Buying a second property?

chrishar

I own with a mortgage a leasehold flat, I bought it in my 20s and have rented it out most of the time as I've always had the option of cheaper living ( at a friend's or parents). However I wanted to own property as early as i could so the prices didn't get away from me.

My current flat is valued ( by the bank) at 180k. That's with a 62 year lease unexpired. To extend this would cost circa 21k and result in a flat worth around £210-215k.

My current mortgage is in two parts, 36k @ 3.89% and 35k @5%. Total 71k. I earn 24-30k a year and I'm owed 36k from two loans to friends which I'm being paid back 1k a month.

I have a happy tenant paying 9k a year and rarely contacts me unless there's an emergency.

My question is , is now the time to buy another property? I would be looking to live in a new property , I have no desire to evict my tenant and live in my current flat.

I've looked into Re-mortgaging as a buy to let and am able to borrow 130k @2.49%. this frees up nearly 60k.

On my wages I can borrow 133k currently , that would give me a budget of nearly 200k for a second place.

With the rent of 750pcm and interest only mortgage of 273 there's a decent profit to be had by keeping my flat
However I was slightly concerned with the stamp duty rise of 3%. The tax changes won't affect me as even if I earn 30k in my job, add the 9k rent and im still not a high rate payer.

So should I be looking to buy a second property now, 10 years after buying my first one? I'd appreciate any views on the whole situation and what I should do?

Thanks very much

Pixie5740

After all your many previous threads you still can't decide what to do? Is £200k enough to buy you somewhere you would like to live? Is the flat you let out with its ever-decreasing lease worth hanging on to?

chrishar

Yes 200k would afford something within 10-15 miles distance.
I am fairly sure the flat is worth hanging on to, as long term property nearly always pays off and increases in value.
Any other thoughts?

Pixie5740

Doesn't your lease only have about 63 years left on it so unless you are thinking about extending the lease it's actually a depreciating asset.

chrishar

That's correct, however NatWest has valued it at 180k and happy to lend on it above 55 years remaining.

If I want to extend the lease I could find the money from remortgage ( although that would stop a second property purchase) or wait til the money I'm owed at 1 k a month is repaid.

Due to NatWest offer though it's not urgent to extend it?

Pixie5740

The cost of extending a lease is exponential. The lower it goes the more it's going to cost you. Your lender might be happy to remortgage when there's only 55 years remaining but if you had to sell that property, for whatever reason, a buyer wouldn't get a mortgage for such a short lease.

chrishar

I understand that, I am thinking of extending it in the next 2-3 years once money I am owed is paid back. Would you suggest doing it now then? I could get a personal loan up to 25k from my bank and do it nowon the other hand my dad actually said to me why extend the lease when it will outlive you???

booksurr

on 19th June you posted

chrishar wrote: »

Following advice on this forum I was intending to sell my let out flat and buy somewhere for myself after.

This is not going to plan though. The market has slowed down and I've not had a viewing in several weeks. Also the tenant doesn't want to move and so would prefer me to sell to an investor.

chrishar wrote: »

i would prefer to live alone but I don't want to live in the property I let out. So it's either leave it rented or sell it.

Any rent I paid would be less or equal to the rent I receive from my tenant at the moment.

so the rental property is doing nothing more than wiping its face in terms of income and its value is decreasing every year that goes by because of the lease remaining. It will soon reach a point where it is unmortgageable because the lender will not offer on a short lease for a buyer

as you've been told before, until you extend the lease you won't be selling it other than as a cash purchase to a landlord unless your purchaser forces you to extend the lease as a condition of their purchase, and the cost of that is increasing each year you delay - see here:
http://www.mypropertyguide.co.uk/articles/display/10111/should-i-buy-a-flat-with-a-short-lease.htm

so the latest iteration of your inability to make a decision comes down to you are going nowhere until you sort out....

chrishar wrote: »

If I want to extend the lease I could find the money from remortgage ( although that would stop a second property purchase) or wait til the money I'm owed at 1 k a month is repaid.

AdrianC

Pixie5740 wrote: »

The cost of extending a lease is exponential. The lower it goes the more it's going to cost you. Your lender might be happy to remortgage when there's only 55 years remaining but if you had to sell that property, for whatever reason, a buyer wouldn't get a mortgage for such a short lease.

This, with bells on. Frankly, extending the lease should be your HIGHEST priority here. The cost to extend it is not going to reduce, and it's currently a good investment in terms of return.

You say you would need to borrow to do this - do you have any other savings? If not, you should be thinking of reducing your exposure to residential property, not increasing it, imho.

booksurr

chrishar wrote: »

on the other hand my dad actually said to me why extend the lease when it will outlive you???

true if you intend to own it until you die and you bank on the fact you will never need to sell it. On which basis a rental income which simply wipes its face and a property you cannot sell is an idiotic investment because it will be next to impossible to sell without extending the lease and that will soon be prohibitively expensive. I assume your father has no knowledge of residential leases?

Pixie5740

Your father might be right, you might outlive the lease but you can't then argue that the leasehold is going up in value and is therefore worth hanging on to from an investment point of view, it's one or the other.

OP, you remind me an awful lot of another poster called turtleneck who procrastinated and then some. He also let out a property with a short lease and couldn't make up his mind whether to sell, continue letting, buy his own home.......