Cheaper house and rennovate or expensive house ready to move in?

typeractive

Hi all,

I've been looking into a particular house. The asking price is £75k. Upon viewing the house with my mate who is a builder he reckons it will cost around £25k to fully refurbish (needs new central heating / wiring / kitchen (as it don't have one), bathroom, damp proofing in some rooms, decorated throughout, yard pulled up and relaid - you get the jist).

So, I have been thinking about money. I have thought of a couple of scenarios:

1. Buy house for asking price and spend on renovating: 75 + 25 = 100k!
2. Buy a property already 'liveable' for around 100k
**with either suggestion I'd still need to furnish the place as I'm FTB (which is what I was keeping my savings for initially).

These are just summising I bought a place for full asking price. The reason I am seeking advice is: whilst I have savings (around 30k) they would be totally wiped out renovating the house, whereas if I **could** get a mortgage for 100k - I might be better off being able to put down a good deposit and keep some available to me.

Which do you think would work out cheapest? A few years ago people could get mortgages for more than the cost of the house. I think now times have changed.

It's difficult for me to explain. Basically I guess I am saying I don't want to utilise all my savings in one go, and that it might work out cheaper to buy a more expensive property. With the cheaper place I was looking to pay off the mortgage quicker - say 15 years as opposed to 25/35. If I got a place for 100k approx then I'd have to pay it off over a longer period of time.

Any ideas welcomed!
:beer:

poppysarah

Mortgage might be hard to get on place with no kitchen and valuation may come back a lot lower - which is good though...
Depends. I've been paying attention to age of sockets and wiring and central heating - if it needs replacing fairly soon and the house is quite well decorated it can sometimes make a real mess of the decor - so what's the point in paying more for a pretty house with poor wiring (one socket a room is a big clue) if you have to trash it when you rewire etc

typeractive

poppysarah wrote: »

Mortgage might be hard to get on place with no kitchen and valuation may come back a lot lower - which is good though...
Depends. I've been paying attention to age of sockets and wiring and central heating - if it needs replacing fairly soon and the house is quite well decorated it can sometimes make a real mess of the decor - so what's the point in paying more for a pretty house with poor wiring (one socket a room is a big clue) if you have to trash it when you rewire etc

Thanks Poppy. You are correct about getting a place without a kitchen. Apparently by law there needs to be a sink in the property (which there is!, but the rest is missing! lol). The only fortunate thing I have on my side with the decor stuff etc is my best mate is a plasterer - so that helps.

Does the valuation come back with the survey? At the moment I am interested in offering say £60k. At first I though that was rude, but havign read a couple of stories on here I think well it's worth a shot!

In terms of investment I think it would be a good buy once rennovated as it's a 4 bed place and a 2 bed place in the same street is up for 90k (that looks in decent condition).

Entertainer

If it's a renovation project then you should be adding value of between 5-10% which is what people do professionally in any normal market conditions provided you have reliable and affordable builders which it sounds like you have. So I would say it sounds like a good deal.

As for the money, I think you're basically asking whether to have more money tied up in your property or a larger mortgage. You are almost certainly going to be paying more in interest on your mortgage rather than the net interest you receive on your savings, which is pitiful at the moment as you know. Therefore, provided you don't need the savings for a major purchase which you might otherwise have to put on a credit card or need it for other lifestyle reasons, then on pure investment grounds, you are probably better off paying off as much of your mortgage as possible.

You could always remortgage later as well (not that I'm advising that, people should be aiming to own as much equity in their houses as quickly as possible.)

spuds_2

I would buy cheaper and renovate - provided you are prepared to do some work yourself and live with the place as it is. If prices go down further, better to have a smaller mortgage. Also, if interest rates rise, you will have a bit more spare cash than if your repayments were higher.

In some houses you are paying for someone else's taste and choice of fittings. Buy a place to renovate and you can do things as you want, as well as adding value.

Unless, of course, you see an immaculate, stonking good house on at a very keen price - in which case, buy that.

The other thing I would add is not to pay too much. I have noticed that houses that need a lot of work can actually go for quite high prices - people assume that they are a bargain and when they are done up they will be worth substantially more. That is not always the case. Most roads have a ceiling price and you need to factor this in to any offer. Your plasterer mate should be able to help you cost the project.

typeractive

spuds wrote: »

If prices go down further, better to have a smaller mortgage. Also, if interest rates rise, you will have a bit more spare cash than if your repayments were higher.

Exactly - that was my ideal reason for buying somewhere a bit cheaper. I like the like the idea of having a 'bit of security' especially doing it on one income.

The other thing I would add is not to pay too much. I have noticed that houses that need a lot of work can actually go for quite high prices - people assume that they are a bargain and when they are done up they will be worth substantially more. That is not always the case. Most roads have a ceiling price and you need to factor this in to any offer. Your plasterer mate should be able to help you cost the project.

Yeah - that is why I want to make an offer of around 80% of the asking price (£60k). There is a 3 bed house across the road on the market for £130k. My mate who is a builder (who came to visit the property) thinks it should be around the same price once complete - I beg to differ. The 130k house is semi detached 1930's build with rounded bay in the front and the front bedroom - you can tell it is much more spacious and not a fair comparison to the actual row of terraces I'm looking at.