Can't get on the ladder in London - BLT somewhere else?

Lara44

Hello! I posted on the mortgages forum earlier but really I think the post would be better off here - hope that's okay with everyone.

We are a young couple living in London. We would love to get on the property ladder but this seems very unlikely in the near future as we can't afford to buy where we live (Bow) and we don't want to move anywhere else. We also rent an amazing house at a knock-down price from a lovely landlady which has allowed us to save a good chunk of our salaries.

What should we do with this money?? Has anyone else had the experience of buying BTL in another area to build up equity? Any pros and cons of doing this? My parents are retired teachers turned property developers with 4 years experience, so we would be looking for a property which could have investment potential in terms of capital growth, extension, lof conversion, modernisation etc, in a few years when our salaries increase.

We will need another year to save the rest of an £18,000 deposit to put down on a £120,000 property (the most we seem to be able to borrow on £17k and £18k respectively. I am 25 and OH is 28 so no plans for children for another 5 years at least, in which point we would want to cash in the property in order to buy somewhere to settle in properly. Not sure where that will be yet, depending on jobs.

We currently have very low overheads, our rent is only £460 between us for half of a lovely 2 bed Victorian terrace. Ideally we would stay here for another few years as it means we can bulk up the savings a lot - a 1 bedroom flat would cost us double this per month.

Feedback much appreciated!

Lara

Alan_M_2

The answer to your question is subjective and based on a speculation of what will happen to the housing market in the short term future.

My advice is, sit tight, save what you can and enjoy your younger years as much as you can whilst saving. I believe in 18 months time we'll have a far better picture of what is happening with property - either way. And never worry about something over which you have no control.

This is my opinion only and based on nothing more than my 37 years life experience on this earth, I don't own a crystal ball.....

jyonda

17k & 18k?!? I can't believe you are even thinking about BUYING property on these incomes. Let alone Buying to let and being landlords. How are you going to cope with void periods, maintenance costs, agents fees?

First of all you need better incomes. Work longer hours, get another job, do whatever you can but you NEED to earn more money before you can even consider getting into this sort of debt. Secondly the kind of property you would be buying would be fairly if not very undesirable and you could have MASSIVE problems shifting it in the future at the price you want.
My advice is to earn more and save even more than you are now and get your careers going as neither of you are that young and you can say what you like about 'plans' for a family but you may feel differently later and unexpected joy does happen.

Put your savings in ISA's if you haven't already.

I know it must be very frustrating for you both having seen other people making large profits on property especially in London but that doesn't mean you will too. Be patient.
You have quite a large student loan to pay off too. Do you have a skillset which you could take abroad and earn more money perhaps tax free with lower living costs?

I really wish you all the best

Catmeister

Hi LaraHoust, just wanted to say please take jyonda's frankly rude comments with a pinch of salt!

You have a combined income of £35,000 - when our combined income was only 20k (:eek: :eek: :eek: - I was still a student so 'combined' is probably pushing it!) we bought a property in Surrey in March 05 for £129,950. We managed to do this with the help of father-in-law as part guarantor, plus demonstrating to the bank that mortgage repayments would be far below rent repayments. For this money we got a two bed, spacious but run down property, and we did had to compromise by moving out of London (OH lived in Vauxhall, me in Blackheath - first marital home). For us, this worked fantastically - in a few months we'll be moving, will make £35-40k on this house, (giving us much needed deposit - first property was 100% mortgage) and now that our earnings have almost tripled, we will be able to buy around the same space in centralish (SW zone 2) London.

So you do earn enough to buy a property, but as a first buy, I would agree with other posters and say don't bother with buy to let, especially with rising interest rates. Are you sure you can't compromise at all on location? I'm not sure how much you have available to spend - 120k or that plus deposit of 18k? For 120k you can still buy property in London; I've just had a quick look and the main areas are SE - Deptford, Lewisham, Woolwich, Catford etc - and if you're prepared to buy ex-council you can even get 2 beds. And I've also had a look in Bow and one one bed was 134k, so you do have options. Weigh up the total cost of buying - moving, stamp duty, (although if you do get somewhere for under 125k this is exempt), utility bills, maintenace, with your take home pay now, and see which makes sense. As your rent is so low now, it may make sense to wait a few years until your salaries improve, but remember that house prices are rising astronomically, so the longer you leave it, the harder it will be to buy your first property.

Hope this has been helpful - I have flu so sorry this is a bit long winded and unstructured! And good luck!

jyonda

So 2 years ago you took a reckless gamble with Daddy as guarantor and got away with it. It doesn't mean they will.
Now the only thing allowing you to move out of your obviously too small starter property is that your earnings have trebled. And now some naive young FTB's will be buying it at a grossly inflated price and will pay the price when the bottom falls out of the market and no-one wants a one bed starter studio with kitchen/bathrom combo in the middle of rural nowheresville.

Rude no. Big slap of reality YES.

tomstickland

BLT somewhere else?

Being serious, I would suggest you build up savings rather than gambling it on a BTL. Since every idiot in every pub in the land blathers on about BTL and investments you can be sure that it's not a good idea at the moment unless you do your homework very carefully and even then you can't predict the future.

BrightonLad

MMM Nice BLT!


I did exactly this, and when i started i was probably only earning 18k max, and it was just my salary too that i had.

Have a look at my post in this thread (post #7)
http://forums.moneysavingexpert.com/showthread.html?t=374252

Good luck!

Catmeister

jyonda wrote:

So 2 years ago you took a reckless gamble with Daddy as guarantor and got away with it. It doesn't mean they will.
Now the only thing allowing you to move out of your obviously too small starter property is that your earnings have trebled. And now some naive young FTB's will be buying it at a grossly inflated price and will pay the price when the bottom falls out of the market and no-one wants a one bed starter studio with kitchen/bathrom combo in the middle of rural nowheresville.

Rude no. Big slap of reality YES.

Rude YES - possibly the rudest person I have read on this forum. To clarify 'daddy' or father in law acted as guarantor for £30,000 - you seem to think he bought the place! We live half an hour from London waterloo by train or car, and have excellent transport links, hence why we chose it. We live in the most desirable area of the country - a mile from St George's Hill. The property has two large double bedrooms and a large garden and the people before us were a family of 4.

So hardly a one bed/studio (by the way they are not the same thing as you seem to think) and hardly in the middle of 'rural noweheresville. And hardly 'bought by daddy' as you imply - do you even know what a guarantor is?

It was also hardly a reckless gamble when as I already stated we demonstrated to the lender that our mortgage repayments were lower than rent we were already paying.

My advice to OP was sound; if you want to buy you can, but you will have to buy either small in the area you want to remain, or slightly further away - ie zone 3/4 and SE instead of E.

Your advice was rude and incorrect, and totally unhelpful to OP. As such I pointed this out in order to help OP - there's no need for an ignorant character assasination because you've had your feathers rustled. I thought this forum was for advice, not over-opinionated upstarts.

littlesaint

Hi Lara,

I'm in a similar position to you, in that I'm renting but saving for a deposit. One of the reasons people give you for buying, is renters are throwing away money. Now, this doesn't really apply to you, because you are in the fortunate position of having a fantastic deal on rent. This gives you the wonderful opportunity to put away a lot of money each month. Of course, you need to pay off your debts, if you have any, and start a high interest account.

If I were you, I'd stay put for as long as you can, enjoy the low rent and save. If your salary and deposit increases, you will be in a much better position to buy. There is the issue of house prices, but remember, you have to pay for stamp duty, solicitors and lots of other extra costs, if you buy.

Of course, if a great opportunity to buy comes along and you can get a mortgage, then go for it. For now, I think you are better off taking advantage of your current position.

jyonda

Catmeister- Get a grip. The advice given is essentially the same as everyone else's except you who thinks everyone should borrow whatever they can, regardless of their incomes or market conditions. You borrowed 6.5 times your income with a 100% mortgage to move into somewhere you don't want to live. That is reckless. Maybe it didn't seem that reckless because you had someone willing to bail you out if it all went horribly wrong.

And the original question was about being BTL (or was that BLT mmmm...) landlords which you seem to have missed.

I thought this forum was for advice, not over-opinionated upstarts.

Everyone has their opinion, some you will agree with some not. That's what forums are about.

there's no need for an ignorant character assasination because you've had your feathers rustled

I couldn't agree more....