Buying the house we're renting

Faloola_Chong · 28 September 2011 at 1:12PM

Has anyone got any thoughts on or experience of this?

Got sick of living in the crummy flat I bought in 2004, but as we'd paid off almost all the mortgage we decided to go mad and moved into a rented detached in a nice part of town; then put the flat on the market and to my amazement it sold (although at a lower price than I paid for it

)

We love the place we're living in now so I thought I'd enquire whether the landlords would consider selling it. The agents rang me last week to say they would consider selling and had had it valued at £290-295K (I'm taking this as an estate agents asking price; a similar property but not as modernised was on the market at £250K and sold recently). We have just signed a 12 month tenancy so there is no urgency to buy, but at the age of 41 I don't want to spend too long renting or I'll be running out of time to pay off another mortgage...

Just wondering what I should take into account when deciding what to offer (or whether to)? If we pay £275K the repayments on a 24 year mortgage (5 year fix; 30% deposit) will be much the same as our present rent, and hopefully we'll be able to make some overpayments. The property is only ~20 years old & has been completely refurbished (new bathrooms, kitchen, boiler, double glazing) recently so hopefully shouldn't need any large investments in the near future.

Anyway the way I see it:

PROS
(i) Won't actually have to move!
(ii) We know the property and area well.
(iii) Landlords recently bought a property (January) and presumably would want to sell this one to pay off their new mortgage.
(iv) No chain and no potential competition.

CONS
(i) Landlords don't need to sell and may not be willing to negotiate on price.
(ii) Don't want to fall out with landlords by making them an insulting offer

I'm tempted to make an offer of £275K now and say that if this is unacceptable I'll make another one next year (which may be higher, the same or maybe even lower depending on what happens in the market)

Is there anything I'm not thinking of here?

franklee · 28 September 2011 at 5:53PM

Faloola_Chong wrote: »

Just wondering what I should take into account when deciding what to offer (or whether to)? If we pay £275K the repayments on a 24 year mortgage (5 year fix; 30% deposit) will be much the same as our present rent, and hopefully we'll be able to make some overpayments.

What rate is that five year fix at? What rent are you paying? Really the buy vs rent calculation should compare the mortgage interest against rent plus take into account the loss of income on your 30% deposit. You should be getting some income from your 82K deposit saved.

What's the landlord's position, is he an accidental LL who was unable to sell his own home so let it out, or did he purchase the property as an investment? Was it for sale before, can you property bee it. It's worth taking an interest in your landlord's situation.

If it were me I'd sit tight for nine months or so and mention it again towards the end of your 12 months fixed term. I see little point in doing anything now was you've 12 months security and you can see how the market goes.

Also don't forget higher stamp duty kicks in at 250K so draws down the price of property "worth" 250-285K or so. Also nothing to stop you getting it valued yourself.

Yorkie1 · 28 September 2011 at 6:30PM

I'd get a valuation from a RICS to start with. No point in arguing with the LL's valuations unless you've got something independent to base it on. You don't say whether the LL's figures are from EAs or RICS too.

Faloola_Chong · 28 September 2011 at 6:51PM

Thanks for the replies

I presume that the LL's valuation was from the estate agent/letting agent who we're renting the property through. Unless they haven't told me, no one has had access to value the property in the 6 months we have been living here, so I guess it was a drive by/letting brochure pictures valuation. Is it worth getting another EA valuation for comparison?

I'm not sure about the LL's situation. The property was last sold in 1997 and I can't find any evidence of it having being on the market for sale. I believe the property was let privately before we moved in in March, but the landlords set up a mail redirection in their names when we moved in, so they must have lived here fairly recently. They purchased a more expensive property nearby in January this year...maybe they've been abroad? or maybe moved out of this place temporarily for it to be refurbished and then decided to buy elsewhere and rent this one out? Mysterious...

The 5 year fix is at 3.69% (£995pcm) and we are paying £950pcm rent. Interest only at the same rate would be £584pcm.

Faloola_Chong · 6 November 2011 at 7:37PM

Sorry to bump this but...

I've been doing a bit of research on Zoopla and found (i) that the similar property recently marketed for 249000 actually sold for 220000 and (ii) other similar properties sold in 2007/2008 for 250000, since when there has been little change in prices. Properties such as this one that sold around 2000 are 'valued' much higher by their calculations, so they have obviously underperformed compared to the overall 'detached' market in the area, which I can understand as their size and layout wouldn't appeal to everyone.

How can I explain this to the EA and landlords without saying 'YOUR VALUATION IS LUDICROUSLY OPTIMISTIC?'

Yorkie1 · 6 November 2011 at 8:07PM

You get an independent valuation as I suggested in my previous post.

theartfullodger · 6 November 2011 at 9:02PM

But if you are keen to buy, why would the current owner want to sell at any lower price?? Presumably he is making money from you already, he can wait as long as he likes..

No, it's not fair...

Hope you find somewhere you want at a price you consider fair..

Faloola_Chong · 6 November 2011 at 9:04PM

Yorkie1 wrote: »

You get an independent valuation as I suggested in my previous post.

I've been trying to find out what that's going to cost...does £200 + vat sound reasonable? Be interesting to see what they come up with.

When I bought my last place they just seemed to confirm the price I'd offered (although in retrospect this was too high), then when I remortgaged the guy asked what I'd paid on purchase and just added a bit on as prices had gone up...

Faloola_Chong · 6 November 2011 at 9:07PM

theartfullodger wrote: »

But if you are keen to buy, why would the current owner want to sell at any lower price?? Presumably he is making money from you already, he can wait as long as he likes..

No, it's not fair...

Hope you find somewhere you want at a price you consider fair..

Thanks, yes that's the trouble. I'm hoping they'll consider it as they may not get as much at a future date and they want to pay down their new mortgage. Also I presume they can avoid paying CGT if they sell within a certain time period.

theartfullodger · 6 November 2011 at 9:28PM

Many landlords don't worry too much about paying off mortgages: I've 3 mortgages, all interest only & no plans to pay them down.. (I get tax relief on the interest payments - daft I know...)

If he only bought recently he is probably expecting to hold on to it for 10, 20 years - unless he gets a very attractive offer....

Beckyy · 6 November 2011 at 9:42PM

I definitely would not say 'if this offer isn't high enough I'll make a better one next year'. If he's in no rush to sell then waiting another year, while making rent is the easy option.

I would get a couple of other estate agents to value it and just make an offer you're comfortable with and can afford.

Buying the house we're renting

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