Does this seem do-able to you?

wench90

Hi,

I've recently been presented with a opportunity to buy a small property in my home town in Wales. My OH and I currently rent a flat in York and pay £460 pcm. Between us we earn nearly £43000 pa but cannot afford to buy anything in this area as house prices are so high. My grandfather wants to sell his terraced house in a small town in Wales for around £38000 although it hasnt been valued yet and i'm not convinced it's even worth this much in it's current state. It isnt in a great area but house prices in this town have risen by 44% over the last few years and the property is positoned on one of the better streets were most of the residents have bought their homes. My grandfather's house is basically in the same state as it was 25 years ago and would need a new kitchen, bathroom, windows etc.

My OH and I are considering buying this property to fix up and either rent out or sell on. I recently searched the land registry and in Feb of this year a house 3 doors away sold for 50000k and at the end of 2005 another was sold for 60000k, i'm convinced with some hard graft we could only make a profit on my grandfather's house providing we had a strict budget, should we decide to sell it. However, my concern is that we will still be paying our rent while also trying to find a mortgage on my grandfathers house.

Our outgoings are as follows:

Rent £460
Council tax £93
Loans: £233
Gas and Electric £37
Phone £20
Gym £53
Internet £14.99
Loans insurance: 15.00
Mobile phones (PAYG): £20-25
Food £120
Petrol £120 (my OH travels 50 miles to work everyday)

Our biggest outgoings are credit cards. I have two cards totalling 6000k and my OH has four cards totalling 4000k. I have been paying off £300 per month off my cards to try to get the debt down. My OH is also trying to pay as much as possible.Minimum payments arent a problem, but we prefer to pay more each month.

I also save £100 per month in an ISA although recently used my savings to pay off a large chunk of debt.

If we go for it we would have to get a mortgage and a loan to do all the work, I would aim to borrow no more than £48000 which would depend on how much my granddad's house is valued at. I have mixed feelings about this, i think we could pull it off but i would like some objective opinions on this before we take the dive!!!

Any advice would be greatly appreciated!
Cheers

Ian_W

In terms of the finance I would have thought it may well be do-able to raise that sort of money despite your CC debts but a cash deposit would certainly be needed, 5min and probably nearer 15% for a BTL mortgage. But bearing in mind you're only borrowing 1x combined annual salary I'm sure there are ways. I'd see a mortgage broker or wait for someone to post on here.

Whether it's worth doing depends entirely on the valuation, how much of the work you can/want to do yourself and how much time you can spend flitting between York and Wales. Because the purchase prices are low there isn't a huge margin to work with and I don't suppose B&Q charge any less for bathrooms and kitchens in Wales than they do elsewhere. New bathroom, kitchen, double glazed windows [hows the c/heating, roof, structure etc?] may set you back £10K unless you are really compitent DIYers, add in purchase and selling costs [legal & EA's] and that puts you up to £50K, assuming it is valued at £38K. If you sell at £60K [do check that house is identical and doesn't have extra space or features] how many hours will it take you to travel and do the work?

If you decide to rent instead of selling do your homework on the local rental market. Does it pay for itself, ask local letting agents, look in the local papers - are there loads of property to rent?

Personally I wouldn't do it unless the rewards for the hard work were good and IMO they don't look too worthwhile. BoL whatever you decide.

wench90

Thanks Ian,

All the things you mentioned have also crossed my mind, i plan to do some more research before i make a decision. Going back and forth to Wales would be a pain but i do have a lot of family members who are in the building trades so I would definately get some help. I have also been concerned about the cost of the various things that need doing,although i'm pretty sure the rest of the house is pretty sound. I will try to find more about the other two houses sold on the street.

In terms of rental I know rental properties in this area are in demand and average rental is £300-£350 pcm. So this may be an option but i couldnt really afford 15% deposit for BTL. I could probably get together a 5% deposit though!

Anyway, thanks for your thoughts.

Ian_W

With family in the building trade locally you should be ideally placed to be able to get some pretty firm prices for what needs doing.

A £50K interest only mortgage at 5% will cost you about £210pm so the lower rental figure is about 150% of your mortgage payments, which is healthy and certainly makes renting look a possibility. I'd see a broker if you decide it's worthwhile and get a residential mortgage while you do it up and you could probably remortgage to a BTL if you're going to let it out. For the first one no tie ins and low fees are more important than a low % int rate.