Do not shout!

thriftybabe

Friend of ours works for a builder who is offering staff incentives to buy some of their properties. The one he is thinking about his around £40k less than any of the others that have sold. Do you think he should buy? I don't think he should as I think the property will fall more over the next year but what do you guys think. He is not buying it for himself but as a buy-to-let. I know he already has properties and he does not make much from these. Surely it would be best to put the money in the bank with one of the tax free incentives. The other thing which I think is a bit crazy is that jobs in Construction are not safe. I think if it were me I would keep my funds liquid just in case!

BiggaThanBen

If others were sold for £70K a year ago then £40K off is definitely a bargain, he should go for it !

kennyboy66_2

thriftybabe wrote: »

Friend of ours works for a builder who is offering staff incentives to buy some of their properties. The one he is thinking about his around £40k less than any of the others that have sold. Do you think he should buy? I don't think he should as I think the property will fall more over the next year but what do you guys think. He is not buying it for himself but as a buy-to-let. I know he already has properties and he does not make much from these. Surely it would be best to put the money in the bank with one of the tax free incentives. The other thing which I think is a bit crazy is that jobs in Construction are not safe. I think if it were me I would keep my funds liquid just in case!

Why not just work for his employer for free?

lynzpower

I think he should be mindful of ensuring his own job is safe before taking on any other debts at this time.

carolt

40K off what? Difficult to comment without knowing this. Also, if he wants it as a BTL, it depends on the rental yield, surely?

thriftybabe

I think they were going for £131k and will now be getting it for £91k. To be honest it is not in a great area and I would think the only people who would like to rent there is social. The figures do not add up to me but he thinks it is a good deal. Our own company have already built a lot of social housing in the area so I would imagine that it would be hard to get someone from social to let it out as there is already an abundance of that in that area.

He seems keen and is a really positive person. I am so negative all the time about construction. Thanks to this site I was aware of what was going to happen in January. He looked at me as if I was mad when I told him that there were going to be hard times ahead. I still do not think that he thinks it is going to get any worse but I believe it will.

He thinks as long as it covers nearly all of the mortgage, he can put the rest to it and still make a profit in the long term as he is getting it at such a good deal

Max_Headroom_3

The reason that this builder is offering a "special staff discount" of £40K off (reducing property from £131K to £91K) is because he can't sell them for more than £91K (if he could, he would).

So your friend is not buying a £131K property at a big discount, he's buying (at best) a £91K property for £91K and potentially a property worth less than £91K for £91K.

Discounts and money off asking prices is meaningless, the only figures that matter is what he's paying compared to market rate (what the house would sell for on the open market). And believe me, if this builder could get more than £91K on the open market, he would be.

There is no "discount" here.

thriftybabe

I think he thinks they will go up in a couple of years time and even if he loses short term he will still make a profit after that. I don't see things changing for a few years. Next time I see him will speak to him. I have told him that he should go on this site and he will be kept up to date with things before and will tell him again so that he can make an informed decision.

hornetgirl

thriftybabe wrote: »

He thinks as long as it covers nearly all of the mortgage, he can put the rest to it and still make a profit in the long term as he is getting it at such a good deal

I find that phrase "covers nearly all of the mortgage" very scary. If the rent doesn't cover the mortgage, AND leave a bit left over for voids, repairs etc it doesn't sound like a very good idea at all.

sarkin

If your friend can rent the property out make a good profit and the yield is higher than putting the money in a high interset savings acount then its a deal.

I think you will find the savings acooutn will win and its risk free.

ANYWAY WHO'S SHOUTING

Max_Headroom_3

thriftybabe wrote: »

I think he thinks they will go up in a couple of years time and even if he loses short term he will still make a profit after that.

Back up from where though, and how high? If they drop by half and then increase 20% he'll still have lost a lot of money.

He'll have to tie up a fair chunk of money right now to cover the deposit, buying costs etc, be dealing with the aggravation of tenants and maintenance, having to cover void periods or non payments, all so that he can play at landlord and hopefully one day it might even be worth as much as he's ploughed in? Hardly a good investment strategy.

A lot of people look at what things were once worth as some kind of "value marker", as though they automatically have to get there again, it's just a blip.

And even if he's right (hell of a gamble), even if they recover to £91K five or ten years, why not buy then whilst they're going up and have all the aggro on an appreciating asset, not a depreciating one? Won't have cost him any more but it'll have saved him a load of hassle for a few years and he won't have to tie up his capital till then.