Loft conversion or buy another property?

bluebell_woods

I wonder if anyone would have any thoughts on our situation. We've lived in our 2-bed semi-d bungalow for 4 years. We paid just under £139k for it. Our neighbour with the same property has had hers on the market for about 2 years at £130k and hasn't sold it, so we don't think we could sell ours, especially as we're a family of four so it does have a lot more stuff in it. We need extra bedroom space for two growing teenagers so thought we'd convert the loft making 2 bedrooms and shower room/wc. We've had a plan drawn and have been told that this would cost us around 30k. Because we know we won't get anywhere near the value back on the amount spent in terms of property valuation, would it be better to use the £30k savings for the loft (and maybe a bit more) to buy another property with 3 bedrooms where there might be some room for value being added on and rent the current property out for the time being?

Yorkie1

You may find that you cannot get a lender to agree to Consent to Let or to a BTL mortgage on your bungalow, if you are in negative equity.

Are many other bungalows rented out; you'd need to see what rental income you could get compared to what the current mortgage outgoings are.

bluebell_woods

We're not in negative equity but we don't think we'd get back what we paid for the bungalow if we sold (because of our neighbour's situation trying to sell). Do you mean you have to have a percentage of equity in a current property to put it on to a buy to let mortgage?

harz99

Hi Bluebell; a few random thoughts for you.

Is the garden and external land area with your bungalow sufficient for a 4 bed property, should you wish to sell the property in the future?

Assuming you are going to put the two teenagers in the new part upstairs, have you considered the likely disturbance from them being above you?

If the teens are not going upstairs, do you really need two extra, rather than one extra bedroom(s)?

Do you view your bungalow as your home, in which you are happy to stay for many more years? Or do you consider it to be an investment/stepping stone to better things?

Have you considered the "dead" money in buying another house and renting your bungalow? By "dead" I mean all the fees, stamp duty, removal costs, carpets etc. you will encur by buying a second property.

Could you find or afford a 3 bed house which actually has three DOUBLE beds which is what you will need with yourselves plus two teens?

Finally, if you do buy and let the bungalow, can you cope with "voids" when there are no tenants in situ, or big bills for repairs/refurb etc?

If you were in a detached bungalow, the answer would be easy - extend upwards. A semi is more difficult, and can be a problem when you wishto resell, especially if your plans involve altering the roofline and unbalancing the look of the pair of bungalows.

bluebell_woods

Thanks harz99 for all those thoughts - very useful.

Yorkie1

bluebell_woods wrote: »

We're not in negative equity but we don't think we'd get back what we paid for the bungalow if we sold (because of our neighbour's situation trying to sell). Do you mean you have to have a percentage of equity in a current property to put it on to a buy to let mortgage?

I am not an expert, and hopefully some experts will be along soon, but I believe that if you actually remortgage to a BTL product, the lenders often want 75% or 80% max loan to value.

I think there may be another lender which looks more at rental income so long as your own income is £25K+.

Consent to let criteria, if your current residential lender permits it at all, will depend on your lender.

How much mortgage is outstanding?

Brodiebobs

Depends who your lender is, i'm with C&G phoned up and asked what the procedure was to rent property out, they sent me a form asking how much it would rent out for (we got an estimate from estate agent) why we wanted to rent it out (as you we put outgrown) we then got a letter saying it had been accepted and we had to pay £350 'admin fee'.

In the end the house we wanted to buy fell through, but the consent to let is for the remainder of the mortgage term, 20 years in our case so when the right property comes along we can rent ours out.

edited to add, we are in negative equity according to c&g indexing system and they seemed to have no problem with this. Also after see-ing a mortgage broker most lenders ignore the the rental property if its self-sufficient, i.e the rental income covers the expenses.

Muscle750

we have a bungelow and is now 4 bedroom with a ensuite 2 years ago we "re converted" the loft space it already had two bedrooms yet had been done and not using avalible space as they had left the chimney in situ. anyway now one bedroom is 21 ft x 14 and the other is 16 x 12 and we have a nice ensuite with a big walk in shower. end of the day if you move you can wave goodbye to £10k on fees etc so i would if you need the space extend however get a good builder 3 estimates and make sure the work is regualary inspected by the building control etc. ours went slightly over budget and was £28k
Also one thing also to bear in mind is the joists may well need replacing as they wont be man enough this will be big money as the ceilings will be down etc . we were lucky as ours were down when the original work was done