Should we continue the purchase? - need some objective opinion

GemmaZE

Wise ppl on the forum, need some objective opinion - so we could hopefully make sound decision in this very stressful buying process. 
Honestly, we have been losing sleep and kept questioning our decision since the offer's even accepted. me and my husband seem to disagree on some days, and agree on other days whether or not to continue with the purchase. 

We have been looking for a larger house in the past 2 years, we're in very good school catchment area so we can't move yet until my eldest's got accepted to the local secondary in 2 years time. The house price has been increasing like mad as a result of cross-rail, and we've seen house we used to be able to afford has gradually got out of our budget. After some planning and extra borrowing, we are in fortunate position able to buy without selling our current house. So we saw a 30's 3-bed semi nearby (not school catchment) that has potential for us to extend to and eventually will be big enough for us, put down an offer and accepted. The plan is to let out the new property for the first 2 years, do it up and move in.  

Plus side: 
+ We love the location, back to the largest local park and sport centre. I can see myself retired and stroll around the park after dinner.
+ Top end of our budget.
+ Still walking distance to school, kids won't need to change school.
+ House price increase, and we can secure the price now with rental income + capital growth in the next 2 years, it's more secure than investing in shares and stocks. 

Negative: 
- It's in conservation area, so there is limitation on how you can extend the loft (too tiny for a couple), we might live on the same floor as our noisy teenager son/daughter once all done.
- Next door is doing big extension, so good 6 months difficult to find tenants.
- It's very tired condition, needs fair bit of work before we can let out.  
- Found out last week, the developer of a block of flats right opposite submit the planning for extra 2 floors (21 self contained flats) development. This will block the light. Eye sore in the front reception room, let alone the disturbance for at the least a year, the traffic, parking, the noise etc. It's not yet approved, but we know how it works, most likely they will refine the plan and eventually will be approved, just a matter of time with dealing/negotiating with council. 

I am worried once we bought the house, with doing the extra work to make it appealing to tenants, next door 6 months extension, opposite god-knows how long, we would have trouble finding tenants to make it profitable rental income for 2 years. And after the seeing the plans of opp development,  Do I want to be overlooked everyday by a 5 story block of flat?.. I am not too sure..

I love the house, love the views of the park and lifestyle... If we let go of this house, don't know when next one comes up, and if we can still afford it. 
It's a hard decision.. Pls talk some sense out of me. What would you do if you were us? 

Section62

GemmaZE said:

It's a hard decision.. Pls talk some sense out of me. What would you do if you were us? 

Letting a property is a business - there's a lot more to it than finding a tenant who will put up with living close to a building site.

Have you gone through what letting involves, and got a realistic idea of income, and is this something you have the time and budget to do?

If not, then delaying your purchase until you are ready to move might be the better option.


Edit: And are you talking about Crossrail 1 or 2?

AdrianC

If that extension to the flats goes ahead, then never mind the tenants - will YOU want to live there in the future?

Bear in mind, too, the +3% SDLT. How long will that take to recoup from the post-tax profit from the lettings business?

Yes, you *might* be able to reclaim it if you complete the sale of your current place within three years of the purchase. But if you aren't even going to market it until two years time...
When will you be giving the tenants notice?
What if they don't move out promptly on expiry of it, but decide to hang about until a court grants you possession?
What if the place then requires work to be livable...?

Meanwhile, why is the value of your existing place not keeping up with the market around it?

goodwithsaving

"We might live on the same floor as our noisy teenager son/daughter once all done" - erm, that is the case in most houses.
"it's more secure than investing in shares and stocks." - that is very much assuming the market continues to grow, or at least levels off at it's current values, or that any of the surrounding works don't negatively impact the joy of the property and cause you to sell
Letting involves many liabilities - extra SDLT (unless sell and make primary residence within 2 years), electrical condition, gas safety, EPC ratings, fire safety, insurance, letting fees, funding whilst property is empty....it isn't quite as straightforward (or profitable) as many think. Certainly not these days unless it's an inherited property or one bought many years ago.

Personally, I wouldn't be buying now if I was buying another property. I'm selling and buying in the same market, which is probably the best position to be in (i.e. buying is more expensive but selling high helps) but unless it's a FTB (so no SDLT which helps save) or a forever purchase, I wouldn't be.

SuperHan

Have you factored in additional stamp costs of buying a second home if you can’t sell yours within 3 years, as it’s not guaranteed that you’ll be able to get he tenants out in two year’s time if they don’t want to leave. 

If it’s your dream house, go for it. If it’s just about getting into the market now, your house will continue to increase in price in line with the local market for the next two years.

Slithery

What makes you think that your tenants will want to move out in 2 years when you'd like to live there?

I suggest that you read the first 9 posts in the following thread and all of the links that they contain before even considering starting a residential lettings business.

Tenancies in Eng/Wales: Guides for landlords and tenants

Doozergirl

You've got 2 years.  You can afford to buy without selling, so even if house prices go up, you can afford to sell up and buy, the same way as others do.  

There will be another house within 2 years, especially if you're telling us it might not even be big enough when you've finished? 

I'm not seeing the real benefit.  Being a landlord is no fun either.  

Reginald74

Just to chuck in: most schools have a sibling priority as part of their admission policy which overrides distance. If you have an older sibling already at the school (including sixth form) this may mean you can move away without worrying about that.

lookstraightahead

Being a landlord is a difficult job.

To me it sounds as if you just don't want to wait so you're trying to find a way around buying now.

Your solution is not an easy one.
You say you are going to rent it out then do it up, do you mean the other way around, as you will need to make it fit for rental.

tacpot12

While your negatives are all certainly negative, I am inclined to think that you are making too much of them:

• If your neighbour can do a big extension, so can you, when you have the money. (It might even help if you tell the neighbour that this is your plan, and that you are keen to learn what measures are needed to keep construction noise at a minimum)

• Tenants that are out at work all day will not notice the construction noise so much.

• The flats shouldn't be an eyesore, and once they are up, you (and others) will adjust your perception of them. 

Only the work needed to prepare the property for tenants seems to be a real negative, but the upside will be the rental income. Tenants don't actually look as hard as they should at properties they are considering letting, so a superficial tarting-up should be sufficient, providing the building is water-tight and everything works well enough.  

FreeBear

If the neighbour is doing a large extension, what are their plans for it ?

If is going to end up being an HMO, would you want to live next door to it ?