any tax boffins out there?

susiefloozy

doh! - just found the thanks icons!

(susie blames pregnancy brain fog for lapse in common sense)

susiefloozy

dontshoot- it was you who I was asking that question re- the property. and of course, also thanking you for your time.

I've lost the plot entirely.....

Daddy_Bear_2

susiefloozy wrote: »

Jimmo (you know your stuff eh?:T )


Daddybear - thank you also for taking the time to offer your advice- you're right that I do wonder if I'm doing the right thing. My reasoning behind it really, is that the flat itself was going relatively cheap (100k) in an area where there seems to be little else on offer for that price.(it's a newbuild- no one else has lived there before)
There does seem to be a bit of a saturation point with flats in the area at the minute, but as I say, I kind of felt inspired by its lower price, and felt that we could make a bit back. We're not really looking to make a fortune, if you see what I mean.

I guess I am a bit green about the whole property thing- do you really think it's a terrible idea?

100K for a flat might seem cheap today but will it in two years time if interest rates are 7.5% as being predicted by some economic groups now?

In 1998 that same flat would probably have cost you around £20K so is £100k cheap? It might seem cheap comparing it to other prices today but is it really worth the risk and headache to you? You are talking about subsidising the mortgage to the tune of £100 per month, does that take into account periods when the flat is vacant and with so many other flats available to rent do you really think you can rent it 100% of the time? And do your sums include all the costs associated with buying, solicitor fees etc. And have you factored in upkeep costs? You would also need to deduct those from any profit you might make. Bascially, what I'm trying to say is it is not a one-way bet, house prices can go down. They are going down in America, Spain and Ireland already. All these places also had massive house price booms like the UK, fuelled by low interest rates. Interest rates are now rising in all these countries and it is extremely likely that within 12-18 months in the UK house prices will be on the way down, if not before. March mortgage approvals were down 10% on 2006. That is a leading indicator for prices falling. Perhaps it will only be another 6 months before prices fall and flats will be hit the hardest. There are so many of them and so many have been bought for BTL/speculation that they will be offloaded at the first sign of trouble increasing the supply and driving prices lower. Buying a flat that costs you £100 a month (min) is not an investment, don't confuse buying property with investment. It is only investment when you buy at the right time and now is not the right time.

This line from The Economist;

'Residential rental yields are now below the cost of borrowing, which means that landlords are relying on house-price gains to make new investments pay off. That could prove a risky bet.'

Do you think that makes a good investment?

dontshootthemessenger

Hi Suzie,

I am glad that you have given this some thought. You'd be surprised at the number of people who simply listen to the Estate Agent and jump in without thinking. I suspect that the reason the price of this property is lower than the others is precisely because of the saturation that you mention i.e. the slide in prices has ALREADY BEGUN for this type of property in your area. If this is true, the overwhelming likelihood is that for the foreseeable future, prices will continue to go in one direction only. Since you have actually asked for my advice I will give it. Please, please, please DON'T buy this property. Put the deposit and the money you would spend on monthly mortgage payments somewhere safe. With a baby on the way you are going to need it later and cannot afford to take such a huge risk. There, I've said it!

And good luck

RedTomato

I just came across your thread because I've been looking for tax advice myself and I have to say that your strategy looks rather risky. Your figures remind me of this person who was struggling on an old thread that I read - had bought for 99K and was failing to sell at 115K

http://forums.moneysavingexpert.com/showthread.html?t=374446

If you want to do high risk investing, have you thought about drip-feeding the £100 a month into a shares ISA in a high risk category? It seems like people feel safer investing in property because it is something that we think we all understand because we all have to live somewhere but there are lots of examples of people who have lost money on newbuilds in the past few years. A new build flat is often like a new car that loses money as soon as you drive if off the forecourt. Unless you know the developers personally, don't trust that the discount that you are getting is a real discount.

Have you thought about posting on the property forum the area that this flat is in and all your financial assumptions? Have you costed this as a BTL rather than residential mortgage now that your plans have changed? Have you costed in service charges, possible voids, EA and solicitors fees when you come to sell?

Most people buying BTLs at the moment say that they are willing to subsidise rent because they are in it for the long term, being in it for 2 years really does seem high risk in the current climate (inflation rates at their highest for 10 years therefore interest rates should go up etc. etc.)

susiefloozy

Dontshoot and Redtomato


Thanks again for the interest & advice.

I take your point about being told a property is a good deal when it actually isn't- but there are other flats currently being built right next door to the one I'm buying, and the developers are seeking around 125k starting (1 bed also).

Does that make a difference to whether or not you think mines is a good deal?

I'm in Manchester by the way.

Susie

anniecave

try to look at what properties actually sell for rather than what the prices are advertised at. They may not get £125K for them.

There were a couple of flats near the church that I go to that were being advertised 9 months ago, and they still haven't sold and l noticed the price advertised has come down now. I personally always thought that they were overpriced, so I guess everyone else agreed!
Do you actually own the place now or is it still going through?

Only you can make the decision of what to do. All the best with whatever you choose to do.

dontshootthemessenger

Hi Suzie.

The lower price makes no difference at all for me. My view is that new build buy-to-lets are simply a no-no as an investment right now. Think about it. The developer presumably knows about the other flats so why are they so desperate to sell 'at a loss' ? Perhaps they see trouble ahead and want to quickly shift what they have left before it's too late. Perhaps their flats just aren't as good. Whatever the reason, please don't be tempted by the 'bargain price'. What matters most for you is not the price now, but the change in price between now and two years time. If you truly believe you will, after all costs, make £15000, and can live with the possibility of ending up (tens of) thousands of pounds in debt then go for it. Personally, I wouldn't touch it.

Good luck!

dstm

susiefloozy

Thanks annie and dontshoot

Annie- I would like to be abe to get my hands on info about what flats/houses actually go for, but EA's never part with that info, do they?

I've spent most of today going over and over this in my mind- what started out initially as a query about how to aviod cgt, has now turned into the possiblity that there may not be any gain!

On top of the £100+ we would be paying every month to subsidise the flat, we were also needing to borrow the deposit, which, with the repayments, would effectively push it up to £250 pm. I know that sounds mental in hindsight ( hindsight being the dangerous tool of analysis that it is) but like many, I saw (see?) property as a way to make a few quid.

Ahhh, ho-hum, you can't half tell I'm not a property developer, eh? :rotfl:

I'm glad you've told me how you see it though- I've been talking it over with my bf and he seems to think we should take the advice. We may well have been acting in haste and repenting at leisure isn't somthing I want to do with a baby due in 5 weeks.


We've already instructed solicitors though, and paid 200 squid towards their fee. Do you reckon i'll be liable for any more?
There was also some dodgy fee set by the financial advisor in the EA's, who wants £176 for finding us the mortage product (what a con). No doubt they'll still be wanting that?

Thanks guys

susiefloozy

Jimmo

I think you're right- it's all a bit mental. I have owned a flat before, and was able to clear some substantial debts I had accrued during my uni years ( I had a good time ). I bought that flat 'on a wing and a prayer' back then as well (100% mortgage, borrowed fees etc) and I guess I just thought I could do it again.

oh well, you live and learn eh? ( or I may not have done, had I not come on this board- so thankyou!):p


Susie