selling and buying advice

m17936

hi, i bought a flat in brentwood essex a year ago for 242000 pounds. in august, due to work committements, i had to relocate to london where i am renting at the moment. so i rented the flat and i am getting 350 pounds on top of the expenses (mortgage+service charge). the mortgage on the flat is for 75000 pounds for 14 years.
i have seen a lovely property in london which i would like to buy but i don't want to end up with a huge mortgage so i want to sell my flat in essex first.
i phoned an estate agent and they said (without inspection) that now the flat is worthed 200000 pounds and they adviced me to rent it for the time being.
should i follow that advice or take a loss on the sale with a possible gain in the purchase of the new flat. this is a brand new one, direct from the builder, asking price 340000 pounds but the selling agent spontaneously dropped to early 300000 so i guess there is more room for negotiations.
any suggestion, guide, advice will be very much appreciated.

silvercar

If you are happy to be a landlord then I would transfer that mortgage to a BTL and buy your new place. Why realise your losses if you don't have to? If you wanted to sell, you would need to get the tenant out and risk having the property empty for months while the sale goes through.

m17936

sorry maybe it will sound stupid but what is a BTL?

ad9898_3

m17936 wrote: »

sorry maybe it will sound stupid but what is a BTL?

BTL = Buy To Let, my advice would be, forget your new build flat and concentrate on selling your own. EA's are notoriously optimistic as to when prices will reach 2007 levels again, my opinion would be around 2017-2020 (adjusted for inflation).

If you let out your own flat and buy a new one, you're opening yourself upto all kinds of risks at this time in the cycle. What if you can't let it ?, void periods.

BTL was an astute business for only a certain number of business minded people, for the rest it was a ' get rich quick pyramid scheme ', I advise you not to go down this route, as seems you are are quite inexperienced in the matter.

Sell..... and good luck

huntersc

My advice would be to stay away from purchasing any kind of property right now. You're already in a position where your property is worth less than you paid for it and you don't want that to happen again. If you buy this new property in London you are massively exposing yourself to a falling market with two investments. So do not buy.

As for whether you should sell your current place or continue renting it, well if you can afford to lose £40k + stamp and other costs then I guess it could be an option. However very little is selling right now, you'd probably b lucky to get an offer at all, nevermind an offer at £200k.

You've got a nice little earner there, £350 excess a month is okay, your mortgage is being paid, I'd continue letting it out. Personally I might increase how many years the mortgage is over, from 14 years to 20, this would give you a bit of extra room but that's up to you.

So I'd say not to bother buying a new property right now and continue letting out the old one.

m17936

thanks a lot. it is my view as well. i am very inexperienced of the uk market and definitely i don't want 2 properties.

Premier_2

So you are making about £350 per month profit (plus a little more since your figures probably include the capital repayment portion of the mortgage)

In the last year your have been losing £3500 per month on the capital value of the asset.

Now it depends on what you think will happen in the future.

Most people expect prices to fall further, at least for the next 6-12 months - some probably will say 6-12 years but let's not argue over that here. Does it seem a good business to earn £350 pcm yet depreciate capital at £3500 per month?

Let's assume prices stay stagnent. You currently have £125k in equity tied up in that property generating an annual profit of just over £4200.
You would earn £5k in interest on that £125k by placing it in a bank at a rather low rate of 4%

Let's take the unlikely scenario and you believe against all odds prices will rise short term. What's the increase in value of £300k at say 10% compared with the increase in value of £200k at the same 10%?

Whichever way you look at it, why would you want to retain the current property as an 'investment'?

m17936

Thanks a lot premier. So if I decide to buy how would you go about it?

huntersc

No, that's not what Premier is suggesting. He is suggesting you sell the property, not buy the other one.

As for whether you should sell, Premier makes a valid point about the investment. However it all depends on whether you could afford to sell at a drop of around £50k in a year and second, if you could sell it at all. I would suggest it's worth waiting until at least March 09 to see what happens to interest rates and mortgaged rates.

Sonwabile

Please advise.
I made an offer for a house,245000. The survey(organised by the bank) devalued it to 230000, but the bank has given me a mortgage for the original offer of 245000. This doesn't seem right. My solicitors have not been helpful and the agents were not pleased. And mention at some point,'the bank has to consider the wrong survey'.
Can the bank be made to consider the survey or account for not doing so?

Your advice would be much appreciated.

Cat695

Sonwabile wrote: »

Please advise.
I made an offer for a house,245000. The survey(organised by the bank) devalued it to 230000, but the bank has given me a mortgage for the original offer of 245000. This doesn't seem right. My solicitors have not been helpful and the agents were not pleased. And mention at some point,'the bank has to consider the wrong survey'.
Can the bank be made to consider the survey or account for not doing so?

Your advice would be much appreciated.

Erm so you want to pay the 245k??? because if my bank said its only worth 230k I would be changing my offer.....why would you want to be in more debt?? the seller doesn't know that your bank is still willing to give you the 245K so drop your offer