This post is seeking input and any advice from fellow GEI posters about a coming change in living and working arrangements.

First of all whilst I post this to elicit any views that help with our coming change in living and working arrangements I hope his post will resonate with fellow posters. I hope whilst setting out a dilemma and our thoughts about how to turn this to our best advantage people wont find it too self serving and recognise some of the themes that we grapple with at times in our lives. Maybe this dilemma has similarities with your own circumstances and I can stimulate dialogue and debate that may be of benefit to others.

I am married with three children aged 43 next birthday and currently a UK resident. We are emigrating from the UK in three months and are planning to join many other expats in the south of Spain (Incidentally many expats seem to be going in the other direction back to the UK). From a family perspective this makes perfect sense - we have no close family in the UK any more, my wife's family have enjoyed being based in the south of Spain for a decade or more. We like the more relaxed lifestyle, have found a good international school for our children (!6, 12 and 10) are learning the language and hope to spend time beyond the limits of the expat community. At this level the move is very straightforward but that is where the simplicity ends.

In the UK I run my own consulting company and have been providing commercial and procurement services to clients increasingly government departments for a number of years. The work is lucrative but quite long hours and increasingly repetitive. The work is also quite frustrating due to the difficulty that major infrastructure projects are having raising private finance in today’s debt markets. My perception is that if we get a change of government in the coming year many of these projects will be culled and the demand for such consulting services will reduce (at least for 2 years or so after the election) and at a personal level this will put pressure on the amount of work available and the rates that can be charged for such services. As the UK struggles with its mounting debt problem many projects (Crossrail is just one example) may be delayed, put on hold or cancelled altogether.

As a family we will miss the financial security of work (which I will carry on for a few months following the move to soft land the move) but have been planning for a while for life without the income from work.

We have been very fortunate to be planning such a move. We started with nothing in the early 1990’s other than a 95% mortgage on a then undesirable property in South West London and have become both fortunate beneficiaries of the rampant UK property market (we had both sizeable family house and an earlier house that we kept on as a buy to let during the property boom) and of the sage advice offered previously on House Price Crash (site now taken over by the vicious and critical) and GEI (fortunately still a savvy bunch). The buy to let we sold at the top of the market in 2007 and our family home we have sold this winter – (when the downwards direction of the UK market was inescapable and before our equity had been eroded too far). We have also acquired two overseas properties along the way (an owned outright villa in St Lucia in the Caribbean and a buy to let in Hong Kong – 65% debt funded.) We are not under pressure to sell either property but will probably dispose of one so that we eliminate debt on the other (both ultimately are priced in US$) particularly if it becomes clear that interest rates are likely to rise.

In Spain we will rent (a quality five bed villa close to amenities and schools is now available at around 1500 Euros a month). The property crash in the Costa Del Sol has to be seen to be believed – huge numbers of properties have been heavily discounted but remain unsold – what deals are done are typically at 50% below what properties would have sold for at the top in 2006 and agents feel 70% below is coming before too long. The number of surplus properties is scary, most properties built after 2005 are vacant, problems with planning and developers abound and properties that would have rented comfortably from 1200 Euros a week in holiday period will not now rent as the Brits are going elsewhere (Cyprus, Turkey etc) to avoid the Euro. We probably will buy again in a few years when the market conditions are right and assuming the move is successful.

So that just leaves the difficult what next decision. We have a final salary pension scheme which will provide a basic level income from 55 or 60 and we have budgeted carefully in terms of expenditure. Whilst fees for international school do not come cheap they are affordable and we are not extravagant people preferring the value of time to material possessions. To provide a comfortable income we are seeking to make an investment return on our funds of a minimum of 5% per annum - hopefully not too stretching a target.

Here our challenge really begins. In terms of investment choice we have experience in buying, renting, refurbishing and selling property and am acquiring some experience in investing in shares, bonds and other paper assets. Emotionally we are probably more comfortable with the property investment route – cash flows are reasonably predictable, fluctuations are easier to understand and markets are probably easier to time. We probably understand that the UK market is one to be avoided for a number of years – but were yields to approach 10-12% - might become attractive again. This implies prices may have to fall by up to another 30% and we don’t agree you should buy in a market with much further to fall just for a positive cash flow. However, the market is probably 2 to 4 years away from its cyclical low and we need to be earning an investment return now or come up with a plan B.

Accordingly we have been dabbling in self invested shares, corporate bonds and ETF’s for the past six months or so. This has been a rollercoaster. We initially made some sizeable losses as the market tanked towards its March 6 low – mitigated some of these by hedging the risk using inverse ETFs and then locked into some profits on the back of rising markets in China, Brazil, mining and banks. I am closely following the Dr Bubb diary and other topics on GEI for an interim market top whilst staying mainly invested if the current rising market continues. All in all a fairly hairy ride and whilst an education this has been anything other than a passive investment you can leave to enjoy other pursuits. Even the more predictable asset types remain volatile – we bought corporate bond ETFs that then tanked and have subsequently recovered.

With no fixed income option really available to us we have approached a seemingly reputable company offering to build an offshore trust using Lombard finance and a Luxembourg Bank. Investment profits from capital gains and dividends would then roll up within the trust vehicle thereby minimising tax paid. We are hesitant because of the bad reputation of such investment advice (although the company offering the advice is based in the UK and Spain has been going 30 years and appears to be reputable and trustworthy) but the trust route introduces its own counterparty and credit risks. I feel uncomfortable in putting a large sum into such an investment I cannot see and touch.

The other option is we could set up an offshore or onshore self trading account and continue to invest ourselves. To take this route I think we would both want to get much more experienced with the trading side of investment as well as probably invest some time and money in the best possible market information sources. This will probably a few months to organise and include both fundamental and technical investment advice.

So we seem to be left with three choices

- Invest in property – UK or otherwise – in 2 to 4 years time
- Invest in stock market related trust
- Invest via the likes of Internaxx in our own self managed share, bond and commodity portfolio. This may include some gold and/or other precious metals (perhaps if the normal summer low in gold transpires)
OR a combination of the above.

Before we go any further I thought I would set this out for GEI posters and see whether there are other options available or whether instinctively any of the options were the best way to proceed or should be ruled out. I am sure fellow posters must go through these considerations and so this may be of help to others as well as myself.

Any views welcome.

My suggestions:
+ Dont mess about with stocks now, unless you want to put some small sums into Bear instruments,
+ Study currencies, and park a good share of your funds in Non-Pound, Non-Dollat, Non-Euro currencies (I'm in C$ and A$)
+ Look for dipsm and corrections in Gold as a chance to get some gold exposure
+ Study the local property market, and see if you can develop "an edge" in getting possible foreclosure bargains in 2-3 years,
but you will also need to know how to rent out anything you buy for investment'
+ Seek like-minded people who can help you in your "investing and research", but take full responsibility for decisions.

Can I move this to the Main board for a few days of "airing and commentary there"?

Some of your issues are similar to Wanderers, but from a Spanish perspective instead



Have you priced the HK property recently?
Prices are up quite a bit (like 1-2% per week!) in recent weeks, and I think this is a bit of a selling window, for those that want to reduce debt. We decided to lighten up a bit, and have sold two of our properties. Both were acquired in Q4.2007, and bothe were sold at a profit, rather than reletting them at much lower levels than we achieved in 2008.

Dr Bubb

Thanks for your comments - much appreicated as ever. Please feel free to move to the main section to attract more comment.

To follow up on a couple of your comments.

Re currencies I am looking to move away from US$ and GB£ to both Euro and a resource based currency possibly AUS$ CAN$ or NOK as the latter seem to be more commodity backed and less reliant on debt based economies. I have been expecting Euro to fall back further against other currencies but it still seems to be one of the stronger currencies - not sure how long this can continue for.

Re HK property I am still considering what best and will ask agents for a current valuation. I bought directly after Chinese New Year last year - the capital price market ticked up slightly and then fell about 25% in the Autumn. It seems to have ticked up 10% since then leaving me with a 10-15% loss. The loss is mainly mitigated by the fact that it was bought at about 2US$ to the £ (now around 1.50US$ to the £) although the debt is in HK$. Property was then rented on 2 year contract at a good rental value and with a HIBOR mortgage product at around 2.5% I am currently banking a nice rental profit each month (although I guess if I had to re rent it would be at about 20% below when this contract was signed). I suppose I am hoping the current recent strength will continue for a few weeks (months) longer and I will be able to take a small profit by way of currency gain when I sell. I guess the main concern is rents don't appear to be appreciating this year which might undermine the current price increases should economic confidence again deteriorate.

Yes.
That's the main Achilles ankle of this "recovery."
At the end of a tenancy, where I can sell at a profit, I am tending to do that, rather than rent at a far lower value.