Buying with intent to move

F1001

Hi there


I am looking to purchase a property - a house for me and an elderly family member as I have prematurely sold last property and are staying with family as last purchase fell through. Need to move out of here asap.


We are now thinking to move abroad in a couple of years time - need to think through and work out whether we want to do this or not, whether I can get a job there etc.
I want to buy (rather than rent) something now though as prices are just going up and if moving abroad doesn't work out I don't want us to be left off the ladder and unable to get back on. Also thinking a house rather than a flat so if we stay in UK then this would be the ideal set up.


So, question is - if I buy a house now and decide then to move, how much would we lose if we try and sell in a year or twos time (I have been told property is for the long-term not short)?
Should I go for a flat rather than a house as this would be easier to sell rather than a large house?


Would appreciate any thoughts on this plan to buy for potentially the short term and with maximum flexibility.
Thanks!

Argghhh

i would make your mind up about the moving abroad part before doing anything - its the key. buying houses cost money and you may not be able to sell when you need to so if still thinking of going abroad in next 2 years - rent it will work out more sensible in the long run

F1001

Yeah I wish I could rent to take the time to think it through but I just feel that prices are going up and if I do decide to stay then by that time I will have lost out twice 1) paying rent and not saving 2) prices will be higher and I will need more for the deposit.
Thinking if I have to spend dead money through renting, why not spend it through the buying /selling process?

Argghhh

because you then have a house to either sell or let with all the pitfalls associated with that if you decide to go abroad - i would make up your mind before deciding one way or the other

pathtofreedom

No one can really answer your question as we don't have a crystal ball. It all depends on the area you're looking at, the market conditions - including globally - which people can't predict.

Are you going to buy with this relative? Depending how old they are and if they are on the mortgage this might limit you as to what you can get. If you're using some of their money for a deposit it might get you in to problems later if they die within a certain number of years of the gift depending how much it is.

Are you going for a fixed rate and for how long as this will probably have extra costs to factor in for remortaging or changing it to have consent to let / btl if you are thinking of moving. Then you have to factor in the costs of running a business and being a landlord which I think would be a lot harder and cost more not living locally to your property.

Some people can't buy your house if you just plan to buy and sell something in the same year as mortgage companies won't allow people to buy it.

If you're planning to just leave the relative living there while you go abroad will they be on the mortgage or have any interest in the property? This might cause you problems if they need to go into a care home if it is done this way and that house needs to fund their care. Also what is something happened to you, will they then be stuck with a mortgage they can't pay?

pathtofreedom

Also depending on how expensive this property is you're looking at, with mortgage fees, solicitors, survey, searches, stamp duty, then more solicitors when you sell it and possible mortgage fees to change to consent to let / btl have you worked out how much you lose from all that before you even get started?

Say you bought somewhere for 200k say 5k for all those fees, if something happens or interest rates rise and you have to sell quickly at a loss you're already that 5k down. Then you have maintenance on the house as well, eg boiler goes bang or something thats another 2-3k you won't see again.

That is also before you even think about the costs associated with renting it out eg insurance, certificates, voids etc etc. So unless you can guarantee - which no one can - that the place you buy increases x% in a year, 2, 5.. then you can't really look at property as a short term, or any term investment.

F1001

So the mortgage will be in my name and lender is ok for relative to stay with me. I am looking at fixed for 2 years. Yeah the fees will mount up as the property is quite large so bigger stamp duty costs.
If I move my relative will definitely be moving with me too - so option would be either to sell, or to let if market is difficult for a sale.
Might a flat be better option than larger house?

pathtofreedom

I don't think you understand what I'm trying to say.

rent - agency fees, deposit (you'll hopefully get back), rent, moving costs, for 2 years = x

buy - solicitor, searches, mortgage setup costs, stamp duty, moving costs, maintenance eg boiler, roof repairs, (flat - service charges, sink fund, leasehold rent) mortgage interest, solicitor fees to sell, estate agent fees to sell, (or change to btl fees, agency to rent out the property, certificates, insurance, voids.... )= y

you seem to think rent x for two years will be lower than buying y for 2 years. No one can predict if the actual house / flat will go up in value in 2 years to make it cover all those extra costs to buy / sell it. If you do just rent it you need to be thinking of it as a business from the start and what your yield would be, this would be over longer than 2 years as well.

Renting isn't dead money as you call it in this situation really. If you want to go into btl you need to approach it that way as a long term business investment, especially as you'll have a lot higher costs if you're thinking of living away so you'd need agencies to help run it for you which would eat into your yield. Buying somewhere just to sell it 2 years later, is very unlikely to mean you end up with your money back unless you're doing a big renovation as well, which will also cost money and should be done as a business really.

F1001

Thank you it is v helpful to look at it in this way! Doing the sums now considering all factors you have included above and it is all making much more sense now and renting seems better vs buying the house we want until I get to year 7! Will do the same sums for renting vs a smaller house or a flat and wondering if it will come any different - Thank you!

AlexMac

There are almost too many variables to forecast renting-V- buying for the next few years; area, local house/flat prices, local price inflation, local rent levels and maybe more significantly, whether your plan to move abroad actually happens...

But, having owned flats, houses and holiday homes in London, the SE Coast and Italy for the past 40 years, here's my opinion (for what it's worth).

Sorry to send you back to the drawing board, but in summary, my advice would be to Buy, but...
- to buy the best place you can afford,
- to buy in the best area you can, as these appreciate faster, but also
- to look at the local rental market so that when you do go expat, you can keep the UK property, rent it out and enjoy UK price inflation while retaining the safety net of a UK property to move back to (even if this means renting abroad)
- and if the overseas lifestyle really works out- to retain the option of an eventual sale

Generally, I've done well by owning rather than renting UK property. In every one of the past 4 decades - except one (the late 'noughties', see below) - I have benefitted from house price inflation which has beaten other investments or savings, even when selling after only 3-4 years and after taking mortgages, agents and solictors' fees, SDLT and removal costs into consideration.

Some of those returns have been startling; I doubled my money in the 7 years between 1985 and 1992, and considerably more than doubled it again between 1997 and 2000 despite only owning that property for 3 years. Even the flat we bought on the SE Coast for £152k (plus a £20k refurb) at the peak in 2007 just before prices in that county tumbled 25% sold for £172k three years later as prices crept back after the crash of 2008-9.

Whereas the 33k (Euro) Italian flat simply didn't appreciate in 5 years; we'd have lost money if the Euro hadn't risen against the pound so we benefitted by about £5-7k from the exchange rate. Friends with a French property experienced the same - prices in rural France are currently stagnant and you may have read recent press reports of the guy who sold a flat in Islington, London, five years ago (where prices have since doubled or tripled) and bought in France (where they've dropped) and is taking a big hit now he's moving back.

While UK annual HP inflation may not reach the worryingly high rates of the past few years, it's still higher than wage inflation or savings rates; albeit variable by region
- Uk-3.6%,
- London 10.5%
- East Anglia 2.4%... ( http://www.nationwide.co.uk/about/house-price-index/house-price-calculator )
- and in my area it's 15-20% p.a in the most popular streets.

I can't see that being matched anywhere else in Europe (although you may intend to go further?) and I can't see a UK house price crash (as in 1989-ish and 2008-ish) given current demand and shortages.

But of course- this is a mechanistic approach. You should buy or rent as a lifestyle choice not as an investment... Best wishes with your choices

F1001

AlexMac wrote: »

- when you do go expat, you can keep the UK property, rent it out and enjoy UK price inflation while retaining the safety net of a UK property to move back to (even if this means renting abroad)
- and if the overseas lifestyle really works out- to retain the option of an eventual sale

This is exactly why I was thinking to buy so that it's a back-up if we eventually decide not to move or want to come back. Although when doing the sums, the cost of buying a large house in this market will take a long time to recover costs if we want to sell even if the location is good. And also the sizable deposit needed sitting here in the UK might constrain us buying something nice abroad - I am thinking West Coast Canada - also expensive property prices!

In your experience would you suggest a flat or a house to buy here in my circumstances? I am thinking something in the burbs of greater London where am getting more value for money


When you say best property I can afford - do you mean a biggest / new build / luxury / good London postcode?