Right to buy small flat in a bad area?

hardnutman

Hi,

To cut a long story short I was homeless a while back and thankfully after some very hard times got into a council flat.

Fast forward to now and I have just gained the right to buy my flat at a 50% discount.

The flat is worth about £60,000 and I have just under £30,000 in savings.

To complicate things I just got married to a foreign national who is going to have a hard time getting a job anywhere outside London so we have plans to move there in the future.

The area the flat is in is well known for being a drug infested area and has a load of rehab clinics. I frequently find syringes on the ground by my car in the morning.

So, the question is whether or not it is worth buying my council flat in cash without a mortgage and renting it out? It is a very small flat, only really suitable for 1 by normal standards, although the council says it's suitable for 2.

I know I would be becoming one of those nasty types that buys social housing just to rent it out, but considering the option is available to me and my life was already set back more than 10 years due to the aforementioned issues it is quite tempting. I just don't know if it is worth saving for longer and buying a non-council.

I worry about the kind of tenants I would be able to find (drugs etc) and whether or not I would be able to sell the flat if things don't go well (service charges etc).

I guess the ideal situation would be to rent it out for 5 years then sell it for twice the paid price and use that as a deposit on a house, but I have doubts that could really be pulled off.

fishpond

"The area the flat is in is well known for being a drug infested area and has a load of rehab clinics. I frequently find syringes on the ground by my car in the morning"
With the type of tenant you may get as a private LL, could you not approach a local housing association or council with a view to allowing them to take it over for a given amount of time.
Not sure how this works with HA's and councils but I know it is done.
Maybe someone will be along to enlighten.

hardnutman

fishpond wrote: »

"The area the flat is in is well known for being a drug infested area and has a load of rehab clinics. I frequently find syringes on the ground by my car in the morning"
With the type of tenant you may get as a private LL, could you not approach a local housing association or council with a view to allowing them to take it over for a given amount of time.
Not sure how this works with HA's and councils but I know it is done.
Maybe someone will be along to enlighten.

You have to offer to council or a HA first if you sell within 10 years. That would be great, I just worry if they decline and then I can't find a private buyer as I have no idea what it is like to try and sell property to a HA.

Pixie5740

You could always end up with a tenant like yourself. However if the area is that bad who is going to want to rent there privately and who will want to buy the property in the future? Is the area marked for regeneration or is it going to continue sliding round the u-bend?

Owain_Moneysaver

Will you be allowed to rent it out immediately after purchase under the Right To Buy discount conditions?

Be aware you will be liable for repairs to the exterior and common parts of the building. Depending on the type of building that could be very expensive. Some mixed council/bought blocks can be difficult to insure, especially if there's a flat roof.

Also consider whether there is any likelihood the council will 'regenerate' the area by compulsory-purchasing your flat back and selling the site for demolition and rebuild. It is not unknown for councils to decant their own tenants and allow blocks to become very run-down to reduce the value they have to pay back to owners.

AlexLK

Better for you to use the £30,000 as a deposit on a better class of property, surely?

hardnutman

AlexLK wrote: »

Better for you to use the £30,000 as a deposit on a better class of property, surely?

That is what I am trying to determine. There is potential to double the £30k and make rent on top of that as long as the properly can be rented out and sold. I wouldn't be able to do that in 5 years on a non-council property.

The area is undergoing regeneration and there are efforts to sort out the drug problem but it is all just words at the moment really.

There are communal areas and a lift which is something else that has worried me as lift repairs could be expensive. That said the flat is in a block of about 15 so those costs should be brought down a fair bit.

Bit of a tough situation really. It's a massive gamble. I guess I could try asking local estate agents if they would be able to rent it out, but they will probably just lie to me anyway.

I don't get the feeling that there are any plans for it to be demolished or anything like that.

Pixie5740

The maintenance costs of properties where the council is the freeholder can be absolutely astromically high especially if there's a lift to service.

AlexLK

What prices are similar properties going for at auction? If it's circa £60,000, buy the property and take it to auction ASAP.

In regards to renting it out, I would be extremely weary. My parents are experienced in this field and have 12 properties. However, they would not consider buying a property in such an area because they would be very worried about the type of tenant such a property would attract. Do not underestimate the level of grief tenants can cause nor the level of damage.

Soot2006

If you have £30,000 then do yourself a favour and buy the property you want. This cheap flat in a poor area with potentially high maintenance costs might end up feeling like a millstone around your neck ... Even with the rental income, it will take you a long time to get another £30,000 to buy the property you want .. consider landlord obligations and maintenance, void periods, etc .... You only live once, don't make it harder!

BitterAndTwisted

Once he council decide to refurbish the building you could be landed with a bill greater than the discount you will receive.

If you weren't going to get a discount on the purchase would you buy this property yourself? I suspect not.

Save your money and buy elsewhere