COMMENT
Leaping Off The Housing Ladder!

I'm a great believer in putting my money where my mouth is.

For example, I believe that the UK stock market is undervalued (here's one reason why), so I've backed my belief with a huge sum, to which I keep adding every month. Also, I think pensions make a great deal of sense, especially for higher-rate taxpayers, and so I'm putting a skipful of cash into my company Stakeholder scheme.

However, the biggest step that I've taken over the last twelve months was to sell my home and move to a larger, rented property. Yes, I've joined the ranks of the sell-to-renters (STRs)! One other Fool writer has done this, too.

What made me take this revolutionary step, after being a perfectly happy homeowner since the end of 1992? First, I couldn't see the price of my home going much higher in the immediate future, so I was confident that I wouldn't miss out on much more growth. Just one two-bedroom cottage in my street has sold for more than £250,000, and it was a stunning property.

Note than houses priced at £250,001+ attract Stamp Duty Land Tax of 3%, compared to 1% on houses sold for between £120k and £250k. Hence, a house sold for £250,001 would attract a bill of £7,500, compared to a tax of £2,500 on a house sold for £1 less. This 'threshold effect' has helped to hold back house prices in my street for perhaps two years.

Second, I'd made a handsome profit on my home, which could be used to subsidise the rent for a larger property. In just under 12½ years, my house price grew at an average annual return of almost 11%, which is a great tax-free gain. What's more, the profit from selling my home was more than 2½ times what I'd paid for the entire house in the first place – and 25 times the initial deposit that I put down when I bought it. Wow, that's some return – and all thanks to the gearing (the magnifying effect) of borrowing money to buy an asset!

Third, I needed a bigger home, because our two-bedroom place was too small for two adults and two young children. The arrival of my daughter gobbled up what little free space we had left to move around in, so we had no choice but to move on. But I didn't want to go from paying a tiny mortgage to taking on the burden of a six-figure home loan. After all, the annual mortgage repayments would have gone from a modest 5% of our income to perhaps three or four times that figure, which would have been far from pleasant!

Actually selling my home was a complicated process. Thanks to mortgage problems, our original buyers pulled out last October on the day of exchange, and the subsequent sale was held up by a legal problem. Trust me: the last words that you want to hear as a homeowner are "defective title"! Still, after eleven loooong months, it was all done and dusted and my equity has been sat in a high-interest savings account for a couple of months now. Sadly, the taxman will be looking for two-fifths (40%) of the sizeable interest earned, but this extra income is most welcome!

But, get this: I have no plans to withdraw any of the capital or interest now or at any time in the near future. All I aim to do is to move this money between the highest-earning savings accounts every six months or so. Even an extra 0.1% a year is worth a lot to me!

Furthermore, as well as making this money work hard on my behalf, I plan to add to it as often as I can. My goal is to make my 'housing war chest' large enough to buy my next family home outright, which will require a lot of scrimping and saving. I reckon that, by 2007, I'll have enough money in shares and cash to buy my dream home without a mortgage. To be mortgage-free by forty was always one of my dreams, and I honestly believe that I can do it.

Finally, to save time, I'll answer a few questions that readers always ask me when I write about property and house prices:

Q. Do I think that house prices will fall?
A. Yes, almost certainly over the next two years, and possibly longer.

Q. What are my views on consumer debt?
A. I think you've all gone on the biggest spending spree in history, increasing your total debt by £591 billion in a mere eight years. The fallout from this splurge will damage millions of households. You keep borrowing, and I'll stick to saving and investing, and we'll see what happens in the long run!

Q. What are the benefits of selling to rent?
A. You can cancel your buildings insurance policy, plus there's no wretched DIY to do. Yippee!

Whether you're a homeowner or tenant, enjoy the sunny weekend!

More: Get a tip-top mortgage, savings account and 0% credit card.