Is it worth buying for 2 years?

Winterrose

Hello,

Would you buy a property if you knew you would likely need to move in the next few years?

I am a FTB and can only afford a one-bed flat, but due to my personal circumstances would likely be looking to move fairly quickly, within 2/3 years.

I'm worried it might not be a good idea as :

a) the cost of buying and selling could wipe out a lot of what I've paid towards the mortgage

and

b) prices may fall and I could be stuck (area I'm looking at is the edge of SW London)

The thought of the alternative - spending around 21k in rent for 2 years - fills me with dread, but I'm also aware that renting offers far more flexibility.

What would you do?

westernpromise

I'd work out the entry and exit cost and consider which chucks away the most money:

- conveyancing: about £1000 unless you use a bucketshop
- legal searches
- insuring the place
- stamp duty (you don't pay much as an FTB but if you use up your FTB card on this one, you can't use it later, so this is a cost, just a non-cash cost)
- service charges, ground rent, and any repairs
- cost of selling: estate agents' fees, chiefly - about 1.5% of property value
- amount of the mortgage you'll pay off: on a typical FTB deal, you'll pay off about 6% of the loan over the first two years, so that's a gain (a deduction from your costs, if you like).

Then compare that to the £21k in rent. Which is more?

Prices are going sideways or maybe down at the moment, so don't rush to decide, as time is on your side here. Generally though transaction costs on property are now so high that it's not really worth getting in and out inside a period as short as 2 years.

KL0001

Usually, buying is always seen as the best thing to do. Consider the cost of buying then buying and selling again in a few years.

We!!!8217;re currently buying/selling and for this process alone we are budgeting £15000 in expenses (solicitor fees, estate agent fees, stamp duty, moving costs, survey etc). Buying as FTB we all spent around £3,500 on conveyance, mortgage product fee, mortgage broker, survey and moving costs). So in total, as an example it!!!8217;s cost £18,500 to buy, sell and buy again.

On the flip side, in 3 years we!!!8217;ve taken approx £10000 off our mortgage rather than paying rent. Plus our house price rise has been fairly substantial.

Renting somewhere means you!!!8217;ll also have less unexpected costs such as a broken boiler or leaking roof?

Winterrose

Thanks.

I think the costs in total of buying and selling will still be less than paying rent for the same period, but that does depend on the property market staying the same or improving during the years I'm in the flat.

However, if the value goes down I'm not sure how realistic it is that I'd be able to stay put for 5 years (for example) to ride it out.

But if I don't go ahead and buy this year, I'm not sure when my next chance will be since rent will stop me saving so if the market goes up I will be priced out.

The choice is basically whether to buy just to get on the ladder, or wait until I can buy a property more suitable - which may be years yet.

Winterrose

KL0001 wrote: »

Usually, buying is always seen as the best thing to do. Consider the cost of buying then buying and selling again in a few years.

We!!!8217;re currently buying/selling and for this process alone we are budgeting £15000 in expenses (solicitor fees, estate agent fees, stamp duty, moving costs, survey etc). Buying as FTB we all spent around £3,500 on conveyance, mortgage product fee, mortgage broker, survey and moving costs). So in total, as an example it!!!8217;s cost £18,500 to buy, sell and buy again.

On the flip side, in 3 years we!!!8217;ve taken approx £10000 off our mortgage rather than paying rent. Plus our house price rise has been fairly substantial.

Renting somewhere means you!!!8217;ll also have less unexpected costs such as a broken boiler or leaking roof?

Wow, £15,000

I am drawn to the flexibility of renting, I know I won't be trapped in a certain size of property or a certain town. I do appreciate the benefits, particularly as you said, the safety net of not having to cover significant costs.

I'm scared either way to be honest! With buying I'm worried I'll get stuck in a small flat or have to sell at a loss, with renting I'm worried it'll mean buying will be off the table for many years yet.

bouicca21

When the market is flat, 1 bed flats can be difficult to shift. If you do decide to buy think very carefully about size and location - you want something that will tick as many boxes as possible, so as to keep your potential market as wide as possible.

lessonlearned

How long is a piece of string.......

There are so many variables, location, State of the market now, state of the market when you want to sell.

What you need is a crystal ball......:rotfl:

My sister bought a one bedroom flat, 18 months later she sold it for double. I did something similar although it was a house not a fiat and it took 3 years for the price to double.

However, there is a caveat. I've known it go the other way. I have know people take quite a hit. It all depends on the state of the market, whether an area is "up and coming" or on the skids and whether you will have any unforeseen costs such as maintenance issues.

The only thing I would say is do not be tempted to buy a new build. New build apartments often drop in value for the first few years before prices recover again. It can easily take 10 years or so.

Fine if you are in it for the long term or if you are a landlord getting a good rental but not too good if you want to protect your capital investment in the short to medium term.

I would consider anything less than 5 years short term. Short term gains can be spectacular, but only if the circumstances are right.

diggingdude

There is quite a knowledgeable chap on here called Crashy. I am sure he will be along soon to answer your question




p.s - Don't listen to him

financegeek

I was in a similar situation and decided to buy, whether that's the right decision or not is yet to be seen, but i'm hoping so.

It may be that the market stalls or that i make a slight loss on this flat (depends on how much needs doing to the flat over the time i'm here) but for me the freedom of having my own place was something i couldn't wait another couple of years for.

I think it's something only you can decide in the end. worst case scenario if you can't shift your flat when you want to move, could you rent somewhere bigger and rent your flat out?

davemorton

If, over 2 years the mortgage and buying/selling costs work out cheaper than renting, I would say it is better to buy. If prices go up/down, its all relative to your next move. Infact, if you are moving up the chain, you may even be better off if prices drop.

AdrianC

For two years? No way would I buy.

Even if you get a buyer quickly, you've lost at least a quarter of that time, probably a third or more, just on the paperwork.