should I stretch myself for higher value house?

loonybirdy

Hi all,

I'm currently torn between buying two properties - one is a small 2 bed fairly modern end-terrace in good condition, worth 120k, the other is a 3 bed fairly modern but dated and needs bathroom and kitchen doing, worth 140k. My predicament is that I have a budget of 145k, and can't decide whether to buy the 2 bed and use the large amount of change to add a conservatory and new kitchen and save the rest, or to stretch myself and buy the 3 bed and struggle to renovate it...just for the sake of owning a higher value property (which will have more in equity..?)

I guess the possible housing crash (if it happens) is also concerning me, I just don't know which is the more worthwhile option...?!

All advice and opinions will be appreciated!! I need to decide by end of today, theres nothing like a bit of pressure, eh...

Mrs_Pepperpot_2

We have recently been in the same boat and decided to go for the cheaper property. We just felt that with the market being a bit unpredictable at the moment it would be the safer option.

Good luck with whatever you decide!

Biggie

being as it appears to be more of a buyers market

why not try and play the buyers off each other and try and negociate a better price on both properties and then go for the one that gives the most discount. You never know you may even get the 3 bed for the price of the 2 bed :-)

wherediditallgo

If you don't need the third bedroom, I'd definitely go for the smaller property. Property crash or not, properties often need a bit more doing to them than you initially expect, & having the remainder of your budget to play with will really help you do that, plus you can always do the conservatory & kitchen when it suits you. Stretching yourself to buy the bigger place would leave you in schtuck if anything else needed doing to it, never mind a price crash etc on top.

loonybirdy

thanks guys for advice, not sure i could get the 3 bed for the same price as the 2 bed, lol...

what do you think about the equity situation, i.e. if i have a higher value house, will it be worth more in a few years time than the cheaper house? e.g. if the 140k house is worth 160k in 2-3 years, compared to the 120k house being worth 130k in 2-3 years....i'd make more money if i buy the 140k house (ie. 20k instead of 10k)..?? what does everyone think?? (of course i'm assuming prices will still rise)

epz_2

loonybirdy wrote: »

i'm assuming prices will still rise

thats a pretty big assumption, its easier to add value to a place that needs tarting up and the bigger it is the wider range of people it will apeall too but going for broke aint smart either.

lypsey

Loonybirdy
Take half an hour and look at the share prices of Barrett , Persimmon , Bovis , Berkeley and Redrow. These are probably 5 of our biggest house builders.
Then take a look at Bradford and Bingley and Northern Rock , but take a look before the crisis. These 2 are the biggest BTL lenders

My advice is log on to www.iii.co.uk , it is free and has some good charts.

You will see that even before the NR crisis all of these seven shares were on their knees. Ask yourself why ?? The smart money ie the people who are not using there hearts like you and me on their houses but the people who HAVE to make money trading shares are already OUT of housing related shares

This may give you a very good idea where most people think the market is going. Do yourself the biggest favour in your life and wait 6 to 9 months to see what the market does. If it falls by 10% , you may well save yourself 15k and then you wont have to worry what house you buy
I believe the market will come back 40 -50% over the next 5 years
Good luck

loonybirdy

lypsey wrote: »

This may give you a very good idea where most people think the market is going. Do yourself the biggest favour in your life and wait 6 to 9 months to see what the market does. If it falls by 10% , you may well save yourself 15k and then you wont have to worry what house you buy
I believe the market will come back 40 -50% over the next 5 years
Good luck

thanks lypsey, but unfortunately i don't have the luxury of time, i am porting a very favourable rate mortgage and my sale should go through in a week or two...and my lender only allows a small period of time to refund my redemption charge, so ideally i need to purchase in the next month or two to avoid this hefty charge...

lypsey

Why not rent ??

I have sold my house , put the money in the bank , and I have my feet up waiting for the market to fall and that will mean I won't have a mortgage

pinkshoes

lypsey, why don't you put a sock in it for once about your theory on HPC, and answer the question in hand!? (FYO, my parents bought in late 80s at the peak before the crash. Their house cost them a whole £87k, and despite the crash, it's now "worth" £360k... so if you're buying a house as a family home, then who gives a hoot about HPC?!?!)

Loonybird, you need to work out how much it's going to cost to put the new kitchen/bathroom in the 3 bed, and also how much adding a conservatory onto a 2 bed will increase the value. If you like both equally, then work out which one will create more value when perfected! Personally I'd go for 3 bedrooms over 2, but if it meant borrowing more than 3.5x salary and I had less than a 10% deposit, I'd go for a cheaper option.

SquatNow

I'de rent for a few months and see how far the market drops... experts are saying a crash is on the way.

Better still, Squat Sociably and put the money you would have paid as rent into a savings account, then after the crash you'll probably be able to buy a place outright.