some initial advice

Spilt_Milk

My parter and I are both in our mid-twenties and we are planning to take a year off to go to Australia for 2008.

We both feeling like we're chucking money away on renting at the moment and the idea of getting some bricks and mortar seems like a good way to go.

We have the money for a deposit of about 10k and qualify for a mortgage of up to 120k. We are in early stages of thinking about this - got our first meeting with mortage advisor on saturday.

What would like to do is buy a place in south of England to live in and pay mortgage for a year - then rent it out for the next year whilst we travel.

Is this a mad idea or a perfectly good one?

I am naive to all this - though hoping to be an expert shortly

seven-day-weekend

Are there any properties in the south of England for !130k???

Otherwise I think it is actually quite a good idea. You may need to look at another location though.

lilybugs

I think this will be a good way of ensuring that you don't spend the deposit in Oz but will it tie you down a bit when you get back? It is great to have a place to live when you return but your return is unlikely to coincide with the end of the lease so you'll need a spare bed to borrow for some time. You might want to stay in Oz longer, run out of money and come home early or decide that you're never coming home at all. I've met plenty of people that have each done one of these, me included. Don’t let having a property back here hinder your trip of a lifetime.

You don't say whether you're going to work over in Oz or travel. If you've got a job to go to over there then money isn't going to be such a big issue but if you haven't and you’re travelling, please ensure that you've got some sort of back-up to pay a mortgage back here if the renting plan backfires.

How about renting a cheaper property for a year to help you save up for your trip and for a house deposit for when you get back?

Dead_Eye_Jones

I think its a mistake to think renting = money down drain. I found renting to be good value for money, in fact my monthly rent was less than the monthly interest on my mortgage so from that point of view the argument is certainly not always true.


Do you really want to be burdened with a mortgage whilst travelling? Renting buys you freedom and I think its good value for money, I refused to buy for 5yrs or so after leaving Uni and thanks to careful saving and some good decisions have a much bigger and nicer house than my peers who jumped straight into buying the 1st crumbly flat they could scrape a deposit together for. And I had the pleasure of moving around without a 2nd thought, having no responsability when out of the country, etc. Of course the time came when I wanted to put down roots with the missus and we wanted to think about a stable home for a future family. Having been kicked out of a rented place I wouldnt rent again, but my situation is different to yours, im now after stability...

Buy a house because you need to, because you want to settle, not because you are worried about where to put you money. Remember you can still invest that deposit and have it work for you over the next 2 years, ensuring you have a bigger one upon your return .

Spilt_Milk

Thanks for the advice all.

here's some more info to shed light on our situation:

My partner has due nationality and will take a job. I am a graphic designer but having spoken to people the best I can really hope for is the odd bit of freelance rather than full time work due to VISA only allowing you to work for 3 moths - but I'm still investigating this. TBH I think any work we do will be to fund our travelling.

We would look to have a tennant in the place for a one year term.

Currently we pay £650 a month in rent in Southampton. We could potentially get a 1 bedroom flat for around the 100k mark. We have to look at the maths of covering a mortgage and agency fee.

When we return we are unlikely to want to return to Southampton. Initially we would return to one of our parents homes. We would probably look to then move to London or Brighton where we would probably just rent a cheap studio for a year after which we would probably sell the Southampton place having hopefully made some profit.

lilybugs

Please don't plan to make any profit from property, especially in a couple of years. This is where you could really get stuck if you are relying on this. You might be better off saving that £10k + the fees you'll need in a high interest account to use when you get back.

Spilt_Milk

Well, we've moved things on a step now and been to see mortgage advisors. We have mortgage agreed in principle for up to £125k. We don't want to overstretch ourselves and this figure allowed monthly repaments to be roughly what we are currently paying in rent.

We know we can buy a place and we've seen a few properties but the thing that we are looking in to now is the rental market and wheather we can reasonabley expect to cover costs through rental.

The main thing I am worried about is can we legally rent out a propertya year after purchase? I've heard conflicting views on this. Some people same to say you can't do it unless you get a buy-to-let mortgage others simply say no problem. If anyone can shed further light I'd very much appreciate it.

Over and out

rosysparkle

Does your mortgage allow you to rent without penalty or a higher rate? Whether you can let or not is not a legal thing, it will be dependent on the terms and conditions of the mortgage.

Things to think about: how will you cover the mortgage if the property is unlet for any periods of time? Don't forget that the agency fee won't be the only deductions from the rent, you need to allow for a gas check annually, for insurance (buildings, contents, rent & legal protection), for repairs, for ground rent, for service charge, for utilities during empty periods....

You will need to apply to the HMRC (form NRL1, your agent will have it) for CNR exemption while you are overseas, otherwise your letting agent will be obliged to deduct UK tax at source from the rent. If you have no other income arising in the UK, at £650ish a month less allowable expenses on a joint property you probably won't have any tax to pay, but you still need to declare the rental income on your tax returns.

I don't think you should expect to make any profit on the property in the short term, and it certainly wouldn't be prudent to make fiancial decisions on the expectation of making a profit from it.

libitina_2

Well said Rosysparkle.

clutton_2

i would be most relucant to let it for 12 months initially. If you do rent, then ask your agent to issue a 6 months AST to start with, (which contains a Section 21 Notice for repossession within it ) and at least if the tenants do turn out to be baduns you can get them out sooner rather than later. It is very easy to renew the AST after 6 months if the tenants prove satisfactory.

Debt_Free_Chick

seven-day-weekend wrote:

Are there any properties in the south of England for !130k???

Otherwise I think it is actually quite a good idea. You may need to look at another location though.

Hastings, Bexhill, St Leonard's...... even Rye and possibly Battle