Buying a highrise council flat in city centre

Samfre

My partner and I have been living in a council flat, 15 storey high, in Manchester city centre for 9 years. As we now have to children we have been working very hard to save some money for a deposite so we can buy our own house. The building has been upgraded so it is now in good standard. We have managed to save about £25000 to enable us to be able to get a mortgage but due to the location of the flat we are tempted to buy the flat using saved cash as we can put together a deposit of £10000 from family and buy a house. The building has about 10% owner occupier and the flat can be rented out for about £650 monthly with service charge of £100 per month. We are very divided about this and we could do with some words of advice. The flat value is approximately £80 000 and we have to pay about £33 000 to buy it.

tacpot12

Well done for saving £25,000!

If you can buy a flat worth £80,000 for £33,000, the sensible decision is to buy it, live in it until you can rent it out, and then buy a house.

You will have spent the £25,000 on the flat, but you will be able to repay the family and resave the same amount more quickly with no rent to pay. I've done a quick calculation and think you could be back to having £25,000 in about four years. If you have to stay for five years before you can rent it, you will have about £30,000. When you do move out, you can overpay the mortgage using the rental income. This will reduce save you loads of interest on the mortgage, and get the mortgage cleared about eight years earlier than if you don't buy the flat.

So financially, buying the flat makes sense. Having to put off the move to house is not ideal, but you will create a much better financial future for yourselves and your children if you take that route.

davidmcn

The mortgageability of council high-rises is very poor, so have you looked into whether lenders would even consider it? For similar reasons, it won't be that easy to get rid of when you come to sell.

buglawton

A no brainer to buy it but I feel there are sure to be clauses in it about early reselling.

Housebuy12345

Don’t forgot if you rent it out you’ll be paying. 20% tax.

Samfre

That is my main worry and possibly some unexpected maintenance charges but it has recently been upgraded and the cladding is safe from fire point of view.
Another worry is whether potential renal income will be counted for the future mortgage application.

Samfre

Yeah...can't be sold within 5 years to benefit from the discounts. The obligation to pay the discount back goes down over the five years.

[Deleted User]

Are you sure you only have to pay £33k to buy the flat? Its a rather large discount after 9 years. I read its 35% after five years, with 1% extra for each year after that.

I could be wrong, but might be worth checking.

Socajam

I am with davidmcn, I would not buy it, no matter how lucrative it may seem.
If it was a house, I would say go ahead, but a high rise council flat may turn out to be an albatross around your neck.

Samfre

Based on my research not possible or very high rates.
Flats have sold on to cash buyers for 70k to 80k though.

Samfre

50% for flats after 5 years and 2% for every year after that