Real Potential of buying a house?

krish123

Hi Guys,

im currently looking into my future in terms of getting on the property ladder, but will this really be possible with just my own income?

to give you some background details: i am currently 23 and earn £23,500 a year. i live at home and pay a small rental charge.

I have now got my company pension setup and i get 5% contribution from the employer and 5% from myself. I also opted for salary sacrifice so get slightly more into my pension monthly.

I also have my own investments setup and contribute £50 a month into Vanguards Lifestrategy 80 equity fund.

now basically my dad proposes i try for a buy to let purchase and rent a property out, but how possible will this be for me?

will i be able to get the loan? will i be able to get a decent interest rate? will it actually be worth doing this and be a potential for me to actually make money?

Im trying to plan ahead so i make good decisions when the time comes.

I also have buying a car on my mind as i currently use my parents car and just pay to maintain the car i.e tax,insure and petrol of course.

By the age of 25 i want to know what may be possible for me but i want to do the right thing of course.

So any advise is welcome! any more info needed just let me know

Bossypants

What do you have in the way of savings/deposit?

krish123

currently £9K, i think my parents would give me £10K help on the deposit, so by 2017 i think id have 30K for a deposit, but that would be all my money gone !

And this is what i mean because the deposit is only start of the costs of buying a house.

Bossypants

For a buy to let, you'd need a minimum of 25% in deposit, and 40% to get the best rates. In the past I've budgeted £5,000 for legal fees and always been left with change to spare, but you'll need to review current rates when the time comes.

One thing that will likely trip you up is that the majority of buy to let lenders want to to own or have owned a property before doing a buy to let.

Personally, in your situation, I would be looking into buying a flat for myself to live in, and then looking at getting a lodger/flatmate to help cover the mortgage. I don't know what prices are like in your area - you might be able to afford a two bed, in which case great, but if not you can look for a one bed where the layout would allow the lounge to be used as a second bedroom, and do it like that (this is what I'm doing at the moment, albeit with a house and two lodger - it works very nicely).

krish123

Thanks for the reply some good points made there and hence why i think it could be largely difficult to execute what im thinking.

say a £150K house then, i would need £37,500 just for the deposit! thats a hell of a lot of money and plus the 5K to account for other costs as you mention.

See for me there is no rush to move out my parents are happy to let me live with them for as long as i want but they suggest this route to make money as an investment.

Personally my view is that when i settle down with a partner and at the age of say 30 odd with 2 incomes we would comfortably be able to afford a house we would actually like to live in ourselves

In the mean time i just think it would be good to enjoy having cash flow and enjoying things whilst im young.

Its not like im not making my money work either as i say i have started investing 7 months ago and hope to up my investments when i can.

any more views welcome

krish123

Bossypants wrote: »

For a buy to let, you'd need a minimum of 25% in deposit, and 40% to get the best rates. In the past I've budgeted £5,000 for legal fees and always been left with change to spare, but you'll need to review current rates when the time comes.

One thing that will likely trip you up is that the majority of buy to let lenders want to to own or have owned a property before doing a buy to let.

Personally, in your situation, I would be looking into buying a flat for myself to live in, and then looking at getting a lodger/flatmate to help cover the mortgage. I don't know what prices are like in your area - you might be able to afford a two bed, in which case great, but if not you can look for a one bed where the layout would allow the lounge to be used as a second bedroom, and do it like that (this is what I'm doing at the moment, albeit with a house and two lodger - it works very nicely).

I have recently thought about going down the flat route. In my area i can get a decent 1/2 bed flat for 100-120k.

is there any thing i need to be aware of buying a flat instead fo a house?

are flats just as rentable? do they increase in capital value similiar to houses?

in terms of the mortgage will i still need 25-30% minimum for the deposit?

Also is there a charge to maintain the block of flats? i heard there are some sort of maintence charge of the flats.

Malmo

krish123 wrote: »

See for me there is no rush to move out my parents are happy to let me live with them for as long as i want but they suggest this route to make money as an investment

Not making any judgements, but being a landlord is a business and not to be treated simply as an investment that you can put money into. It's not a hands-off matter and there are many things to consider. I often hear this sort of advice being given by parents, who have never been landlords themselves or if they have, they've not been particularly good at it.

There is a very very small pool of lenders that would even consider a BTL mortgage for a first time buyer.

Foxy-Stoat_3

krish123 wrote: »

is there any thing i need to be aware of buying a flat instead fo a house? Ground rent, building maintenance and extending leases when the time comes.

are flats just as rentable? do they increase in capital value similiar to houses? yes, depends on the area, you will need to do homework, a lot of home work.

in terms of the mortgage will i still need 25-30% minimum for the deposit? Minimum 25%, plus fees, plus say £2000 in reserve for essential repairs, plus 3 months mortgage payments saved for voids plus time and money to get the property rentable and the possibility that in the worst case you will have to pay the mortgage for 6 months if you get the wrong tennants in

Also is there a charge to maintain the block of flats? i heard there are some sort of maintence charge of the flats. yes, prices vary so you will have to ask the Estate Agent/Vendor

Hope some of that helps

audigex

krish123 wrote: »

I have recently thought about going down the flat route. In my area i can get a decent 1/2 bed flat for 100-120k.

is there any thing i need to be aware of buying a flat instead fo a house?

Fees, lease length (you don't "own" the flat, you "own" a long term lease on it), occasionally fairly volatile prices, if several people decide to sell at the same time as you

krish123 wrote: »

are flats just as rentable? do they increase in capital value similiar to houses?

Yes they do, although like houses they can also drop in value. In some ways it's more likely for a flat to drop in value - if someone owns 5 flats and decides to lease them out to DSS (or whatever it's called now) applicants, the block's reputation can plummet.

krish123 wrote: »

in terms of the mortgage will i still need 25-30% minimum for the deposit?

Yes, but of course flats are cheaper so that will be a smaller amount of cash

krish123 wrote: »

Also is there a charge to maintain the block of flats? i heard there are some sort of maintence charge of the flats.

Yes, typically there's a maintenance charge which is usually fairly reasonable, but can be expensive - they vary masively. Parking spaces etc can cost extra.

krish123

Malmo wrote: »

Not making any judgements, but being a landlord is a business and not to be treated simply as an investment that you can put money into. It's not a hands-off matter and there are many things to consider. I often hear this sort of advice being given by parents, who have never been landlords themselves or if they have, they've not been particularly good at it.

There is a very very small pool of lenders that would even consider a BTL mortgage for a first time buyer.

No thats a very good point and am aware of the work that will need to be put in myself. My dad actually is a landlord so he does know what it involves and has made me aware of this too.

i just feel if i can somehow get on property ladder earlier rather than later it would be more beneficial for me.

right so realistically do you think id have very little chance of getting a BTL mortgage? if so doe that mean i cannot take this route of renting the flat out?

krish123

audigex wrote: »

Fees, lease length (you don't "own" the flat, you "own" a long term lease on it), occasionally fairly volatile prices, if several people decide to sell at the same time as you



Yes they do, although like houses they can also drop in value. In some ways it's more likely for a flat to drop in value - if someone owns 5 flats and decides to lease them out to DSS (or whatever it's called now) applicants, the block's reputation can plummet.


Yes, but of course flats are cheaper so that will be a smaller amount of cash



Yes, typically there's a maintenance charge which is usually fairly reasonable, but can be expensive - they vary masively. Parking spaces etc can cost extra.

Really so you never can actually own the flat outright?

yes i see and those factors you cant really control in the same way you can with a house.

Right yes so i guess you have to look carefully at all the costs not just the actual price of the flat itself.