
Either way, she will learn from the experience, hopefully!
This post resonates with me as I have a younger brother (12 years younger). I bring up stocks and saving money to him all the time. Being 15 years old, he is all about going out to eat with friends, paying for a smart phone and getting the next game console. Him and I are two completely different people. At his age, I was working for myself mowing yards and saving all my money to buy a used truck to expand my lawn business further. Had I known what I know now, I would have invested part of my savings along the way and I’d be sitting pretty. Thing is, he has this wisdom (me) 12 years before I ever knew anything but he just pisses it away. Its upsetting, but like what was said above, sometimes you just need to let them make their own mistakes.
ADD
I agree, it is tough watching when you know that people have the right knowledge but still choose to make financial mistakes. Hopefully they’ll change as they grow up.
Hi ERG!
Yep, I think you definitely did the right thing in this instance.
It is annoying (for her) that she is paying more for the tiny apartment than your 3 bed semi but house prices have gone up quite substantially over the course of 1 year so that’s at least partially something that is out of her control. She is just going to have to hope that a price crash doesn’t come soon or at least at the time when they want to move, or that they save enough/overpay the mortgage enough that they won’t be in negative equity anyway.
Buying a house in mid twenties puts them well above the average financial situation at their age so I really don’t think you can knock them too much, so yea well done for not saying anything I think.
Cheers and hope you feel better soon!
Hello TFS!
Feeling alot better now, thanks. Yeah, I know they are already way above their friends in terms of buying a house at 25 so I’m not too worried, just keeping my fingers crossed that they arn’t forced to sell at a loss due to needing more space in the immediate future.
Thanks for sharing this, Guy.
I’m with TFS, think you did the right thing there. Getting on the housing ladder at their age is quite an achievement these days, let her be happy but also let her learn from her mistakes – you will be there to support her, if this does turn out to be one. As TFS says, house prices have gone up and may continue to rise.
Also as M says, some people love new builds and any snags will be covered by the NHBC. Worth suggesting perhaps that she pay for a snag report (usually a couple of hundred pounds) and they will highlight all defaults in the new build (eg wonky taps, ill fitting cupboards, blemishes in paint, incorrectly installed light switches etc) and these will be sorted out by the builders for FREE, since the property should be perfect and free from defect when your sis moves in.
Great idea weenie! I’ll pass it on to her, thanks.
As a rule of thumb I avoid talking finances with my parents. They do make some investment decisions that I don’t think are smart, but I avoid criticizing them. Mixing business with family makes everyone uncomfortable. If my parents ever need the money, I’d rather just give them some than give them advice.
Hello Investing on track,
My parents and I regularly talk finances, pensions etc. They both retired early and so know what’s required to achieve it. sometimes it is best to just bite your tongue though.
Hi Guy,
I know that I’ve taken both approaches previously, and I think the outcome depends on the person and how the subject is brought up. I can only guess, but there’s a chance your sister shared the picture and details out of pride and satisfaction. She wanted her brother to see her new home. I didn’t get the impression that she contacted you for ‘advice’. Had she asked you to look at it and critique it, as she valued your knowledge and experience on the subject, I think it opens up the option to provide assistance.
That brings me to my second point – It depends on the person. Some people aren’t particularly accepting of feedback whilst others are very receptive to it. For the people that aren’t receptive, I tend to choose my ‘battles’. If I continually offer advice, to their displeasure, I may sense that they tune out of what I’m saying. Even when they’ve asked for help. For people that love feedback, I’ll give them all the help I can offer – If they ASK for it.
For what it’s worth, I would have taken your approach, based on my first point. Nice topic Guy, thanks for sharing. I wish your sister all the best in her new home too!
Cheers
Huw
It pretty much doesn’t matter what other people say, so well done for not picking the fight. I was stupid enough to buy a house in my late twenties, in 1989. Colleagues did suggset things were on an all time high and Lawson’s fiddling with MIRAS was distorting the market. But Britons’ brains fall out when it comes to property, and I was no exception.
Negative equity is ugly though. Ten years later I sold that house for less than the mortgage, and I’d had a 20% deposit. It happens, but the housing cycles are much much slower than equity market cycles. They just seem to crush every other generation. All this happened before the WWW part of Internet got going, so the story is missing from the collective record.