Single first time buyer in London

Mark1987

Hi everybody! I'll try to be brief with my request for help.

I'm a 27yo single guy, currently working in London, with a permanent contract of £25k/year and £130k-£150k of savings. Since it's 9 years I've been wasting my money with the rent, I think now it's time to invest and buy something.
My plan is to buy something in London, something I can finish to pay very quickly, maybe in 4-5 years, sell it and with all the money move back to the north where I can afford a nice house for me and another one to rent. What do you think about that? What can I really afford in London? Is it a good plan?
I'm getting very confused about houses, flats, studio flats, 1-2 bedrooms, ecc.. I would like to receive some advices before to deepen my knowledge about that. My priority is for something that I can finish to pay as quick as possible but at the same time something that may rise in price or, at least, not going down.

(Eventually I could rent the second room in a 2-beds property)

Thank you very much in advance!

Doshwaster

£150k savings + 4 x salary gives you a max budget of around £250,000. What in London available is at that price?

Even if you can afford to buy then how are you going to pay off a mortgage of over £100,000 in 5 years on your income?

Mark1987

That's the point! I would rather buy something for 170k-200k than a 250k property. Since I don't have very clear ideas probably it's not the best buying something around 250k, it would take too many years to repay. What happens if I want/need to sell it and I didn't finish to pay all the mortgage?!
I would say that I want to buy more to invest than to find a definitive property or place to live.

strawberries1

Well done saving so much at 27!
You can buy in London for £250,000 for sure and perhaps have a flatmate to subsidize. Keep living under yur means and you should be fine. Go on to zoopla etc.

Mark1987

Well, my parents are helping me.

I was trying to find a cheap place even to avoid flatmates. I'm a bit tired of sharing a house, even if it may be necessary in London...

hazyjo

When you say "all the money" - what if prices drop? I once bought in London for £227,500 (2006). The market rose, it reached nearer £300k in a couple of years, but then a few years later it was back down and I sold for £228,500 (2011) (despite having done a tonne of stuff to it at my expense - new roof & gutters, decent kitchen, appliances, decoration, shower, etc). Three years later, it's worth around £350-400k as the market's shot up round there.


There are no guarantees when it comes to property. You may be 'lucky', you may not.


Jx

Mark1987

Yes, that's absolutely true. But if I invest 130k of deposit of buy a 200k property, even if I sell it for 180k at the end, it is always much better than keep on paying the rent.

Can I ask what happens if you want to sell the property before the end of the mortgage. For example, I buy a 200k house with a 130k deposit and after 5 months I want to leave London and sell it? Is it convenient?

hazyjo

Mark1987 wrote: »

Yes, that's absolutely true. But if I invest 130k of deposit of buy a 200k property, even if I sell it for 180k at the end, it is always much better than keep on paying the rent.

Can I ask what happens if you want to sell the property before the end of the mortgage. For example, I buy a 200k house with a 130k deposit and after 5 months I want to leave London and sell it? Is it convenient?

Not necessarily. Would have been 'cheaper' for me to rent when you factor in mortgage interest and the works I had done - not to mention several thousand in moving costs and fees/stamp duty!


Very basically, the mortgage is paid off with the profit/equity from the house. You are left with anything after expenses/costs. However, most mortgages cannot just be taken out for X number of months. You will probably find yourself tied into a mortgage for X number of years. You would have to check with your lender.


Jx

Mark1987

Well, yes. Probably in the worst case I could rent the property and pay the mortgage with the rent for x years. It would still be positive.

Mattygroves2

Mark1987 wrote: »

Yes, that's absolutely true. But if I invest 130k of deposit of buy a 200k property, even if I sell it for 180k at the end, it is always much better than keep on paying the rent.

Can I ask what happens if you want to sell the property before the end of the mortgage. For example, I buy a 200k house with a 130k deposit and after 5 months I want to leave London and sell it? Is it convenient?

In your first example you'd lose £20k of your deposit (plus buying and selling costs) so unless you're in there a long time you'd lose more than you'd have spent in rent for a similar sized place. Don't forget that you'd be paying interest on the mortgage (which is equally dead money) and service charge if you end up with a flat.

You can buy and sell properties as often as you like but each time you do you'll need to pay solicitors, survey (buying), stamp duty (buying), estate agents (selling) and any fees there are for redeeming the mortgage. If you want to buy and sell within 5 months and retain the whole of your initial deposit you'd have to hope the property sold for at least £5k more than you paid for it and probably more like £10k. This is possible in London but very risky which is why people tend to view property ownership as a long term thing.

Most mortgages are sold as deals that last for a certain number of years and there is a (sometimes heavy) penalty for paying them off early - which is what you'd do if you sold before the end of your deal. When you sell your solicitor gets the sale proceeds (the price you sell at) repays the mortgage, pays the estate agents fees, takes his fees and then send you the remainder (if there is any).

If you're intending to stay for 5 months then renting is far more sensible than buying and hoping to strike gold. If your time frame is 5 years then so long as you could actually get something that you could afford on your salary (after taking into account travel costs etc) then it starts to make more sense.

theEnd

Mark1987 wrote: »

Yes, that's absolutely true. But if I invest 130k of deposit of buy a 200k property, even if I sell it for 180k at the end, it is always much better than keep on paying the rent.

Are you sure?