FALLING property prices in the US and a weak dollar have made the dream of buying a slice of Florida real estate a possibility for Jan and Ben Collins, who are eager to invest the cash in their bulging savings pot.

The couple, who live in Harrow, West London, with their children Harry, 5, and Lily, 2, have been to Kissimmee in Orlando twice before. “When we were last there, about four years ago, we thought how great it would be to buy a place. It was pie in the sky back then, but recently we’ve been thinking seriously that it might be a good idea,” says Jan.

Florida’s warm climate, combined with the resort’s location close to the sunshine state’s huge theme parks, make it a good rental investment, the couple believe. A four-bedroom villa near the Disney World theme park would set them back £250,000, according to their research, and a rental income of between £400 and £500 a week would cover their mortgage repayments. They estimate that they would let the house out for at least 26 weeks of the year. “We would probably go over there once a year, maybe twice, but we have a big family and lots of friends who could use it as well,” Jan says. “For the rest of the time we would rent it out.”

The main decisions facing the couple are, first, whether they can afford the 25 per cent deposit, which they have been told would be advisable, and, secondly, whether this would be the best use of their money. Jan says: “Should we use our savings to buy a villa, or would a better use be to plan for our future? We have thought about expanding our home, and eventually we’ll need to pay for Lily and Harry to go to university.”

Ben, 38, is a computer programmer, earning £55,500 a year, while Jan, 35, has taken time off work to look after the children.

The couple have more than £110,000 in savings. They have three Isas, worth £14,000 each, a MultiPEP with Skandia worth £14,120, premium bonds bought in 2005 worth £30,000, and £55,000 in two savings accounts. The Collins took out a Woolwich Open Plan offset mortgage eight years ago for £72,500 and the interest-only repayments are £376. They have two endowment plans, one with Lincoln Financial worth £74,000 and another with Zurich worth £30,000.

The couple experimented with living on one income after they got married in 2000. Jan’s salary was saved in a high-interest account for a year, which the couple managed not to touch, explaining their large reserves. They also built up pensions at John Lewis, where they worked together between 1998 and 2003, and made additional voluntary contributions (AVCs) to Lincoln Financial. Ben continues to pay 4 per cent of his salary into an occupational pension and £101 a month in AVCs, putting them in a strong financial position.

The couple have questions about purchasing overseas. “If we go for the Florida property, should we get a mortgage in dollars or sterling?” asks Jan. They would also like to know whether this is the best time to buy.

“It feels like we’ve got all this spare cash, but I don’t want to be frivolous with it,” says Jan. “I’ve read that the housing market is in crisis and prices are low. I’ve been watching the dollar. The exchange rate is starting to drop and we’re getting twitchy.”

Financial CV Earnings: £55,000 a year.

Savings: £110,000.

Mortgage: £72,500, interest-only Woolwich Open Plan offset.

Pension: Both have five years’ contributions to the John Lewis pension scheme. Ben contributes 4 per cent of salary, plus £101 a month AVCs, into current scheme.

Objectives: To decide whether to use their savings to buy a property in Florida, or to invest in some other way for the future.

The Collins: what the experts say

MORTGAGE/PROPERTY

Miranda John, Savills Private Finance

“Buying a holiday home in Florida is a popular dream for many British people, but Jan and Ben should bear in mind that there is continued uncertainty in the US housing market; it is impossible to know how much further the property market may fall. So while it is easy to be seduced by low property prices, any purchase must be regarded as a long-term investment. The days of high returns in the short term are over.

“On the positive side, interest rates have been cut drastically and compared with other overseas markets, such as Eastern Europe, Florida is well established and has enduring appeal.

“If Jan and Ben take out a US-dollar mortgage they need to take into account the exchange rate. Sterling is currently strong compared with the dollar but even over the past year there have been serious fluctuations, which affect any budget and repayment of any currency loan.

“If Jan and Ben had an interest-only mortgage for $150,000 at an interest rate of 5 per cent, they would pay $625 a month. At the most competitive exchange rate over the past year (£1: $2.116) this would be a monthly sterling repayment of £295.37. At the lowest rate over 12 months (£1: $1.9118) the equivalent monthly repayment in sterling would jump to £325.86. Jan and Ben should therefore consider this long-term commitment carefully.”

Action plan

Decide if ready to make a long-term property commitment.

Examine US-dollar mortgages.

INVESTMENTS

Philippa Gee, Torquil Clark

“I am always a little sceptical about buying property overseas. The costs of travel, upkeep and interest rates can prove unattractive and people that I know have come to regret their decision. EIther way, Jan and Ben should get a better grasp on their financial position so that they can make a decision with confidence.

“I am concerned about the health of their investments. An overall structure is missing and there is a lack of equity exposure. There is an adequate amount of time until retirement and therefore a suitable level of risk could be taken.

“I would start with managed global funds, to give the diversification needed but without requiring regular reviewing, such as Artemis Global Growth and Jupiter Global Managed.

“Providing that pensions are in place and the mortgage is minimal, there is still plenty of extra cash to cope financially with extending the house. At a time of a cooling property market, both in the UK and US, it can be a wise investment to add to your home and boost the future value.

“Overall, they need to take more account of their retirement provision and look at exactly how they plan to use the money for their children, as well as regularly reviewing their investments. Jan and Ben are on a great course and with some planning now, they can move forward.”

Action plan

Review plans to buy property overseas.

Give investments an overhaul to make them more balanced.

SAVINGS/FINANCIAL PLANNING

Dennis Hall, Yellowtail.co.uk

“There are smarter things that Jan and Ben can do with their money – how would it feel to be mortgage free? Assuming the Open Plan mortgage rate is 6 per cent then Ben, as a higher rate taxpayer, needs his investments to earn 10 per cent just to break even.

“The Premium Bonds look like a lousy deal. With average monthly winnings of £75, their £30,000 returns just 3 per cent a year.

“Ben and Jan’s savings and investments provide a solid base to build, but I wonder whether they have taken their eye off the ball slightly.

Despite Jan not working she isn’t barred from making ongoing pension provision. An annual contribution of £2,808 will attract a tax reclaim of £792 in this tax year, even if she doesn’t pay tax, making a gross pension contribution of £3,600.

“With two young children, Jan and Ben’s protection policies should be reviewed regularly so that if anything happens to them, there would be enough insurance cover to maintain an acceptable standard of living without any financial worries.

“The older policies should be reviewed too; particularly the endowments and the various pension plans. Charges could be reduced by consolidating the freestanding arrangements into single plans, and it would be an appropriate time to review the underlying investment performance. It might be time to replace the endowments with cheaper alternatives.”

Action plan

Use money in Premium Bonds to reduce debt.

Consider pension contributions for Jan even if she isn’t working.

Reappraise protection needs.

LINKS

Savills Private Finance: 020-7877 4710, www.spf.co.uk; Torquil Clark: 0800 0723186, www.torquilclark.com; Yellowtail: 020-7933 8670, www.yellowtail.co.uk .

Jan’s response “The advice from the experts has confirmed the complexities of owning a second property thousands of miles away, despite the attractive prices. But it may be something we revisit in five or six years’ time.

“The pensions advice was very valuable. We believed that Jan could not pay into any sort of fund while she was not working. We were also not given the option to consolidate Ben’s additional voluntary contributions, which is certainly something we will look at now.

“The investments advice was very useful. Our goal has always been to provide for the children’s education and our retirement, so we clearly need to reevaluate our savings and have a much clearer plan in place.

“Finally, we realise that Premium Bonds aren’t the most efficient savings, but the four £50 cheques that arrived this morning make them worth hanging on to a little longer.”

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