Where to invest in Property...

StevyyR

Good morning everyone,


I'm currently in quite a good situation for my age (23) but due to very limited knowledge of the property sector and general investment opportunities, I am stuck as to what to do... Plus being very cautious I've not rushed into anything.


My question is, based on the following information, what would be the best long-term move?


I have enough money saved up in the bank from working after leaving school to look into entering the housing market (currently still at home due to being <5miles to work, it's just too handy!). In my mind I am currently processing the following plans/ideas as want to know which, from experts, is the best move to make:
-Purchase a studio flat approx. £70-80k outright for rental purposes at 7% yield and then off the back of this income plus extra income from my pay packet, try to get a mortgage to purchase another house to live in. Alternative option here is reverse the tables, buy a flat to live in and then get a mortgage to buy a property to rent.
-Purchase a nice house with a sizeable deposit and small mortgage to live in (easy option).
-Do what someone at work is telling me and split my deposit 5 ways on 5 different flats, looking at around 10% deposit on all of them, live in 1 and rent the other 4 (risky and hard option).


Due to having the money just sat there in the bank currently earning <1% total it is slowly driving me mad that I'm not doing anything with it! Any help and advice would be massive appreciated.


Thanks all
:hello:

LEJC

Dont forget to factor in that you will need a deposit of cira 25% for a BTL mortgage....and that each additional property you purchase after the first one without selling will attract 3% stamp duty.

how does that sit with your deleberations.

hazyjo

In your shoes, I'd just buy in an up-and-coming area (to live in myself) and hang on for the market to rise again (some areas have slowed). Could be 3 years, could be 8. I certainly wouldn't be looking at BTL.


Where in the country are you?

StevyyR

Thanks for the replies both.


Regarding the additional 3% stamp duty I think this will rule out option 3 of buying multiple flats with mortgages as that would be a significant loss short-term?


Currently work in Tewkesbury so have been looking at local areas such as Bishops Cleeve and Cheltenham. Further afield is Bristol but a little too far to commute for me personally but seems to be an area that should see good rise?

Ozzuk

Can't see any way you'll get a 10% deposit on 4 flats, more like 25% needed. It is also a lot of risk for a beginner (or anyone!). Not a great time to buy for investment.

Scotbot

Buy a nice house with a small mortgage. It will go up in value the same as a flat in the same area, you wont be paying an extra 3% in SDLT or capital gains tax when you sell. Plus you will have somewhere nice to live

LEJC

Sorry,but Cheltenham doesn't come across as a place that is known for cheaper property or indeed anything that you could purchase outright for around the £70k mark....
I would even hazzard a guess that a 70k deposit isnt going to get you too far up the property ladder unless you look at some of the fringes of the area that have always been ecclectic in style and nature!

Same will probably be true of Bristol....there's lots of up and coming areas but those that you would be able to invest in probably still have a fair way to go.....
maybe another 20 years or so before they reach a good potential


do you have any examples of what you are considering?

Brock_and_Roll

Due to having the money just sat there in the bank currently earning <1% total it is slowly driving me mad that I'm not doing anything with it! Any help and advice would be massive appreciated.


Thanks all
:hello:

That is certainly true. There are however quite a number of blue chip companies who stocks are currently yielding 4-6% in dividends, so a reasonable spread of these would produce a much better return than the bank. Not without risk of course but a lot less hassle (and potentially costly) than BTL.

StevyyR

Cheltenham is obviously a bit more than £70k but on the outskirts the price isn't too far above and I can borrow the excess amount needed from family to purchase outright as long as it's not stupid amounts (forgot to mention that in the original post). Same goes for Bristol.


From responses given it seems to be best to go for the purchase a nice house in a good area with a small mortgage rather than going down the smaller house and a BTL property? When looking for up and coming areas I'm looking for things like planned housing/industrial builds as well as new transport link opportunities. Are these the kind of things that I should be looking for, or would it be best to just go off data found on the web for the "Top 5 upcoming areas in the UK"? Sorry for all the questions!

LEJC

StevyyR wrote: »

When looking for up and coming areas I'm looking for things like planned housing/industrial builds as well as new transport link opportunities. Are these the kind of things that I should be looking for,

I am no expert in this but the fact that a new transport lonk etc is in the planning may mean that its an up and coming area although it could also mean that even by this stage of being in the planning prices have already gone up.

I bought a property in one of these proposed transport link areas 4 years ago and have seen its value rise steadily....the planning is no further forward today than it was the day we exchanged and completed....
I doubt very much that the improved transport link will be in place for at least another 10 years...but it doesnt really bother us there are still good links to wherever we need to go....

my point being those that made money bought in the area 15 or 20 years ago.....buying now you've missed the boat...needed to be there before the planning went in IMO

steampowered

Your plan sounds like complete madness.

I'm not sure you can get a BTL mortgage without owning your first property.

A 'second-home' mortgage will be harder to get than a first time buyer mortgage.

Plus you'll be stung for additional stamp duty, and lose access to the government support available for first time buyers such as the help to buy ISA. Putting yourself in this situation for the sake of letting out a single £70-80k studio flat would be completely mad.

Contrary to what your workmate suggested, you can't get BTL mortgages with a 10% deposit. You need a much larger deposit for BTL properties.

You should just focus on buying your own first property as and when the time comes. Get that sorted before you even think about moving into the BTL market.

You are still young, so the chances of wanting to move house, or sell BTL property to realise capital to fund a family home, in a few years are very high. And your BTL scheme will mean you get stung for additional tax each time you do that.

If you are frustrated with low savings interest rates, you should invest your money in a balanced portfolio of stocks and shares - perhaps a tracker fund. This will give you a much better return than cash. It is certainly no more risky than investing in BTL property (especially leveraged BTL property), plus much easier to get access to your money when you need it, plus you are not paying unnecessary amounts of tax.

Completely forget about BTL until you are more established.