Is buying this flat a crazy risk?

AliceBanned

Hi

I've previously been on this site and been offered lots of advice and have gone away, looked at other properties and mulled it all over. The fact is I have been offered my housing assoc flat at a discount of £13.5k, which is a bonus for a first time buyer that is difficult to ignore. I have saved £6k deposit so far to add to this. The flat is in the south east within 30 mins by train from London King's Cross, although a short drive or cycle to the station first. It is now being offered to me for £57.5k including discount; a one bed flat which is a concrete build - the only sticking point - but has been classed as "reinstated" with an engineer's certificate. I did a homebuy survey two years ago but am still not confident buying it as I haven't been offered a mortgage on it yet, although that is part of the general lack of mortgages at present for any "nonstandard" property. Would you recommend a full survey? Would this end my slight anxiety that there is a risk with this property? A similar property but not reinstated ie concrete but with 3 beds, sold at auction recently for £140k. I believe these properties are mostly sold on at auction. I don't intend to live in it for ever but see it as a stepping stone as I've been renting for 23 years now and want to purchase but don't earn a huge amount £25k. Thanks, and sorry to come back with this question if anyone has helped me before; the mortgage market has been changing a lot too so I keep looking at my various options. Have been viewing shared ownership properties too but most in this area and commuting distance to London are around £140k so I would pay £70k to own half. Thanks! ps it is a nice flat and nice area although an estate so not popular with other buyers, but I have lived here for three years and enjoyed it. All I want is to know that it's not completely unsellable in future but maybe that;s not knowable. Very difficult to weigh up.

princeofpounds

There are a lot of important issues to consider here. But the first is your tenancy. Do you have a secure tenancy or a shorthold one? A lot of secure tenancies are so generous that to give it up, even for ownership, is a bit silly. You say you have been renting 23 years but don't specify how long in the current place.

Also, consider why you want ownership? Is it because you wish to own and improve the structure, or is it to make money? The latter might not be so straightforward for the following reasons (and more):
- You need to live somewhere. If you buy this, you might be sitting on a paper gain but it will never mean anything to you as if you sell, you will just have to put the money into somewhere else.
- Property can make people a lot of money, but it can also lose people a lot of money (if you have been renting for 23 years, remember the early 90s?!).
- Don't forget to think about the cost of maintenance, insurance etc. which can be high, esp for concrete dwellings.

You are right to be cautious with concrete structures. Make absolutely sure it is easily mortgageable.

Based on 25k earnings a mortgage of 60k should be affordable but take note of how expensive it might get if interest rates rise. You also need to make sure that your small cash deposit and your 'gifted' deposit (if it is a discount from a real and not an overestimated price!) will be enough to be mortgageable. Banks tend to want 20% these days. also, can you sustain your income for the next 25 years?!

If identical houses are genuinely 140k and this is 70k that doesn't sound too bad, but it's not clear if you are talking about full or shared ownership as you mention owning half at one point and buying at another.

AliceBanned

Thank you princeofpounds. Answering your question:
It is a secure shorthold tenancy. Very valuable I know. I've been in this place for three years, and for five years in two other HA places before this one.

I want to own a place as an investment for my future. Despite recent falls I still think it's the best way to invest long term, although many would disagree perhaps. That's why I'm being careful about the decision though. I don't mind putting the money into somewhere else if I sell, I'd rather do that than keep renting, as that's for me a way of having some future security. I know there are risks eg redundancy but everyone has this possibility.
There is a clause in the leasehold documents - there is a cap on any refurbishment charges for the first five years.
It doesn't appear to be easily mortgageable - the sticking point but I am about to look into this again. I suppose if it isn't now that may be due to the general shortage of mortgages at the moment so I could wait a few years.

I confused things - the shared ownership properties I looked at were nearer London by 20 miles so much more expensive. Private flats in my area are around £100-120k for an average one bed. There are some ex council flats for around 70-80. In a sense the only real advantage to buying this flat is that I know it and like the area, but am not totally attached to the area having said that, and that I get a discount. But maybe that's not enough. I just wondred whether getting a full survey would tell me more, as the homebuyer's survey didn't help, it valued the flat 10k higher than the HA though! Thanks for your advice, I'm still mulling it all over..

Cannon_Fodder

A decent investment should not have limitations on how you obtain access to your investment when you want/need to.

If you are not confident in buying it after living there a number of years and full awareness of the 'reinstated'/non-standard issues, then how do you hope to convince someone else to buy it in the future?

By all means buy, if your mind is set on it. But buy something that does not have re-mortgage and re-sale issues.

Purchase as you move to somewhere that is a better commute/area if preferred. Or that is a better resale prospect.

imo.

carefullycautious

You are in the perfect position to exchange to another one bed which is of standard construction and mortgageable. Have you thought of doing this.

Maybe there is someone out there who would want your flat based on its location etc.

Might be worth a try

AliceBanned

Cannon_Fodder wrote: »

A decent investment should not have limitations on how you obtain access to your investment when you want/need to.

If you are not confident in buying it after living there a number of years and full awareness of the 'reinstated'/non-standard issues, then how do you hope to convince someone else to buy it in the future?

By all means buy, if your mind is set on it. But buy something that does not have re-mortgage and re-sale issues.

Purchase as you move to somewhere that is a better commute/area if preferred. Or that is a better resale prospect.

imo.

Thanks. After maybe another year of saving I could probably buy on the open market anyway, so I think I am most likely to do this, just be patient and then buy something I am 100% sure of.

AliceBanned

carefullycautious wrote: »

You are in the perfect position to exchange to another one bed which is of standard construction and mortgageable. Have you thought of doing this.

Maybe there is someone out there who would want your flat based on its location etc.

Might be worth a try

Thanks for responding. Yes I have registered with a very good website, www.homeswapper.com and have been trying this for around a year, in the hope that this could work whilst I was deliberating over the other options, but not found a match yet. I think this would be my best option overall, but of course depends on other swappers. I have had offers of swaps but one place was an unbelievably tiny studio flat with literally a cupboard instead of a kitchen and a shower room and no bath. but was in a great area. Also not re-sellable I'm sure! I've been quite proactive on the website but have met very few tenants (so far) who are serious about swapping. I have managed to swap in the past through a website though, so it can be done. I'm being VERY cautious over swaps though because I've had bad experiences in the past, ie moving to a noisy neighbour problem but I guess I can do plenty of checks as I know now what the pitfalls are.

DVardysShadow

How much is your rent currently? It strikes me that your mortgage might be considerably cheaper, although you will have various leasehold charges.

And is there any clawback on resale - and by how much and fro how long?

At 30 mins from Kings Cross, I would think that right now you would be able to shift it fairly easily for much more than they are asking you for it - in other words, there is quite a bit of value in there. But if you are taking a punt on house prices dropping, maybe it is worth leaving it for a year?

AliceBanned

DVardysShadow wrote: »

How much is your rent currently? It strikes me that your mortgage might be considerably cheaper, although you will have various leasehold charges.

And is there any clawback on resale - and by how much and fro how long?

At 30 mins from Kings Cross, I would think that right now you would be able to shift it fairly easily for much more than they are asking you for it - in other words, there is quite a bit of value in there. But if you are taking a punt on house prices dropping, maybe it is worth leaving it for a year?

Thanks DvardysShadow. Rent £320pcm. Other charges: Estimated Major repairs" £7,528.48 - I will need to check but I believe none of this can be requested within the first five years of purchase. Service charge £298 per year.

Clawback on resale - nothing after three years - approx 1/3 of the discount each year before this.

Yes an interest free mortgage would work out cheaper than the rent. Think I would do interest free for the first year or two. Payments with interest would be around the same as the rent; depends on the interest rate I could get of course.

I have applied several times over the past two years, and to be honest the asking price has dropped £15k since the crash and not risen back up at all yet. I know that these type of properties often have to be sold at auction. I can't imagine I could not be able to shift it either, it seems common sense as it is cheaper than a lot of park homes in this area! The only down side if I wanted to sell on to an investor, as this is the most likely purchaser (buy to let) is that it is not near the local station. I drive and park nearby which takes 15-20 mins so although 30 mins to King's Cross sounds good, there is a lot of competition in the area with more "sought after" developments near the station. they are twice as expensive though. The other downside is the fact that it is ex-council and most of the neighbours are HA tenants, and I know a lot of people turn their back immediately at the prospect, though for me my only worry is if neighbours are a nuisance, not what their background is. It is such a difficult decision!

lynzpower

I would recommend going to speak to a broker, about how easy it is to even get a mortgage on concrete builds. Even in peak market when I was an EA ( briefly) it was difficult to say the least.

It costs nothing to speak to a broker. i used these guys a few years ago and they were excellent all of market ( I used them to buy a SO flat- so not that straitforward and this was when SO was in relative infancy)
http://www.alexanderhall.co.uk/

Rest assured the minute the 5 years is up, you will get that major works bill. Selling with a major works outstanding can be a real turn off.

I also recommend you get a quote rather than an estimate- for example by suggesting that if you were to buy it you would want to pay for the major works asap to help with your budgeting yada yada. I have come accross major works being double what they are quoted, so it might make a difference to you.

What is the major works, is it windows and exteriors?

DVardysShadow

I agree with lynzpower, you need to get the major works fixed. You will be better off with the price high and fixed than low and volatile. Is it only the journey to Kings Cross which makes the location attractive - or is there a college requiring student accommodation or any other aspect of the area?