Right to buy pros and cons

maya40

Hi i am thinking of buying my maisonette from the council but i am a bit worried about the pros and cons. It currently has major damp problems and if i was to buy it at a discount there are also payments to consider to modernisations by the council as it is in a block of maisonettes. I am also worried being a first time buyer on the legal costs and if i could take out a buy to let mortgage on a council property. My partner wants nothing to do with it but i am desperate to get off of this estate where i am and think that buying it to sell at a later date would be a good idea. If i buy it i cannot sell it for 5 years but the council would take back some of the discount from the sale but they dont say how much. If i sell it in in 10 years they dont take no discount back but you have to offer them first choice of the sale. Any thoughts or opinions would be greatly appreciated.

:j

kingstreet

Your fears about maintenance costs are real. You are buying a leasehold property and will face a contribution to any works the council plans.

You won't be able to get a BTL mortgage on a RTB property, off the top of my head.

The discount is repayable over the pre-emption period on a sliding scale. It falls as each year of the five expires, 100%, 80%, 60%, 40%, 20%, then nothing from the beginning of year six onwards.

It's also repayable as a percentage of the market value of the property at the point of sale. This would be based on the discount as a percentage of the market value at the point of purchase.

For example, if you buy for £100,000 with £37,000 discount, that's 37% of market value.

If you then sell in year three for £150,000, you repay 60% of the discount as a percentage of the then market value, for example;-

£150,000 x 37% = £55,500 x 60% = £33,300.

Yorkie1

My personal view is that you would be wise to steer clear if you don't have sufficient funds to pay unexpectedly large maintenance bills. As soon as you own the flat, you have to pay for any work the council decides to do to the block, without any say in when / cost.

Some lenders are a bit picky about providing mortgages on council flats - how many stories high is the building?

And as kingstreet says, you will struggle with a BTL from the outset if that is what you are planning; many lenders require you to be a homeowner before applying for a MTL mortgage, even before you add the RTB element into the equation.

Finally, there is no guarantee that flat prices will go up in the next few years, nor that the council will give you a price you'd like (or would need to move into a nicer area) when you come to sell.

maya40

Hi thanks for the info it's very interesting to learn i think i would only be interested in the short period because of the charges and damp problems but a buy to let mortgage would have been great so i dont have to live in it .At the moment my discount is 50-75% based on me living here 17 years i say 50% because the property is only worth £130,000 average that they have sold for at the lower end so i dont think i would get 75% im still confused though if it would be a good short term investment because of the charges

GMS

Do the terms and conditions of the RTB allow the property to be let? Would the lease allow letting?

Think this is a non starter for the reasons already mentioned even before the terms of lease are checked.

maya40

The rent on the current property private could go between £800 to £875 and based on mortgage calculations and service charges that would be a good profit.

kingstreet

As GMS said, the terms of the lease may not allow you to sublet the property once you purchase it. Check with council.

If they do, you could ask the lender for "consent to let" in the future, rather than buy it on a BTL mortgage at the outset with the immediate intention of letting.

Are you living in the property now? If you are, why not stay there for a few more months until consent to let is more likely on a residential mortgage?

Make sure you choose a lender with easy consent terms, preferable one which doesn't charge a fee or increase your interest rate.

ACG

Im not sure whether its possible, but you may be able to purchase it with a residential mortgage and then convert to buy to let in say 2 years time? (Again, it may not be possible, check the paperwork).

Another thing to consider, if the estate is really that bad and you rent it out - what sort of person will you get renting it? Are they likely to cause damage, rip out the copper piping and wiring? Convert it to a cannabis factory with ventilation holes everywhere?

maya40

Hi i contacted the council and they claim they dont deal with the mortgage side and as long as everything is legal it's down to me but to be honest they where a bit vague which is why i am on here. I definitely dont think i would get a buy to let mortgage going by the comments so i would have to get a first time buyer mortgage but the maintenance works still worries me. Does anyone know the percentage they ask for ? There is 16 maisonettes in the block and roughly 4 are bought.

McKneff

Could you not apply for an exchange to somewhere else through the council.

maya40

I tried but no one wants here that's the trouble it's on an estate