Flat rent before you buy deal...advice

rh203

Hi all,

I'm looking into signing up to a flat rental scheme on a new build flat on Gateshead Quayside. The flat is a 1 bedroom, fully furnished new build priced at circa £110,000. The deal is that I would rent for 12 Months @ £575 and at the end of the 12 Months if I chose to buy at a price which was fixed at the beginning of the rental, the developer gives me every penny of the rent back to use as a deposit (£6900) for a mortgage, but if I chose not to buy, I would just walk away with no ties in the same way as a standard rental.

The development is here: http://www.friarswharfapartments.co.uk/

Questions:
Does this deal sound good on face value
Has anyone done anything similar?
Baring in mind that new build mortgages usually require 20% now because of the crisis, am I likely to have to find a further approximately 15k to even have a chance of getting a mortgage or are there other options?
My starting salary at a graduate job is £21,500 but rises quickly due to the nature of the company and a pay curve.

The way I see it is because of my job, I need to live in the area and will be renting anyway but have no hope of seeing that money again and little chance of saving anything on top of the rental, but with this I'd win either way as I can have the cash back or just walk away after we've 'tried' the place. I'd be living with my Girlfriend who would be contributing to the rent etc so I'm not going in alone...

Thanks for your input.

rh203

anyone have any input?

MegaMiniMouse

rh203 wrote: »

anyone have any input?

Where are you living at the moment? Will the 12-month-deal cost you more/less/much the same as where you are now?

What do you stand to lose by taking on this deal?

MMM

iwantahome

Hi rh203,

have you actually had a drive down to this place? Whilst it advertises to be close to g'head town centre and newcastle town centre. It is actually further away than it seems from anywhere. It is approximately 2.5km walk into gateshead, either along the water or along a very busy bypass/industrial estate. I would suggest that the reason this deal is being done is because the builder is finding it extremely difficult to shift the apartments as it is on the wrong side of the river/too far long the river on the gateshead side for any real interest to be shown. There is nothing around this place apart from a very large industrial estate. If you really want to live by the river then try looking further along on the staithes or dunston riverside as these are a lot closer to newcastle.

Go and find this place and check it out and imagine you were out with the car (if you have one) and your girlfriend needed milk for guests visiting later in the day. Where would she buy milk etc from? She would have a 20-30 minute walk through the industrial estate and some quite questionable council estates. Similarly with getting to the nearest metro station. While I think the idea of trying before you buy is a good idea, I certainly would only look at something like this if it was further along the river.

I feel they are trying to sell a lifestyle that is just out of the reach of the location of the apartments.

Do you have the opportunity to offer less for the flat at the end of the 12 months if the market crashes? and still use the rent as a deposit? If this happened you may end up paying way over the odds just to secure the deposit.

rh203

iwantahome wrote: »

Hi rh203,

have you actually had a drive down to this place? Whilst it advertises to be close to g'head town centre and newcastle town centre. It is actually further away than it seems from anywhere. It is approximately 2.5km walk into gateshead, either along the water or along a very busy bypass/industrial estate. I would suggest that the reason this deal is being done is because the builder is finding it extremely difficult to shift the apartments as it is on the wrong side of the river/too far long the river on the gateshead side for any real interest to be shown. There is nothing around this place apart from a very large industrial estate. If you really want to live by the river then try looking further along on the staithes or dunston riverside as these are a lot closer to newcastle.

Go and find this place and check it out and imagine you were out with the car (if you have one) and your girlfriend needed milk for guests visiting later in the day. Where would she buy milk etc from? She would have a 20-30 minute walk through the industrial estate and some quite questionable council estates. Similarly with getting to the nearest metro station. While I think the idea of trying before you buy is a good idea, I certainly would only look at something like this if it was further along the river.

I feel they are trying to sell a lifestyle that is just out of the reach of the location of the apartments.

Do you have the opportunity to offer less for the flat at the end of the 12 months if the market crashes? and still use the rent as a deposit? If this happened you may end up paying way over the odds just to secure the deposit.

Hi, yes we have been quite a few times. It's not actually that far from the centre. Whilst it is somewhere that you will need to drive to get to places, it's not really that bad at all and only about 3 min drive to the Tyne Bridge or a bike ride up to the Baltic.
As far as them not being able to shift the places, we looked a good few times a few months ago when I found out about my job offer as I knew I'd need to be here in some shape or form and they had a lot left before Christmas and now only have 10 left. The quality of the place is great and it has a brilliant finish to the apartments. As far as the market crashing (again), the price is fixed at the point I start renting, but it is fully furnished and literally ready to walk into and use. If it got to the point in 12 Months that the market had absolutely slumped by something like 10% then I'd just walk away from the deal as per the rental agreement. Either way, to me it seems like a win-win as I'll be throwing rent into a black hole anyway in somewhere much less desirable...

originalmiscellany

signing up, then 12 months later if house prices drop walk away and buy again from them? E.g. you find a reason as to why the flat's not quite right and therefore another more suitable flat is chosen?

(Apart from your integrity!)

rh203

originalmiscellany wrote: »

signing up, then 12 months later if house prices drop walk away and buy again from them? E.g. you find a reason as to why the flat's not quite right and therefore another more suitable flat is chosen?

(Apart from your integrity!)

Ha, yes the thought did cross my mind, but I wouldn't have the deposit but may have some savings that we've scraped together since working for a year or so. Either way i'm no worse but possibly a lot better off if and when I chose to buy after 12 months.

laurel7172

Do you have any idea how many of the flats that have gone have done so for full price? Or even full price less the gifted deposit? But if it's really no more than the going market rate for rent...

Bear in mind, though, that if it is a decent sized block, there will probably be another flat up for sale in twelve months-without the shiny new-build premium. As long as you remind yourself you're renting, with the *potential* for a perk at the end of it, you might save a fortune by moving up the corridor...the builder is relying on you making an emotional investment. Don't.

iwantahome

then it sounds like your mind is made up. Go for it and enjoy.

I do agree that the apartment finish looks extremely good. But personally I wouldn't touch it as it is just stuck in the middle of an industrial estate. 2 miles further down the river and i'd be there in a heartbeat, as the try before you buy scheme does sound good. But it is just a bit to close to those questionable council estates to feel safe walking back there late at night.

It would be interesting to see in 12 months once people have enjoyed their tenancy how many of them take up the offer to buy and take their rent back as deposit and how many look for something else or just continue to rent knowing they can leave without the hassle of trying to sell this on. My bet will be that it will be extremely difficult indeed to get people down there to look as it is quite a way out of the way and further down the river you can currently buy a 2 bed flat for £115k and a 1 bed flat for £110k within spitting distance of the bridges that will take you over to Newcastle.

good luck with whatever you decide.

eddddy

I guess the real question is: is it really worth £110,000 today and will it still be in 12 months time? And if you have to walk away at the end of 12 months, is it worth £575 per month?

For example, if the bank/building soc value it at £90k in 12 months, they will only let you have 80% of £90k. You could ask a surveyor to do a valuation for mortgage purposes (even though you are not buying at this stage). The surveyor will probably charge you for this, but if the valuation is less than £110k, you can use it to try to negotiate a more realistic price.

I guess you can also wait until the end of the 12 months and then negotiate on the price - with the risk of having to walk away without your £6900.

The developer will probably say that the price is fixed, no negotiation etc... but it's a buyers market... and if you have a surveyors valuation to back you up...

I might be completely wrong, but my concern with this kind of deal is that they offer all sorts of wonderful sounding incentives - and then buyers lose track of the fact that the underlying product itself (the flat) is way overpriced. (A bit like the sofa companies that entice customers by offering 4 years interest free credit and nothing to pay for a year. The deal sounds so good, you forget that the sofa is hugely overpriced!)

Typhoon2000

Is a new build, still a new build after it has been rented out for 12 months?
If you going to need need to rent a place anyway, there seems little to lose on this deal. In 1 year you can decide if it is still right for you.