Urgent buying/selling advice

kenk_2

Hello

I am new to forum and am looking for helpful advice that anyone can give.

I have a four bedroom house with a mortgage balance of about 128,000. I need to downsize (redundancy) and am looking at buying a new build two bed two bathroom flat for about 100,000 (just myself, hubby and teenage son).

I am hoping to sell my current house for about 240,000, clear all debts, put an 80,000 deposit on the flat, borrow 20,000 and hopefully, clear the mortgage in about 4/5 years.

I would then want to rent out the mortgage-free flat and buy a house to finally live in - thereby being able to have an investment flat.

I am wondering if I have thought this out thoroughly. I would have to clear out my 4 bed - not sure what I would do with all furnishings etc - but there are only three of us in the house at the moment and we really do not need all the furniture we currently have. I think/hope we would manage in a two bed. The room sizes are not too bad.

Can anyone tell me if they think this is a good idea or have I forgotten something important and am therefore in dreamland.

Hoping you can help.

CapitanPugwash

Hi Kenk,

You may having done this decide that you are in a perfect situation to carry on a more simplified life with lower overheads and fewer possessions.

Questions:

If you have paid off the mortgage after 4-5 years on the flat and then want to buy a house, where are you going to gain a deposit from to buy your next house? You will need MINIMUM 10% and up to 25% for the better deals now.
Have you checked out the costs of running flats with costs like ground rent (can be up £250 per year!) & maintenance charges (anywhere upwards of £1000 and as high as £3000pa)?

Another strategy might be to rent out your current home by the room (with permission from your mortgage company) and rent a smaller flat until you can get yourself sorted out with a new job etc. This would allow you to leave your furniture in situ and not have to worry about disposing/storing. The downside of this is that they may not respect your possessions and you will have to manage tenants in the meantime.

You will also want to think hard about owning a new build flat (or recently built). Depending on where you live, many many city centres are oversupplied with two bed flats: Nottingham, Sheffield, Leeds, Manchester etc etc. With an oversupply with landlords desparate to pay their mortgages, the tenant gains great negotiating power and the rents fall fast. When you come to sell equally, there is very little to distinguish one new flat from the others locally and in the same block. Much of this depends on where you live, though I'm guessing £100k for a 2 bed flat means you are in the north of England?? You need to look at the return that a £100k would get elsewhere in a more individual property?

If you do decide to buy a newer build property, you should look carefully at the ownership structure of the other flats. What percentage are owner occupied? Many blocks are nearly all tenanted which means they tend to be less well looked after and maintained.

Good luck with whatever you decide to do and good luck in your job hunting!

MobileSaver

kenk wrote: »

am looking at buying a new build two bed two bathroom flat for about 100,000 ... I would then want to rent out the mortgage-free flat

The main thing I'd be wary of is the "new build".

Firstly it is generally regarded that you'll be paying a premium of between 7% and 10% over a similar "second hand" home, which isn't a great start for an "investment".

Secondly current new build flats typically have smaller rooms than older flats which can make them harder to let and/or get good prices, especially if new builds five years from now start to have bigger rooms.

Obviously not all new builds are the same so you may be able to avoid both these pitfalls by choosing carefully.

kenk_2

Hi

Thank you for your very quick reply and ideas on my query.

I have done a quick check on getting a loan of about 15,000 to add to my 80,000/85,000 deposit (minimum mortgage one can get seems to be about 25,000 with most banks) and the monthly repayments seem to come to about 310.00 (which would then be my mortgage for 5 years excluding ground rent and service charges for this flat which at the moment will come up to about 85.00 a month) – Hoping then to be able to save quite a bit towards a deposit on the next house in 5 years, and when dear partner finds employment – save his income as well as we should be able to manage on my income. I have to remember though that this is all over five years and anything could happen.

Unfortunately, I am not too happy about renting out my current property with my possessions in it because of the downside of tenants not showing respect to them – all the horror stories I have read about.

The new build two bedroom we have seen is in the South East (not city centre) and still being built so it would have to be bought off plan. As you say, I should take care as to whether the other flats in the block will be owner-occupied or tenanted. With regards to renting out the flat (when I have finished paying off the loan of 15,000) and rental prices, at that point, I would be mortgage-free on that property and any amount of rent would be a plus?

This is all so difficult to decide on. On paper the figures seem to add up. Maybe I could get the next new property on interest only, knowing that I have an investment property of at least 100k. What do you all think?

Colincbayley

kenk wrote: »

Hi

Thank you for your very quick reply and ideas on my query.


I have done a quick check on getting a loan of about 15,000 to add to my 80,000/85,000 deposit (minimum mortgage one can get seems to be about 25,000 with most banks) and the monthly repayments seem to come to about 310.00 (which would then be my mortgage for 5 years excluding ground rent and service charges for this flat which at the moment will come up to about 85.00 a month) – Hoping then to be able to save quite a bit towards a deposit on the next house in 5 years, and when dear partner finds employment – save his income as well as we should be able to manage on my income. I have to remember though that this is all over five years and anything could happen.


Unfortunately, I am not too happy about renting out my current property with my possessions in it because of the downside of tenants not showing respect to them – all the horror stories I have read about.


The new build two bedroom we have seen is in the South East (not city centre) and still being built so it would have to be bought off plan. As you say, I should take care as to whether the other flats in the block will be owner-occupied or tenanted. With regards to renting out the flat (when I have finished paying off the loan of 15,000) and rental prices, at that point, I would be mortgage-free on that property and any amount of rent would be a plus?

This is all so difficult to decide on. On paper the figures seem to add up. Maybe I could get the next new property on interest only, knowing that I have an investment property of at least 100k. What do you all think?

When you come to rent out the flat, you should be looking at the max mortgage possible on the rental property and the min on your own home.
Reason being, you will have to pay tax on the rent, but can off set the mortgage interest cost. In addition you could then release some equity from the property as a deposit on your new home.

kenk_2

kenk wrote: »

Hello

I am new to forum and am looking for helpful advice that anyone can give.

I have a four bedroom house with a mortgage balance of about 128,000. I need to downsize (redundancy) and am looking at buying a new build two bed two bathroom flat for about 100,000 (just myself, hubby and teenage son).

I am hoping to sell my current house for about 240,000, clear all debts, put an 80,000 deposit on the flat, borrow 20,000 and hopefully, clear the mortgage in about 4/5 years.

I would then want to rent out the mortgage-free flat and buy a house to finally live in - thereby being able to have an investment flat.

I am wondering if I have thought this out thoroughly. I would have to clear out my 4 bed - not sure what I would do with all furnishings etc - but there are only three of us in the house at the moment and we really do not need all the furniture we currently have. I think/hope we would manage in a two bed. The room sizes are not too bad.

Can anyone tell me if they think this is a good idea or have I forgotten something important and am therefore in dreamland.

Hoping you can help.

Thank you all for your replies. Does anyone else have any thoughts - good or bad?

G_M

Definately agree with the above. If renting out you do not want a mortgage-free property. Work through the income tax and capital gains tax implications of your plan.