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What's the worst that could happen?!

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  • moanymoany
    moanymoany Posts: 2,877 Forumite
    Well, you know what - we all go to hell in our own way. If your mum wants to throw away her £100k, that's her business.
  • Thanks - lostinrates
  • GracieP
    GracieP Posts: 1,263 Forumite
    My brother still maintains that it is a 'good buy if not a good investment' and argues firstly that Wimbledon Village is very different to Elgin Ave in Maida Vale and also that of the 100s of rental properties he has looked at this is the nicest.

    I live in Wimbledon and the village high st is different to Elgin Ave in both good and bad ways. Personally I prefer Wimbledon, it has prettier and a nicer atmosphere, imo. But on the other hand You can walk to Oxford St from Elgin Ave and Maida Vale tube station is on Elgin Ave, so we had a 30 second walk to the train. However I only mentioned Elgin Ave to illustrate that I had firsthand experience to how horrid living above retail units is.
    (although Northernline would get you to Shaftsbury ok, I'm thinking about the home trip )
    The northern line station in South Wimbledon is too far away from the village to be a realistic option. Though Wimbledon does have a theatre, (two if you count the Polka).

    sliding_doors you need to present the financial figures to your mother. Ideally property investors should be looking at a 10% yield, it's possible to get 7% interest on savings now, so any less than 10% and it's just hassle for nothing.

    This investment will cost your mother £583pm in lost interest on her savings. It will cost her £500pm on interest repayments at 6%. So that is an outgoing of £12996 a year. To get a 10% on her investment she should be looking at a profit of £10k a year. So to cover costs she should be taking £22996 a year in rent. So unless a property commands a monthly rent of over £1900 it isn't worth £200k.

    Those calculations are incredibly rough. I'm not calculating tax on savings interest, legal fees, ground rent, management + maintenance costs or voids. But it goes to show just how unrealistic your mother and brother are being.

    A studio flat in Wimbledon is currently on the market asking for a rent of £850pm. If it achieves that it indicates that it is worth about £102k, but rents are falling so it may be worth even less. I pay less rent than 25% more for a 2 bed house so I think £850pm for a studio is optimistic. £1000pm is comical, sorry.
  • . I just spoke to her and her view is that if things really go bad she will be able to rent it out for £1000 a month (this would cover her even if the interest rate goes up to 10-12%).

    I think she's massively overestimating the rental potential. £1k a month?! For a studio? In Zone 3? (Wimbledon or not).

    For example, on Rightmove at the moment, a (small) studion 400 yards from the station is £125 a week:

    http://www.rightmove.co.uk/viewdetails-7018736.rsp?pa_n=1&tr_t=rent


    Even a really posh and spacious studio near the station is £750 per month, not £1,000

    http://www.rightmove.co.uk/viewdetails-10676790.rsp?pa_n=1&tr_t=rent

    If you are spending £1,000 a month in Wimbledon, you are not paying it for a studio. Instead, in the following listing, you get a 2 double bed, living room, and kitchen flat, between the station (bottom of the hill) and the village (top of the hill) and a garage thrown in. If you were renting, and wanting to pay £1k a month, would you go for a studio, or a 2 bed flat with secure parking, in the same area?

    http://www.rightmove.co.uk/viewdetails-22103822.rsp?pa_n=2&tr_t=rent

    There is another 2 bed flat with garden for rent @ £1,050 per month, in the same area:

    http://www.rightmove.co.uk/viewdetails-22292186.rsp?pa_n=3&tr_t=rent

    And these are ASKING prices for rent, not actual acheived prices.

    The LHA (new housing benefit) is £152 a week in that area for a studio or equivalent. Not a definitive guide (lots of rents are higher than LHA) but still a LOT lower than £1,000 a month.

    I can't see your mother getting more than £750 a month in rent for a studio, and that's optimistic. So that's a rental income of, on average £9k a year, max. Deduct from that terrible 4.5% gross yield average letting agent and void costs, and you have £7.5k a year. Service charge isn't specified on the listing, but could be £600 a year at least. And there's gas inspections, maintaining the place, etc

    That is, therefore, about £5,000 a year to pay the mortgage with. On an interest-only, buy-to-let mortgage, that will cover about £77,000 of borrowing. So your mother would have to cover the other £23,000 of the mortgage.

    It's a terrible idea, to be blunt.
    ...much enquiry having been made concerning a gentleman, who had quitted a company where Johnson was, and no information being obtained; at last Johnson observed, that 'he did not care to speak ill of any man behind his back, but he believed the gentleman was an attorney'.
  • Gangstabird
    Gangstabird Posts: 1,920 Forumite
    Easy to pursuede her - print off this thread. Done
  • lynzpower
    lynzpower Posts: 25,311 Forumite
    10,000 Posts Combo Breaker
    I just do not think that a studio at 200 is good vfm. Ive just checked rightmove.

    http://www.rightmove.co.uk/viewdetails-19856093.rsp?pa_n=10&tr_t=buy 2 bed flat 199 - down from 210

    2 bed GROUND FLOOR garden maisionette 199 from 220 ( quite tempted myself for that LOL) ( although this is more colliers wood- direct access to northern line- leading to leicester sq and theatre land :confused: looks nice too http://www.rightmove.co.uk/viewdetails-20848442.rsp?pa_n=10&tr_t=buy

    Pretty large brand new live work unit in colliers also - off to auction as THIS is overvalued at 200!
    http://www.rightmove.co.uk/viewdetails-17009170.rsp?pa_n=9&tr_t=buy

    The issue is also that THESE properties will also take a hit - not least to the new SDLT announcements today.

    my uncle lives in Wimbles and yeah its oK if you like the burby feel, full of chains as most larger "town centres of london are" but some nice bits as well. :confused: But is it the be all and end all :confused: I guess its easy to spend someone elses money :confused:

    Im certainly concerned that the lad seems to have decided "wheres the nicest" and convinced your mum ( intentional or not) she cant lose. Well plenty of us have suggested how she can lose. If you look even 1/4 mile around winbledon there are two beds on that- much more salable than a poxy studio above a shop.

    I cant say anything about positive about this purchase Im afraid. It sounds to me like the lad likes the idea of posh wimbles- and decided to try getting in the middle of it regardless of value. It sounds a bit like he is steering it, a decision made so quickly? You having grave concerns? Mum wanting to do the best but repeating EA chatter?

    Additionally, Flats above commerical, always more difficult to sell - lenders not keen on them- buyers not overenamoured either, can turn into nightmare when turns into a chicken shop/ boarded up etc. Dont think this cant happen in wimbledon, in a recession im certain it can.

    I really hope this will help your mum change her mind, there have been some excellent points made here, especially by Gracie P.

    I really hope it helps :o Let us know how you go on :)
    :beer: Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
    Theres no dollar sign on piece of mind
    This Ive come to know...
    So if you agree have a drink with me, raise your glasses for a toast :beer:
  • GracieP
    GracieP Posts: 1,263 Forumite
    lynzpower wrote: »
    I just do not think that a studio at 200 is good vfm. Ive just checked rightmove.

    http://www.rightmove.co.uk/viewdetails-19856093.rsp?pa_n=10&tr_t=buy 2 bed flat 199 - down from 210

    To be fair, that's not exactly Wimbledon. This one isn't bad though, the broadway isn't as nice as the village, but I know which one I'd prefer. (Although I have my suspicions that it might be a retirement flat and Foxtons are just being !!!!! and trying to fool potential buyers.)
  • lynzpower
    lynzpower Posts: 25,311 Forumite
    10,000 Posts Combo Breaker
    I dont know wimbledon overly well to be honest, but I just wanted to display that this IS other stuff, and significently bigger at that! But great spot, ccos my rightmove didnt bring up anything less than 199. :beer:
    :beer: Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
    Theres no dollar sign on piece of mind
    This Ive come to know...
    So if you agree have a drink with me, raise your glasses for a toast :beer:
  • GracieP
    GracieP Posts: 1,263 Forumite
    lynzpower wrote: »
    I dont know wimbledon overly well to be honest, but I just wanted to display that this IS other stuff, and significently bigger at that! But great spot, ccos my rightmove didnt bring up anything less than 199. :beer:

    Parkside in the village is the nicest. Huge old detached houses overlooking the common, many which are actually worth 7 figures. The village, where the high st is, is extremely nice, it has more than enough independent businesses to not feel too identikit. The town, where the train station and broadway is, is more like your average south London town. But it's still pretty nice and has an lovely bar which makes the yummiest ice-cream cocktails and has 3 hour happy hours.:D And it might be a chain, but I do love a GBK burger.

    Wimbledon park is something in the middle of the town and village, with fewer chains, but fewer business in total, so it's not really a destination, iyswim. South Wimbledon is skankier, it's not bad, but it doesn't have the same genteel atmosphere.;) It does however have some great asian restaurants, including one which makes the yummiest fresh chicken gyoza.

    Wimbledon is very nice, but it depends on your stage in life. When I first moved to London I thought it was bland. But now that I'm hoping to start a family it is perfect. Which is another reason I think a studio is a terrible investment. It's a family area, and families don't live in studios. The whole area is also dreadfully over-priced. The rent I pay is about a 1/3 of the interest I'd pay on a 100% mortgage for my house. And as far as I can see from past housing busts it is the most overpriced properties that fall the most.
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