Silly idea or good investment?

Jesswithwings

DH and I have the opportunity to buy a massive property with a granny flat. The house itself has 7 bedrooms and 3 bathrooms altogether so plenty of space for us. Its a beautiful victorian building with lovely gardens and close to the beach, town centre and local schools.

Ok... the finance bit. Currently we have a 4 bed semi, but we are coming into some inheritance. The Big house will mean we will have a monster of a mortgage but at the moment we have a lot of high interest loans (which are going to be paid off when the inheritance comes to us) the extra mortgage we will need will only cost us £100 a month more than we are paying at the moment. We will also be able to fix the mortgage for several years rather than be on the variable one we are currently paying. The Big house could have a "granny flat" at the bottom, with 2 bedrooms, a kitchen and a bathroom as well as a separate entrance which we could rent out to either students or holiday makers to generate some extra income.

Its a big decision to make, but it would be our house for life and we would never need to move again (until we go into retirement homes but as we are 30, that won't be for a while!) the market will hopefully go up in that time and we will make thousands on the house.

I'm swinging between loving the idea and freaking out. My sister is a chartered accountant and has looked at our accounts and agrees that its something that we could manage, and if we rent out the granny flat then we will be very comfortable.

I don't want to get swept up in the romance of buying a new house and I'd appreciate some objectective opinions. Are we wise to be doing this? or is it a big mistake?

CH27

I assume you have taken into account the extra bills?
How will you afford to renovate & funish the house?
What happens if one of you is unable to work? Could you cope then?
Could you afford it if you go on Maternity Leave?

How comfortable will you be having strangers in your home with your young children about?
How will you monitor who you rent to?

go_cat

if you can afford it go for it

Don't forget he increased running costs of a 7 bed house e.g electricity , gas , water

Plus your council tax bill will be much bigger

i would do a monthly budget plan for the new property based on your current finances so it is clear in your head

Sambucus_Nigra

If it were me, I'd do it. If the inheritance was guaranteed and the figures worked out.

Nice one

pitkin2020

You only get anywhere in life by taking a risk!!

That said you need to work out the finances and take everything into account. Also what happens if the inheritance isn't as much as you expected or doesn't happen where will that leave you?

The idea of a holiday let could be a great extra income, how much money would you need to spend on that to get it into shape ready for that purpose. A holiday let needs to be good really so a lick of paint probably won't suffice. The better you get it the more you can charge!!

Is the extra £100 an easy find from your wages/income or is really going to mean major cutbacks??

Also do you need all 7 bedrooms, to begin with anyway as you could let a few more bedrooms inc the granny flat as a B&B sort of arrangement to help with finances for a year or two.

1echidna

You need possibly to take a view on future house prices and interest rates. No guarantee that these will be favourable.

Caroline_a

Does it have a lot of work to be done on it? I was in a similar position to you when I was in my 30's, it was a huge 8 bedroom Victorian house in a lovely village with a village shop (one of those that sold everything) as the front part of it. The rear was like being taken into a different world, incredibly high ceilings, massive marble fireplaces and an acre of rambling cottage garden. It would have stretched us, but we felt the shop income would have paid any shortfalls (the idea was that I ran the shop).

However, the old lady who had owned it and run the shop had never put in any accounts, so it was impossible to get a mortgage using any part of the shop income as we needed 3 years' accounts. We sighed longingly and after exploring every avenue walked away.

Looking back, beautiful though it was, it would have needed so much money - a genuine money pit! It had no bathroom, just an instant hot water shower downstairs, and a tiny kitchen - the rooms at the rear of the property had obviously been unused for many years. There was damp in a couple of the bedrooms, no heating apart from one electric fire, etc etc etc.

We drove back a few years later and called into the shop on a pretence of buying something. The shop that had been rammed to the rafters with stuff was almost empty - little of the stock had been replaced. It looked tired and sad, and I thanked my lucky stars that we had had such a narrow escape. Yes it was so beautiful, and a true relic in original form of a bygone age, but probably best for someone with a bottomless wallet.

Jesswithwings

Excellent replies and lots to think about thank you. The house is in immaculate condition, its been very well maintained and the only think we would need to do is take a stud wall down. My husband is DIY king and that would be no problem at all for him.

The "granny flat" wouldnt need much doing to it at all, we'd put a kitchen in, but we already have the stuff to go in so it would cost us pence to get up and running.

The extra bills are worth considering, as are future house prices - as rightly said, the market could crash even more. (Although hopefully at some point in the next 30 years it would improve, no guarantee though)

Income wise, we are in good jobs. DH is flying through the ranks and has just taken another promotion. However, I appreciate that nowadays no job is certain forever and that is worth considering. Future maternity leave is unlikely, I am now "firing on one cylinder" after my ectopic and at present family plans have been put on the back burner, possibly perminantly.

JodyBPM

Some things that you need to consider are:
- property prices may not go up - you may not ever make money on the house price. A 7 bedroom house would also be likely to be difficult to sell, with not many people looking for a property that big.
- interest rates are at an all time low - whilst I appreciate you can fix for the first few years, would the house still be affordable at interest rates of 6%, 8% or 10%?
- letting out the rooms/annex is a business, do you have the time or inclination to run it as such? Meaning accounts and tax, professional cleaning, marketing and advertising etc.

I'm naturally risk averse, and I suspect that I wouldn't take something like this on. Thats not to say it isn't doable or a good idea, though. I just think you need to think through the whole picture, and not be carried away by the dream!

Jesswithwings

JodyBPM wrote: »

Some things that you need to consider are:
- property prices may not go up - you may not ever make money on the house price. A 7 bedroom house would also be likely to be difficult to sell, with not many people looking for a property that big.
- interest rates are at an all time low - whilst I appreciate you can fix for the first few years, would the house still be affordable at interest rates of 6%, 8% or 10%?
- letting out the rooms/annex is a business, do you have the time or inclination to run it as such? Meaning accounts and tax, professional cleaning, marketing and advertising etc.

I'm naturally risk averse, and I suspect that I wouldn't take something like this on. Thats not to say it isn't doable or a good idea, though. I just think you need to think through the whole picture, and not be carried away by the dream!

Exactly, me too! DH is a risk taker, I am very much of the play-it-safe brigade! Interest rates of 10% would be scary, but I think I could get a good income from renting the annex, plus DH would be ready for another promotion at work during those fixed-term years - although obviously no guarantee there. I will also be working much more in the next 3 years - once all the kids are at school full time. Even if I worked 40 hours a week its still only a 3 day week for me (very long days) which will give me 4 days at home to concentrate on the family "business" plus the accounts / tax etc - my sister has her own accountancy business so we would be fine for those

Keep these things to think about coming, its really helping me gain perspective and really think

1echidna

Have you had a survey done on the property, forgotten the terminology, but the more comprehensive one?