UK Landlord Forum / Life

Ok so I was thinking of saving up... well I am already, however im greedy and saving rates are crap and I want more.
In about 5 yrs I figured I could save about £25,000 ish but to get a bigger house ( which is what I want) its not very much... so I was thinking of putting down some of my savings already for a new mortgage...paying part of my mortgage..which would be low anyways...and getting my boyfriends cousin to rent it for security reasons as he lives in a bathrom atm ( dont ask :/) and hes my age, hmmm.
So I could still save up about 12k in this time...so id have to sell the property for more than £12,000 than i bought it for, as i probably wont pay more than that in mortgage payments with the help or some rent... to make it worth my while...yes? Which i think in 5 yrs on most properties would be do-able...yes? no?


Anyways the property!
   So its a studio flat atm... which is crap crap crap...who wants to live in a bed sit basically... and would it actually sell... even if it was cheap in 5yrs time??? im not sure.
Soooooo my idea was to make it into a 1 bedroom flat...which would make the open plan lounge/kitchen smaller however it wouldnt be shockingly small....just petite .
Anyways the money side of it isnt tooo bad at all. Its on for £35,000... and its with Halifax bank who are abit tight fisted and want about £28,000 as they have rejected offers of 20-25k.
So i had a small look at house prices in that area... and prices where that cheap in about 2002 and up until last yr they sold at the 50k mark.
I was also worried that when I came to sell in about 5yrs there would be other flats on the market that had the advantage of being new build and cheap too.
However the repossessed new build flats are selling for 60k atm.... so odv the resale of any of them in 5 yrs or so, would be at least 70-80k atleast.

SO the question is.......Is it worth it? Is it risky? Will I be able to sell and make a nice profit? Ive never actually done anything risky to do with money before so im abit worried really if its a good idea, so please please help me decide. Because I know you are all alot more older and wiser than me !

Thankx

Blimey Fee - no pressure then!

Is it risky - cause it is - everything in this world has risks attached - it's YOUR attitude to risk and the handling of same.

Will you be able sell and make a nice profit? Who knows! No idea - thats part of the risk!

Is it worth it? If you can sell and make a nice profit of course it is - if it becomes a white elephant then no it not n=but again that's the risk you take.

To be honest you have to be looking long term with this at least 5 - 7 years by which time hopefully the merket will have stabilised and the 'correction' finalised. If it were a house i woul dbe slightly happier in saying go for it but a flat to me is just to damn risky, but of course it depends upon location. You will be selling against all those apartments built in old warehouses and mills (take manchester for example - Ancoates, Harpurhey, Piccadilly, Hulme that were advertised at £200k= and are actually worth what some one will pay for them often less than £80K.

What are your plans for the next year, 3 years 5years etc? Where do you want to be? Will this project be a second home or your main home? If second then dont forget you will have to pay CGT on the sale if used as rental unless you appoint it as your main residence for tax reasons and actually live there for a while.

Trouble with repo is you make your offer and then have to do all the work, pay for the surveys etc with no guarantee that they will accept your offer. They will not take the property off the market in that time so you could get Gazumped (illegal but the estate agents/banks dont seem to care). Then after a period of time (usually 30 days) it has to go in the local paper that an offer of so and so has been received for such and such and any higher offers should be received by KnobHead and co Agents by a specific date. So what I am getting at is - you could spend a shed load of money doing the surveys etc and still not get the property if someone comes in at the later stage.

Jools

Thanks Jools !

Didnt think of the Capital Gains tax...as I defo WOULDNT be living there ha its not really my cup of tea tbh... so i'll have to really consider that.

I did do abit of looking and as you say it isnt easy to put an offer it etc and paying for a survey. However mental as it may sound... I probably wouldnt get a survey :/ I know i know. HOWEVER my to be father in law is a joiner/builder who does surveys! so actually hmm yes i would be getting a survey but for free so i dont really need to worrie about loosing money it i get somone else making a higher offer.

Also you mentioned that a house would be less risky than a flat and i was thinking that... BUT I could actually buy a 2 bed terraced for the same price. Seems like a no brainer probably but it is about an hrs drive from where i live and it would cost more to do up and I would have to look for tenants...as just leaving it empty seems pointless.
So I dont know about that one. Probably in the long run it would be better to buy a terrace, it would make financial sense...but just abit more difficult for myself.

If only life were so easy! I must say that I have bought my houses without survey and nearly came unstuck on the last one when - when propping to take the front elevation down we discovered that some tosser has replaced the slate tile with concrete on a hip roof without upgrading any of the joists. Huge panic whilst we installed new joists and purlins to strengthen everything. If you have someone who knows what they are doing great!

MAnaged to sort for £600 so not bad result.

In theory for the CGT avoidance all you have to do is show you were living there as your main residence so all you do is change council tax to your name, insurance, divert post etc - keep utility bills etc and then at some stage move it back to your existing residence. Do it too many times and HMRC will get pissed off BUT all it is is one piece of paper - perfectly legal as avoidance not evasion!

Jools

It's the worst time to save! Rates are ridiculous.

Your money would be working harder if you:
a) reduce debt
b) invest

I'm doing a combination of the both at the moment!

Debt reduction is the way to go!

Get rid of credit card balances and or loand - it's often better to take the hit on early repayment charges as you are paying more in interest than you would get in a savings account.

www.moneysavingexpert.co.uk is an excellent site.

Jools

Well ive got mortgage debt.... but I dont really see that as debt if you get what i mean. But I havent got ANYTHING else. Browny points for me eh.

So is it best to just invest in property?
Going to see a terraced house...next week i think it is. Hopefully it wont be a wreck .

Quote from: FeeFee on June 30, 2009, 11:00:04 AM
Well ive got mortgage debt.... but I dont really see that as debt if you get what i mean. But I havent got ANYTHING else. Browny points for me eh.

So is it best to just invest in property?
Going to see a terraced house...next week i think it is. Hopefully it wont be a wreck .

Are you going to invest with that annoying b/f of yours, or is this going to be a solo project?
A mortgage is still a debt, Feefee!!

That's the problem - most of the financial institutions do not want us to see mortgages as debt - just mortgages, hence the "why not remortgage your house to take out the equity and then buy a car, go on hols etc" attitude of industry. They also called the bundles of sub prime toxic mortgages they sold 'derivatives' so that none of the high cost idiot bankers could tell they were actually packages of debt made to look nice.

A golden turd maybe nice and shiny - especially when you spend a long time polishing it up - but at the ned of the day - it's still a turd!

Jools

PS annoying B/F - do tell!!

Yep investing together.... And what is with this annoying b/f thing ha he has his flaws but doesnt everyone?! So i think you should take it back!

Anyways gonna have a look at some cheap properties etc but think im going to keep my options open atm as hopefully i will be a landlady ( a very nice one too ) at the end of the month!

So with that and work and im starting two courses in aug. I wont have much time left!
But thanks jools you have enlightened me abit more .   

well done Fee!

It's all about options! Always try to have a way out or at least a plan B,C & D.

If you are investing together then make sure you have a really good business agreement in place, just incase, it does not work out and you have to sort out all the issues. Always easier with an agreement in place (ie how much each of you is putting into the deal, whether any money should be returned straight away or within a period of say 6 months (to aid cash flow)).

No one wants to go into a relationship/business deal thinking about stuff like that BUT it is an important part of business. You dont want to be left liable in case he buggers off and vice versa. It's about protecting your investment.

Jools

PS I blame PF about the annoying bit!

Having no credit can go against you, so just make sure you keep tabs on what debt you have etc and keeep it good.
As jooles stated its all about options, the more you have the more you can play