Make the move or keep saving...?

loofer

Well here I am, my first post. Hi everybody.

I'm sure this has been asked several times or at least might help others in similar situation.

My stats are:
24years old
Single (though looking to get married next year)
Living with parents in North Manchester
Working full time in Liverpool (£24K)
Don't pay any rent:j
But do pay half Utility bills (circa £80 pcm)
Manage to save £800-£1000 pcm, straight into savings account.
Current savings £43,000
I've only been working fulltime for about 9 months, I feel I'm financially astute and find it easy to budget and save money.

The situation... well, as the title suggests. I've read on another thread how there seems to be this 'house price crash looming over us'. I'm too young to remember the last house price crash so I find it a little inconcievable. I can understand a slow down in the rate at which prices are rising, but can't see them going backwards. There's no science behind my thought, I've just always known prices to rise in my short adult life so that is what I will (ignorantly) believe.

I could buy an avg house (terrace 2up/2down) for say £120k. Get an 80k BTL mortgage over say 20yrs. Monthly payments of £600. Rent it for between £400-£475pcm plus pay an extra amount (say £500 pcm)to clear the mortgage nice and early (7-8yrs hopefully). In the meantime I would be staying at my parents home where they live at the moment or even into their second property which they are also happy to allow.

Other choice is to keep saving. The way I see it is (in theory) if I was able to save £800 pcm for the next 7 years, I would have saved circa £70K + the £43k I already have. I'm not tied down to a house. I will hopefully (due to salary increase) be able to get a bigger mortgage (hence more desirable house) and be able to afford the payments.

I also don't know where (geographically) I will be working in the future. I'm on a graduate scheme which gives me siginificant career oportunities and the choice to move around (though I would always stay within North West)

Of course I know there will be instances where I can not save that amount each month. I also havn't factored in that it is likely (or not) that the price of the house I buy now may increase in value over time and represent a bigger asset than just saving money for the next 7 years.

What would you do in my situation?

P.S don't just limit it to the two choices outlined above. I'm open to all ideas.

Thanks

advent1122

What if you cant rent out the house?

loofer

advent1122 wrote: »

What if you cant rent out the house?

A very possible situation. Knowing the local market, I can say that £400pcm for a 2 bed Terrace is pretty much the minum around here. Of course it all depends on condition of propoerty and area but I would take that into account when finding a property.

I'm hoping the right house let at the right amount will hopefully increase the chances of it being rented out.

I feel I can afford a mortgage commitment of about £600. Thats why I wouldn't arrange the mortgage over a shorter period even if I could pay more at certain times.

Alias_Omega

You have an ideal situation here to invest that cash for the future, you will only be able to get about a £141,000 mortgage based on about 4.7x your wage. Im in the same position, though earning about 4.5k more.

If you put the deposit into the house, you can buy a house and borrow less, but what happens if you lose that house.?

How about a £10,000 deposit, Save the £33,000 in goverment bonds, or National Savings or something, then take a repayment mortgage, with an option to make cash lump sum payments.

I worked out that £5000 lump sum would save £18,000 on the mortgage in payments.

Im unsure what £33,000 in goverment bonds a year would bring in, but its something to consider as the usual what if house prices crash etc..


(must let you know that i am NOT a mortgage advisor, and my advise should not be relied upon)

Alias_Omega

Ok, how about you use the cash you have to buy a house, goto right move, spend about £60,000 and buy a house outright. Bring it up to rental spec, but no work to it thats not needed, rent it out to DSS people. Guarenteed income, and any damage, well it dont matter as you've spent no cash on it.

The rent will come to you, and go into savings, the house is paid for. Savings be used incase anything is needed.

meanwhile whilst your young, you have become your first landlord. Stay at home, move in with someone whatever, the house should pay for itself, your savings increase by about £4000 a year (less maintance costs), and when the area is revamped, house prices increase and your sorted...

Cheap housing is for winners..

Can buy them at £45,000 over in grimsby..and they are lived in.

loofer

Alias_Omega wrote: »

Ok, how about you use the cash you have to buy a house, goto right move, spend about £60,000 and buy a house outright. Bring it up to rental spec, but no work to it thats not needed, rent it out to DSS people. Guarenteed income, and any damage, well it dont matter as you've spent no cash on it.

The rent will come to you, and go into savings, the house is paid for. Savings be used incase anything is needed.

meanwhile whilst your young, you have become your first landlord. Stay at home, move in with someone whatever, the house should pay for itself, your savings increase by about £4000 a year (less maintance costs), and when the area is revamped, house prices increase and your sorted...

Cheap housing is for winners..

Can buy them at £45,000 over in grimsby..and they are lived in.

Thank you, that's very sound advice. I would feel quite comfortable doing that. Especially as I don't really intend to live in the the first house I buy. It would be an income vehicle once paid up.

Property isnt as cheap as that round here, more like 70k minimum. However if I ventured into some parts of Lancashire or even East Manchester then it ceratinly is a possibility.

Ultimately I just want to make my money work harder for me as I know its not doing much sat in a bank a/c. Eventually I want to be in a position to buy a relatively nice house in a nice area and be able to comfortably afford a mortgage (like everyone else hehe).

Alias_Omega

You say your from liverpool, well you have...

Liverpool, Birkenhead, some parts of chester, ellesmere port, widnes, runcorn, litherland, sefton

all areas that are cheap and local to you within 20mins..

A builder will buy a house for £60,000, rent it out for 2 years, then sell it on.

How you think they own 5-6 houses.

jonewer

Alias_Omega wrote: »

Ok, how about you use the cash you have to buy a house, goto right move, spend about £60,000 and buy a house outright. Bring it up to rental spec, but no work to it thats not needed, rent it out to DSS people. Guarenteed income, and any damage, well it dont matter as you've spent no cash on it.

The rent will come to you, and go into savings, the house is paid for. Savings be used incase anything is needed.

meanwhile whilst your young, you have become your first landlord. Stay at home, move in with someone whatever, the house should pay for itself, your savings increase by about £4000 a year (less maintance costs), and when the area is revamped, house prices increase and your sorted...

Cheap housing is for winners..

Can buy them at £45,000 over in grimsby..and they are lived in.

What if house prices dont go up? What if the DSS tenants trash the place? Unfortunately you HAVE spent money on it to bring it up to rental spec where it will have to remain - this will also cost money. Given the current yields from BTL - why not just stick the money in a savings account risk and hassle free?

WHAT IF HOUSE PRICES GO DOWN?

From the BBC - where do you live again? STILL SURE PROPERTY IS THE BEST PLACE FOR YOUR CASH?

NAMEAV PRICE (£)QUARTER
East Anglia
£191,899 -0.8%
West Midlands
£166,831 -3.1%
East Midlands
£161,425 -1.1%
Wales
£155,323 -1.1%
North West
£152,079 -0.7%
Yorks & Humber
£149,954 -3.2%
North
£138,312 -3.5%

Thats right folks! West Mids and Yorks and Humber property lost over three % of its value in a three months.

BornSloppy

You're happy living at home so buying a house then renting it out is a good idea. I wouldn't mind doing it with my savings. I'd buy a 2 or 3 bed terrace and rent it out to a student couple or DSS people as mentioned. First choice would be Everton followed by Wavertree and other areas close to town. The current regeneration of Liverpool (the constant roadworks MUST be good sign!) means it's best buying here

Alias_Omega

jonewer wrote: »

What if house prices dont go up? What if the DSS tenants trash the place? Unfortunately you HAVE spent money on it to bring it up to rental spec where it will have to remain - this will also cost money.

What if they dont trash it, what then?

You cant live your life with 'what ifs', i like the idea that you could be worried about this, if she / he bought a house that was not too bad, spent a little cash getting up to a decent spec, ie.. new carpits, paint it, get it checked over (minimum work), then rent it out.

Well i cannot really see a £60,000 house reducing that much in the future as this seems to be throw away money.

Look at the price of a brand new audi TT, they are about £30,000, a Nissan 350Z is about £35,000. How about a BMW X5.? £50,000..?

I was looking at a BMW 1 series diesel car, brand new they were £19,000. Great.. i thought, thats a 1/3rd of a house.

firesidemaid

remember you have to pay tax on any rental income over the mortgage interest amount.

so, depending on your btl plans you may want to keep it either interest only or over a longer term