Cheap house - should I buy?

Debicj

There is a house for sale locally for £89,950. The same house last sold in 2006 for £103,000. Similar houses in the area are for sale for between £109,000 and £120,000. This house has been gradually reduced from £119,000 since April.
I would like to buy this house in order to rent it out and in a few years time maybe live there myself. I believe that I would be able to find tenants fairly quickly and obtain the rent that I would want. It's a nice family home, in good condition with large rooms - it was ex council, although a few houses on the street have been bought.
I have offered £80,000 and been refused but told that they will accept £85,000. I don't really want to go any higher as it would be stretching my finances slightly.
There are 4 issues that I would appreciate people's views on.
1) There are some terrible neighbours who I know have caused problems for people in the area. Think Jeremy Kyle guests and you will have some idea! I know who they are and I think I could cope with them, but would it put tenants off?
2) The house has just been advertised with another estate agent as going up for auction with a guide price of £85,000. I don't want to get involved in an auction so I would need to act quickly if I want to buy it. How can I negotiate to get the price I want to pay? The first agent more or less told me to go away if I wouldn't increase my offer. She wouldn't even let me make another appointment to view again!
3) If I were to buy, it would be a cash purchase. Would I really need to have a survey carried out? I guess the house must have originally been surveyed in order for a buyer to get a mortgage so there couldn't have been any major problems. It's approximately 50 years old appears to be a nice solid, well maintained building. No obvious signs of any problems. I know it's not best to buy without a survey but funds are very limited at the moment!
4) I can't help thinking that there must be a hidden problem because the house is so cheap compared to others in the area. Or is it simply priced realistically? The others haven't sold yet so are they too expensive?
I'd be grateful for advice and comments. Thanks.

Fire_Fox

Don't look at local for sale prices, look at land registry sold prices. Do you know anything about the BTL market or about the legal responsibilities of a landlord? Of course bad neighbours would put off tenants, and they'd be mighty p*ssed off to find out you know and kept in quiet! Why don't you want to go to auction as a cash purchaser? These days things are simply not selling at auction, you'd probably get a bargain. Is this house still a good buy when you factor in income tax, capital gains tax, buying and selling fees, letting agents finders fees, vacant time between lets?

You don't know what level of survey was carried out by the last buyer, might have been just a mortgage valuation. If you don't have at least a Homebuyers Report and you find out there are problems during a tenancy you are going to have a nightmare, as you may have to pay for the tenants to live in alternative accommodation. If funds are limited you can't afford to be a landlord, you can't make excuses when the boiler breaks down or the roof leaks. You will need money for finding and vetting tenants and safety certificates. If you think there is a hidden problem have a survey completed.

Debicj

Fire_Fox wrote: »

Don't look at local for sale prices, look at land registry sold prices. Do you know anything about the BTL market or about the legal responsibilities of a landlord? Of course bad neighbours would put off tenants, and they'd be mighty p*ssed off to find out you know and kept in quiet! Why don't you want to go to auction as a cash purchaser? These days things are simply not selling at auction, you'd probably get a bargain. Is this house still a good buy when you factor in income tax, capital gains tax, buying and selling fees, letting agents finders fees, vacant time between lets?

You don't know what level of survey was carried out by the last buyer, might have been just a mortgage valuation. If you don't have at least a Homebuyers Report and you find out there are problems during a tenancy you are going to have a nightmare, as you may have to pay for the tenants to live in alternative accommodation. If funds are limited you can't afford to be a landlord, you can't make excuses when the boiler breaks down or the roof leaks. You will need money for finding and vetting tenants and safety certificates. If you think there is a hidden problem have a survey completed.

Thanks for your reply.

Unfortunately, I can't find anything similar that has sold recently in this area. It's a village and even comparing to nearby villages isn't any good as there can be quite a variation in prices within a relatively small distance. There have been a couple of repos that went at auction for around £65000 ish but they needed work doing on them whereas this one wouldn't need touching. It's ready to move into.

I do have another property that I rent out so I understand what being a landlord entails. I am also very familiar with this area and I think I could find tenants quickly through word of mouth as I found my existing tenant this way. I'd be willing to accept LHA and there are plenty of single mums around here desperate for a house. My other tenant would probably have a mate who would be interested. Checking them out would be fairly easy as it is an area where everyone knows everyone else or is related! The neighbour thing could be a problem as most people would already know about them. However, some people might know and not be bothered because if you get on with them they wouldn't bother you.

Funds are limited as I will be remortgaging my own home to fund the purchase and there is a limit to how much I am allowed to borrow even though I know I can easily afford the repayments. My monthly cash flow is more than adequate but unfortunately it is from sources that lenders do not take into account. Therefore, I will have the available funds for repairs etc. It is just the cash to fund the initial purchase that is limited. This is another reason for not buying at auction. I don't want to remortgage without being certain that I will be buying the house. If I don't buy it, I wont need the money and I don't want to incur any unneccessary expense.

With regards to a survey, I can't see what it could pick up that my husband didn't notice when we viewed (or at least wouldn't notice if we could have a more in depth look). What sort of things would a survey cover? I didn't have one on the last place I bought as it's a flat and as I am only responsible for the inside, not the building, it didn't seem worth it. There havent been any major problems there. I got the electrics and central heating checked out and repaired and had budgetted for this so it wasn't a problem.
I don't have much experience of surveys so would appreciate info on them.

I believe the house is a good buy. It's not purely for a quick profit or even profit from the rent. I plan to let my daughter live there in around 5 years time and eventually move into it myself when I downsize to retire. I'd like to buy now while I can afford to. If prices go up, the amount I can borrow won't allow me to buy anywhere.

Thanks

Running_Horse

1. Tenants have the freedom to move at the end of the lease. Nightmare neighbours will cost you money.

2. Let it go to auction. You might get a bargain. You can't force them to accept your offer.

3. You want to invest £80,000 cash without a survey? Amazing.

4. In case you haven't noticed, this one hasn't sold either.

But it sounds like you have made your mind up to throw away your money despite identifying major problems. Go for it.

Debicj

Running_Horse wrote: »

1. Tenants have the freedom to move at the end of the lease. Nightmare neighbours will cost you money.

2. Let it go to auction. You might get a bargain. You can't force them to accept your offer.

3. You want to invest £80,000 cash without a survey? Amazing.

4. In case you haven't noticed, this one hasn't sold either.

But it sounds like you have made your mind up to throw away your money despite identifying major problems. Go for it.

Thanks for your reply.

1) That's what I'm worried about

2) If I didn't get the house, I'd have remortgaged and have £80,000 cash that wouldn't need. Am I right in thinking that to buy at auction you have to have the cash ready? Or is it just the deposit and then would I have time to arrange the remortgage?

3) What would a survey look at? On previous purchases they haven't appeared to tell me anything I hadnt picked up myself and seemed to be very basic. These were the type of surveys required by the mortgage companies.

4) I am aware of this. I just wondered if the others are way overpriced and this one is priced somewhere near a reasonable level.

WhiteCat_4

Does it need modernising? Houses with hideous decor from the 60s and 70s will need gutting and starting again.

Also, does it stink? Cats and dogs can make a place smelly, especially if an unneutered Tom has lived there.

Does it have damp or rodents?

Does it look well built or have cracks?

Check if it is likely to flood

Has it been unoccupied for a long time?

What are the houses like around it? One street can be THE street to live in and another can be the 'wrong side of the tracks'

Is it near a train track? Or a main road? Screaming kids? - check for trampolines from the aerial shots.

Debicj

WhiteCat wrote: »

Does it need modernising? Houses with hideous decor from the 60s and 70s will need gutting and starting again.

Also, does it stink? Cats and dogs can make a place smelly, especially if an unneutered Tom has lived there.

Does it have damp or rodents?

Does it look well built or have cracks?

Check if it is likely to flood

Has it been unoccupied for a long time?

What are the houses like around it? One street can be THE street to live in and another can be the 'wrong side of the tracks'

Is it near a train track? Or a main road? Screaming kids? - check for trampolines from the aerial shots.

Lovely house, modernised and decorated nicely. Not been empty for long. The owner has moved into her fella's place. No sign of damp and not in an area likely to be flooded. It's in a nice quiet street that I wouldn't mind living in. I know this village very well as I have lived here practically all my life and I have no doubts at all about the location. The condition of the house appears to be very good. No cracks and a well built ex council house that has been there for years. I really cannot see any physical problem with the property which is why I am curious as to why it is so much cheaper than the others. It just seems to be a bit too good to be true if you know what I mean.

I cannot see any problem except the neighbours. Even they might not be a problem to some people. It's just that they argue with each other rather a lot and if you don't appreciate bad language its not good! I have been told that they are under investigation from the council so there is a possibility that they may be moved eventually.

G_M

Similar houses in the area are for sale for between £109,000 and £120,000.

How long have they been on the market?

would it put tenants off?

Yes

How can I negotiate to get the price I want to pay?

Make an offer in writing. A EA is legally obliged to pass it to the vendor. (tho whether they do, and whether they say you're a cash buyer..... who knows)
Or if the vendor lives there, knock on the door and say his EA is refusing to pass on your offer - he may be real p*ss*d off with the EA!

Would I really need to have a survey

Without a mortgage there is no obligation, so up to you. Depends how confident you are in your ability to spot serious probs eg roof, foundations, structure, damp, worm, old electrics.....
Having said that, many surveys just say'recommend you get specialist electrical report/ damp report etc etc

to buy at auction you have to have the cash ready?

Google 'property auction' and read how they work. Normally you have to register in advance, pay 10% immediately on the day (check what payment type they accept) and the balance in 28 (sometimes less) days. Some people use the 28 days to get a mortgage, but if the bank gets a bad survey and declines, you're still obliged to buy....

wondered if the others are way overpriced and this one is priced somewhere near a reasonable level.

The others could be over-optimistic vendors, could be this house has a gremlin.....

poppysarah

Debicj wrote: »

I would like to buy this house in order to rent it out and in a few years time maybe live there myself. I believe that I would be able to find tenants fairly quickly and obtain the rent that I would want.

Have you done the research to show this?

Debicj

I know from recent experience, my daughter found it very difficult to find rental accomodation that would accept LHA. Also, my tenant in my flat found it impossible to get council accommodation. Between these two they know many other young mums in the same boat. There are very few houses to rent around here, mostly small flats. There is a long waiting list for a council house.

I think I would achieve somewhere close to the market rent for this area. Based on the LHA payable this would mean a likely 'profit' to the tenant of £5 - 10 per week, which I believe would make it an attractive option.

I know lots of LL don't like benefits tenants but I have been a single parent myself and I know there are many responsible ones. I also know that their income is guaranteed but a working couple may lose their job and suddenly be unable to afford the rent. I would get a decent deposit and insist on a guarantor. I am also well aware of who to avoid in this area as it is a fairly close knit community.

Thanks for the replies. I'll think about it some more and maybe make another offer subject to a survey.

bumpoowee

It's probably priced cheaply because of the neighbours.