Buying a studio flat in London

ruelle

HappyMJ wrote: »

It could be a good "investment" property that you let out to tenants depending on the gross return. Do you know how much a property of that type and location would rent for? What is the gross return? London tends to have a low gross rental return and you would be gambling on capital gains.

I'm guessing I could get around £950 per month for it in rent. I'm a FTB and not really looking to buy-to-let just yet though so I've not really looked into things like rental return/capital gains etc. (should I?)

westernpromise

I had trouble selling a studio in Limehouse in 2012. Nice block, own front door...but a studio, which can put people off.

As long as you can use it yourself for the foreseeable future and as long as you can aggressively pay down the debt during that time you'll be OK - because you won't need to sell and by the time you do you'll have accumulated some equity. If neither applies then maybe it's not the right flat.

ruelle

davidmcn wrote: »

Have you checked that you're able to buy it? Many mortgage lenders don't accept studios as security.

My broker seems to think I can although I'm guessing my choice of lenders will be limited by this.

westernpromise

Helvetica_Van_Buren wrote: »

If you rented you'd be paying somebody else's mortgage.

This is a complete canard.

Rental yields in the south east are below BTL mortgage rates. The landlords currently subsidise the tenants.

Helvetica_Van_Buren

ruelle wrote: »

All good points, Helvetica. I guess I'm a bit worried about what will happen to the housing market after the June referendum but of course no one knows what's going to happen!

I've been watching Rightmove like a hawk and I have noticed prices being dropped recently. Not enough to mean that I could suddenly afford a 1 bed in the areas I like though.

Maybe I'm thinking a bit more long term than you are.

For what it's worth I've just had an offer of £95,000 accepted on a property that I backed out of buying for £40,000 in 2005. I can't tell you how much I wish I'd bought it then for that price.

This property is obviously not in London.

In that time the cost to rent a similar property has risen from about £300 to about £545 for the property. Imagine what will happen in the NEXT 12 years.

ruelle

westernpromise wrote: »

I had trouble selling a studio in Limehouse in 2012. Nice block, own front door...but a studio, which can put people off.

Did you end up selling it in the end?

HappyMJ

ruelle wrote: »

I'm guessing I could get around £950 per month for it in rent. I'm a FTB and not really looking to buy-to-let just yet though so I've not really looked into things like rental return/capital gains etc. (should I?)

Yes buying a home is an investment. You need to look at the potential returns to see if you are paying the right price for the property.

I rent the 2 bedroom flat I'm living in. I pay £475 per month. There is a flat in the same building for sale for £110,000. It is cheaper for me to keep my money in the bank earning interest and use that money to rent the flat than use it for the deposit and pay a mortgage, service charges and maintenance.

ruelle

Helvetica_Van_Buren wrote: »

Maybe I'm thinking a bit more long term than you are.

You're right. Obviously in 10 years any property in London will be worth a lot more. I guess because it's a studio I can't see myself living there for 10 years but it's all I can afford at the moment.

Helvetica_Van_Buren

westernpromise wrote: »

This is a complete canard.

Rental yields in the south east are below BTL mortgage rates. The landlords currently subsidise the tenants.

You'll understand if I don't accept that landlords in the south-east are struggling won't you?

For the sake of clarity, regardless of what the landlord decides to spend his/her rental income on, the OP would be far better paying off their own mortgage with it.

Helvetica_Van_Buren

ruelle wrote: »

You're right. Obviously in 10 years any property in London will be worth a lot more. I guess because it's a studio I can't see myself living there for 10 years but it's all I can afford at the moment.

No but in two or three years you'll have paid some of it off and it is likely to have increased in value.

If you really don't want to live in a studio flat, then just don't do it and keep looking.