Hi, Personal loan for un-mortgageable auction property?

Werdnal

Jack_Johnson_the_acorn wrote: »

I understand that it's my responsibility for the upkeep inside the apartment, general wear in the communal area is not for me to sort... I doubt that it would become an issue although stranger things have happened, and the tax on a 50/50 rent of 450 would be negligible, hardly an issue to concern me. Repayments on £10k would also be minimal so any profit from the rent would go towards the upkeep of the property. Thus leaving me free to save for another place of my own.

It is good general advice for all new LLs to read this post for guidance:


http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12

Also, you are suggesting you will be getting 100% rent 24/7 365 days a year, when infact this cannot be depended upon. Your loan repayment may be small, but what would you do if your tenant stopped paying (either because they chose to be awkward, lose their job, illness or whatever). Or they choose to leave (they do not actually need to give any notice and can walk out on the last day of their 6 months fixed term if they wish) and you have a void in letting. For this reason, rental returns are usually based on 10 months per year guaranteed occupancy, not 12.

You also need gas safety check annually if there are gas applicances.

Do you understand how the deposit protection schemes work? No doubt tenant paid one at the start - so you would need to re-protect the deposit when you take over.

Read, learn and inwardly digest everything you can about becoming a LL (and if your parents are joint owners in this project, they should do the same), before you take on the property. We get regular posts here from LLs who have got it wrong. At best it can be a pain and inconvenience - at worst, cost you money!

The new management company will also impose a maintenance charge or sinking fund to accrue cash for ongoing upkeep of the communal areas and fabric of the building, so you are responsible for these financially - who else do you think pays for it? As I said in one of my earlier posts, with the absence of a management company, it is likely that the building may have been neglected for some time, so there may be costly repairs and work to be done, which you will be jointly expected to pay for along with the other leaseholders in the block!

And remember, this is without knowing the condition or any repairs necessary in your own flat before you even buy it!

Ulfar

Jack_Johnson_the_acorn wrote: »

How do we not have the money to pay for it?? We have a combined monthly net income of £3000 minimum per month.... The loan I have just been offered was for £20'000 with repayments of £450 over 5 yrs...... That leaves us with £2550 each month to survive, I think that means we can afford it.

The tenant has signed a new contract for 6 months paying just over £400 per month. I think this is a great purchase if it can be bought at the right price. The gross yield would be over 10% :T

Except your return won't be 10% as you have missed a few but quite important costs :

Tax on the rental income, your loan interest may not be able to offset as it isn't a mortgage on the property, the capital payments certainly won't.

Service charge, you mentioned there this isn't being done currently but a new company is set to start. does this mean there is no sinking fund already in which case your service charges are going to be quite high as the property probably needs some maintenance to make up for the neglect.

Gas/Electricity safety checks, you can't view the property so have no idea if any repairs are due.

Insurance, you do need landlord's insurance too.

Letting agent fees, tenant is currently in situ, is this tenancy being managed by a letting agent if so they are probably still going to expect payment.

thegirlintheattic

Sounds like a lot of hassle for not much.

Jeffrey_Shaw

Jack_Johnson_the_acorn wrote: »

Yes I was considering this, just depends on the cost.

The policy premium (a one-off cost) itself depends on the property's value.
Example: GCS premium would be £195 [val. up to £100 000], rising at between £25-50 per £50 000 up to £1m.

Jack_Johnson_the_acorn

Werdnal wrote: »

It is good general advice for all new LLs to read this post for guidance:

Also, you are suggesting you will be getting 100% rent 24/7 365 days a year, when infact this cannot be depended upon. Your loan repayment may be small, but what would you do if your tenant stopped paying (either because they chose to be awkward, lose their job, illness or whatever). Or they choose to leave (they do not actually need to give any notice and can walk out on the last day of their 6 months fixed term if they wish) and you have a void in letting. For this reason, rental returns are usually based on 10 months per year guaranteed occupancy, not 12.

You also need gas safety check annually if there are gas applicances.

Do you understand how the deposit protection schemes work? No doubt tenant paid one at the start - so you would need to re-protect the deposit when you take over.

Read, learn and inwardly digest everything you can about becoming a LL (and if your parents are joint owners in this project, they should do the same), before you take on the property. We get regular posts here from LLs who have got it wrong. At best it can be a pain and inconvenience - at worst, cost you money!

The new management company will also impose a maintenance charge or sinking fund to accrue cash for ongoing upkeep of the communal areas and fabric of the building, so you are responsible for these financially - who else do you think pays for it? As I said in one of my earlier posts, with the absence of a management company, it is likely that the building may have been neglected for some time, so there may be costly repairs and work to be done, which you will be jointly expected to pay for along with the other leaseholders in the block!

And remember, this is without knowing the condition or any repairs necessary in your own flat before you even buy it!

The building was renovated in 2007 and £4million spent doing up the apartments. I have a colleague who lives in the building hence why I know about management company taking over in November. They are basically a 4yr old new build. I appreciate the link to the other thread I appreciate the advice. What I have found on this site are posters who seem to relish dishing out negative spin on all situations.... not sure why. :money: Thanks

Werdnal

Jack_Johnson_the_acorn wrote: »

The building was renovated in 2007 and £4million spent doing up the apartments. I have a colleague who lives in the building hence why I know about management company taking over in November. They are basically a 4yr old new build. I appreciate the link to the other thread I appreciate the advice. What I have found on this site are posters who seem to relish dishing out negative spin on all situations.... not sure why. :money: Thanks

Depends how your look at life I guess. I am not a pessimist, or perhaps always an optomist, but more of a REALIST. I have been a LL for only 11 years, and have had the good times and the bad and learned a lot (making a few mistakes along the way - thankfully not the costly variety, but you live and learn!). I have also been a home owner in my own right for 26 years. Been there, done that, probably still got the t-shirt in the bottom of the wardrobe (although I doubt it will still fit!). You are just starting out on your first BTL, and saving for your first property of your own. Surely that qualifies me to know slightly more about the intricacies of the situation than you?

You came here asking for advice, and despite many replies from a lot of different members, no-one yet has really said "Oh its brilliant, go for it"! We are not all pessimistic or relish in painting it as bad as it gets, but there are a lots of posts here from people who get it wrong. So perhaps people are cautious in encouraging you into something which you seem to have done little to research in advance, but still have convinced yourself is an excellent plan with absolutely no possible pitfalls or problems.

Go ahead a buy it, I am sure it will all go swimmingly, you will make thousands and become the UK's top property magnate. In 5 years, come back and tell us what a great investment it was and that you told us so and we were all wrong! - Now is that what you wanted to hear?!

Until then, I will reserve judgement ... There is a saying "Marry in haste and repent at leisure" and this does not have to relate to choosing a life partner! Its just as applicable to other scenarios.

Good luck, as you seem intent on going ahead!

Jack_Johnson_the_acorn

Werdnal wrote: »

Depends how your look at life I guess. I am not a pessimist, or perhaps always an optomist, but more of a REALIST. I have been a LL for only 11 years, and have had the good times and the bad and learned a lot (making a few mistakes along the way - thankfully not the costly variety, but you live and learn!). I have also been a home owner in my own right for 28 years. Been there, done that, probably still got the t-shirt in the bottom of the wardrobe. You are just starting our on your first BTL, and saving for your first property of your own. Surely that wualifies me to know slightly more about the situation than you?

You came here asking for advice, and no-one yet has really said "Oh its brilliant, go for it"! We are not all pessimistic or relish in painting it as bad as it gets, but there are a lots of posts here from people who get it wrong. So perhaps people are cautious in encouraging you into something which you seem to have done little to research in advance, but still have convinced yourself is an excellent plan with absolutely no possible pitfalls or problems.

Go ahead a buy it, I am sure it will all go swimmingly, you will make thousands and become the UK's top property magnate. In 5 years, come back and tell us what a great investment it was and that you told us so and we were all wrong! - Now is that what you wanted to hear?!

Until then, I will reserve judgement ...

Good luck, as you seem intent on going ahead!

HAHAHA, Ego much.....

I was thanking you for your link to another thread and you have decided to take my post as some sort of attack on your knowledge as a LL....:rotfl:

I have several options, Borrow £20k off the bank pay £450 back a month, use my £15k difference to fund the rest of the purchase and use parents if the price goes above £35k... Sounds reasonable, there is a tenant in place paying £450 a month for the next 6 months. Of course there a risks with any property purchase and I appreciate more so with a BTL property.

I plan on letting out the property and then move in after 6 - 12 months..... The property will then be paid off within 3-4 years. I will be debt free and own my own place (with my fiancee).

As for the funny jibe about becoming a property magnate :rotfl:not in the pipeline old man.

Jack_Johnson_the_acorn

Btw the property sold for around £110k in 2007 at the peak of the property boom.

Werdnal

Jack_Johnson_the_acorn wrote: »

HAHAHA, Ego much.....

I was thanking you for your link to another thread and you have decided to take my post as some sort of attack on your knowledge as a LL....:rotfl:

I have several options, Borrow £20k off the bank pay £450 back a month, use my £15k difference to fund the rest of the purchase and use parents if the price goes above £35k... Sounds reasonable, there is a tenant in place paying £450 a month for the next 6 months. Of course there a risks with any property purchase and I appreciate more so with a BTL property.

I plan on letting out the property and then move in after 6 - 12 months..... The property will then be paid off within 3-4 years. I will be debt free and own my own place (with my fiancee).

As for the funny jibe about becoming a property magnate :rotfl:not in the pipeline old man.

No I wasn't taking it as an attack - I was explaining that the reason people here advise caution, is that like me, they have done it all before and found that it doesn't always go well. You seem to think you are bombproof (a condition of the young I often find), so perhaps need to pace yourself a little and make sure you know what you are letting yourself in for. I appreciate the thanks for the link - I hope you do actually read it, and if there is anything you don't understand, come back again and ask.

And by the way, I did take offense at the "old man" bit - I am female!:rotfl:

Jack_Johnson_the_acorn

Werdnal wrote: »

No I wasn't taking it as a jibe - I was explaining that the reason people here advise caution, is that like me, they have done it all before and found that it doesn't always go well. You seem to think you are bombproof (a condition of the young I often find), so perhaps need to pace yourself a little and make sure you know what you are letting yourself in for. I appreciate the thanks for the link - I hope you do actually read it, and if there is anything you don't understand, come back again and ask.

And by the way, I did take offense at the "old man" bit - I am female!:rotfl:

If you read my original post I was only asking for advice re the Loan as to whether or not I would be accepted... Do you not see the possibility of a profit in the very near future in relation to this property? I would post a link but I would be foolish to advertise a property to other possible investors and I plan to make an offer in the next couple of days... Please remember that I am young and willing to speculate and like I have said I'm well aware of the potential pitfalls re this property. But as I have no other commitments and extremely helpful parents financially I can't see me falling into trouble with this flat.

I appreciate the sound advice. Hope no offence has been caused.

November new management company - should increase the value as the mortgage approval would be easier.

3-5 years no Debt and I outright own a property with a value of £40k plus. realistically pre management company going into liquidation the property was worth £100k so value would/should be higher.