Choice between buying and renting two similar houses...
 

We have sold our house and move out in 13 days. The house purchase we planned has fallen through.

We have an option of moving in to one of two fairly similar houses in 3-4 weeks with a short stay at the in-laws. They are of similar type, size, quality, equally good locations etc, and I would say similar value.

The rental is only 3.2% of the present estimated property value based on a known sale price from 2002 and regional house price indices.

Help me with the numbers here... for the purchase we'd need to mortgage a third of it with the rest being our deposit. For the rental we'd have to try to get a good investment return on the proceeds of our present house.

Hi John. Long time, happy with the Evo?

Back to topic. There are too many variables in your question! ie,

The 'insecurity' of renting eg being asked to leave.

Being out of the property market, ie you will not benefit from capital appreciation in property values. Depends on whether you feel these will be significant or not in the next few years.

What level of risk will you take with the investments? If its very safe it will be a circa 5% gross return. You will have to pay tax on this at 40%. If you want better returns you risk losing a fair chunk of your money.

Too many ifs and buts really, only you know the answer

I think at 3.2% yield we're getting a price that takes account of projected capital growth, which is why it tempts.

We of course each have capital gains tax allowances. I'd be looking for some unit trusts I think that would have a diversified portfolio - maybe including some in property to offset the risk of not owning any directly. Then if they were sold and repurchased each tax year (so expenses would be important) then the allowances could be used, along with the usual ISAs etc.