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House Dilemma
UFO_8
Posts: 10 Forumite
First post so go easy guys:
House dilemma
I have a modern 3 bedroom House in the West midlands which has been for sale for the last 18 months; has been valued at £190k. A sale had been agreed, but the purchaser dropped out. It is unoccupied and is costing a small amount in council tax (I was getting 50% relief although the council have changed their rules this year) gas, electric, buildings insurance etc. This would probably total £1300/ year.
I have paid off the mortgage in full, I would like to release the capital to invest elsewhere, but the housing market seems to have really cooled off. So the options I am considering are:
1. Leave the house on the market, keep everything crossed and grin and bear it. Although I have not witnessed any growth in the local housing market for the last 6 months.
2. Re-mortgage on a buy-to-let and take say £100k out to invest elsewhere. This would probably be in the stock market later this year. The potential rental is circa £750/month with a 10% management charge (I would not want the hassle myself.)
I am a higher rate tax payer, so any income would be subject to 40% tax. I am not financially tied to the capital, but it would obviously be nice to invest it elsewhere. Any opinions on the above options, or other ideas would be greatly appreciated.
House dilemma
I have a modern 3 bedroom House in the West midlands which has been for sale for the last 18 months; has been valued at £190k. A sale had been agreed, but the purchaser dropped out. It is unoccupied and is costing a small amount in council tax (I was getting 50% relief although the council have changed their rules this year) gas, electric, buildings insurance etc. This would probably total £1300/ year.
I have paid off the mortgage in full, I would like to release the capital to invest elsewhere, but the housing market seems to have really cooled off. So the options I am considering are:
1. Leave the house on the market, keep everything crossed and grin and bear it. Although I have not witnessed any growth in the local housing market for the last 6 months.
2. Re-mortgage on a buy-to-let and take say £100k out to invest elsewhere. This would probably be in the stock market later this year. The potential rental is circa £750/month with a 10% management charge (I would not want the hassle myself.)
I am a higher rate tax payer, so any income would be subject to 40% tax. I am not financially tied to the capital, but it would obviously be nice to invest it elsewhere. Any opinions on the above options, or other ideas would be greatly appreciated.
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Comments
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Have you thought about reducing the price? Usually when a house takes that long to attract a buyer it is down to nothing more than it being overpriced.0
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What part of the West Midlands are you in?
Birmingham, Coventry, Wolverhampton??
Because, personally, i think, houses are vastly overpriced in relation to wages!
Wage growth is very low, so until either wages start to accelerate, or house prices fall back in line with wages, we will have a stagnant market.
If wage growth takes off, so interest rates will rise, which will bring on this House Price Crash that is and has been talked about over the past couple of years.
So, my advice is, take the hit, reduce the cost until it sells, take the money, and put it in a high paying savings account, because, i have a feeling interest rates are only going one way, and it ain't down?
You do not want to start getting trapped into chasing the market down, resisting cutting the price, then finding out you will have to cut it more at a later date because the market has fallen?
BTW, buy to let is dead, the numbers just do not stack up, the asset price is far to high with a regard to the yield you will get by way of rent, and with no or little capital growth, it just is not worth it.0 -
The house is in Warwickshire, sorry i'm a little weary of giving specific details.
It has been on with several estate agents, each have given positive feedback. I have also taken it off the market in the last 18 months, so it didn't get stale. The price has been reduced, and is very competitive compared to comparable homes in the vicinity.0 -
If it does not sell, the cost is to high, simple as that.
The housing market is being talked up by all the vested interests, but it is not in a good state.
Reduce and sell now, but i could be wrong just my two penneth?0 -
Dear UFO 8,
I am not a financial adviser and so will not get involved with the puposes to which you put your monies but would inform the following, hoping it helps your consideration process:
There are obviously a number of different RTB schemes and lenders. By and large the maximum advance would be 85% Loan to value and the proposed repayments would need to be exceeded by rental income at 125% (this is typical but some variations around). IE: Rental income £750 pm maximum outgoing on proposed re-mortgage repayment £600, which should suffice to cover £100,000 interest only.
You could possibly put a clause in the rental agreement that any parties renting would still have to allow possible purchasers to view the property. Also if you leave the property on the market after any re-mortgage you will have to consider the impact of any early redemption penalties that may apply. However, you may decide to remove the property from the market if you do decide to re-mortgage.
Hope this is useful.
Good Luck,
Regards,
Mark.You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow the MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.I am a Mortgage Broker.0 -
I am fairly local to you (Worcs/Warks border) and haven't noticed any kind of slow down, in fact last year was fairly brisk with a small increase in prices, which we haven't seen for a while.
If you aren't prepared to post up a link on here, where you will get lots of opinion, then you could send me a pm and I could try to help. I sell houses for a living and my bark is worse than my bite
If the house is empty, it might be a significant part of the problem.
I don't really see BTL as a great investment right now but as you own outright it isn't as much of a risk as it would be for those speculating with high LTV mortgages.Everything that is supposed to be in heaven is already here on earth.
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Because, personally, i think, houses are vastly overpriced in relation to wages!
Wage growth is very low, so until either wages start to accelerate, or house prices fall back in line with wages, we will have a stagnant market.
I think you'll find house prices usually vary due to demand, and in areas where houses are several times the average wage, you'll get alot of higher earners stepping in to buy them, then rent them out. Wage growth is about normal in line with "inflation" (according to The Blairmeister), but we do have a housing shortage in this country, thus prices remain high as demand is still much higher than availability.
BTW, buy to let is dead, the numbers just do not stack up, the asset price is far to high with a regard to the yield you will get by way of rent, and with no or little capital growth, it just is not worth it.
BTL isn't dead, as all those who can't afford to buy still need to rent!! It's only dead to those who buy expensive properties on 100% mortgage, then have interest payments that aren't covered by the rent. Make sure your rent easily pays the mortgage interest, as well as any EA fees, and money put aside for problems (plumbing, boiler etc...) and allow for rises in interest rates, maybe up to 10% just to be safe.
You'll only pay tax on any profit after you've paid the mortgage interest and EA management fee.Should've = Should HAVE (not 'of')
Would've = Would HAVE (not 'of')
No, I am not perfect, but yes I do judge people on their use of basic English language. If you didn't know the above, then learn it! (If English is your second language, then you are forgiven!)0 -
I think you'll find house prices usually vary due to demand, and in areas where houses are several times the average wage, you'll get alot of higher earners stepping in to buy them, then rent them out. Wage growth is about normal in line with "inflation" (according to The Blairmeister), but we do have a housing shortage in this country, thus prices remain high as demand is still much higher than availability.
BTL isn't dead, as all those who can't afford to buy still need to rent!! It's only dead to those who buy expensive properties on 100% mortgage, then have interest payments that aren't covered by the rent. Make sure your rent easily pays the mortgage interest, as well as any EA fees, and money put aside for problems (plumbing, boiler etc...) and allow for rises in interest rates, maybe up to 10% just to be safe.
You'll only pay tax on any profit after you've paid the mortgage interest and EA management fee.
What a load of old tosh, BTL as a business model is dead, dead in the water, and the sooner people wake up to this fact, the sooner we can get some sort of sanity back into the housing market. Rather than the vested interested parties such as Estate agents, Financial Advisers and Brokers talking up the market. They have created this bubble we are in, and when it bursts will they be there to mop up the tears, no they will not!
If you are not getting a Gross yield of at least 7% on your BTL then you might as well put you money into a Fixed Rate Bond which will now pay 6.45% Gross, that way you have no maintenance to do, no void periods, and no hassle with bad tennents!
http://www.thederbyshire.co.uk/savings/longer_term/1_year_fixed_rate_bond.aspx?ekmensel=2152299f_175_197_3345_1
£190,000.00 house
Rent per annum at 7% = £13300.00
Rent per Month Gross = £1108.33
Rent per Month after 20% tax = £886.66
£190,000.00 in the bank at 6.45%
Gross = £12255.00
Net after 20% tax = £9804.00
Interest per Month = £817.00 and no maintenance to do, no void periods, and no hassle with bad tennents!0 -
At 40% tax, the OP will have a lot less than £190,000 in the bank :eek:
The rent won't be that high either though. I'm guessing around £700pcm. I know nothing about Business Taper Relief - can anyone explain how this might help the OP if they did let the house?Everything that is supposed to be in heaven is already here on earth.
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you say the house is empty. have you dressed it for sale?0
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