New Apartment Dilemma

PurpleSpud

Hi,

Essentially I have a situation and would love some opinions.

I am divorced and have a lump sum from the equity of our marital home and I want to buy an apartment as I really want something low maintenance after years of owning a house. Initially I was looking to get a Mortgage to add to the deposit however I was soon becoming overstretched trying to buy in my area. In order to buy most flats I would need to borrow more than I am comfortable with I have however found an apartment I really love, it's about twice the size of many others. I can purchase it outright with no mortgage and also have savings left over. I really like everything about it. There is one downside and that is the service charge which is just over £5k per year including insurance and the water bill. The apartment block usually charges £2.7k per year for most apartments but it is based on square footage and the one I want is the penthouse and it is twice the size hence the charge. It also includes a private garage, underfloor heating, lift, communal garden and some amazing views.

In all honesty it is an apartment worth about twice the asking price but it is a cash purchase and there is obviously this high service charge. Without being morbid, I am about 50 and, fingers crossed might even make it to 80 years old. During that time I'll pay about £150k in charges however that plus the asking price would be fair price for this apartment. I am employed and have no children, I don't drive and I only holiday pretty locally. I don't have any expensive hobbies or anything and after the divorce would like to treat myself to something I actually love and enjoy my fresh start. The location is perfect for me and convenient. I also have no-one to really leave anything for after I'm gone so I don't need to make a profit on the property or anything like that. 

In short, am I mad?

cymruchris

PurpleSpud said:

Hi,

In all honesty it is an apartment worth about twice the asking price

If it's worth twice the asking price, why's the asking price half the value? Aside from the service charge, are there any other issues such as cladding? For the sake of argument, if it's worth £500k - and it's not selling at £250k - the question is - why?

Service charges do have a nasty habit of going up though. They aren't fixed forever. 

Underfloor heating is about the most expensive form of heating there is - are you ready for the bills? (Knowing they are going crazily up?)

Does the block come with lots of amenities? Gym? Concierge? Sky garden? Things like that? What makes the service charge so high - have you asked why they are at this level? (I understand it's based on square footage so the larger apartments like the one you're looking at will pay proportionately more - but seems a bit high unless it's swimming (literally with a swimming pool) and lots of other nice things.

Although you have nobody to leave anything to right now - you might at some point become romantically involved (never say never) and although you're not planning any children I'm sure - you may find a new partner has children, and you might want to leave them something. (But that's very much a 'what-if' scenario).

So that's some of the negative stuff out of the way. If after reading that you're still thinking - I can handle all that.....

On the side of the apartment itself, if it ticks all of your boxes, you like it, and have no (current) intention to sell it again until you depart this world, and can foot the service charge, then if it's the best option there's nothing to stop you going ahead and doing it. Go for it - if you're absolutely sure it's the right one for you. Make sure you visit the area several times though, day and night, weekday and weekend, and sit in your car for a while seeing what the area is like at different times. Make sure it's not overly rowdy at 11pm on a Friday night. Or gridlocked with traffic for 3 hours every afternoon between 4 and 7. 

Oh and on a final note - if there's nobody to leave it to when you pass - I can volunteer receipt of whatever's left over 

El_Torro

£5k per year service charge does sound like a lot, even including the water bill. Must be a big flat, how many bedrooms is it?

Also, you say it includes insurance. You mean building insurance? It’s normal for that to be included in the service charge. You’ll probably need contents insurance too, which isn’t a significant cost.

Are you sure this charge is normal? The management company isn’t building a sink fund to pay for repair works? If so I’d be concerned about selling it in future, could put potential buyers off.

If you like the place and can see yourself living there a long time, and you can afford the service charge and other costs, then go for it. You don’t need our approval. 

PurpleSpud

Truly appreciate the replies. 

The building doesn't have any cladding, it's around 1500 sq ft in size. Really good advice about visiting the area and I've done that a couple of times so far. 

I'm probably not going to use the heating that much as I'm at work a fair deal and I'm hoping some of the heat rises 😄

From what I can discover online it appears the Company that built the flats around 15 years ago (and many other flats in different areas) defaulted on the loan and the receiver is selling the property on behalf of the vendor. I am currently awaiting my survey (initial first findings were all good) searches etc.

PurpleSpud

Oh and on a final note - if there's nobody to leave it to when you pass - I can volunteer receipt of whatever's left over  😄

😆 I'll bear you in mind.  Very kind of you  😄

user1977

PurpleSpud said:

From what I can discover online it appears the Company that built the flats around 15 years ago (and many other flats in different areas) defaulted on the loan and the receiver is selling the property on behalf of the vendor. I am currently awaiting my survey (initial first findings were all good) searches etc.

So the original developer is still the owner? Did they just rent this one out?

15 years means that warranties will have run out and the building will be showing signs of wear and tear - so it won't be quite as "low maintenance" as an actual newbuild property.

PurpleSpud

user1977 said:

PurpleSpud said:

From what I can discover online it appears the Company that built the flats around 15 years ago (and many other flats in different areas) defaulted on the loan and the receiver is selling the property on behalf of the vendor. I am currently awaiting my survey (initial first findings were all good) searches etc.

So the original developer is still the owner? Did they just rent this one out?

15 years means that warranties will have run out and the building will be showing signs of wear and tear - so it won't be quite as "low maintenance" as an actual newbuild property.

user1977 said:

So the original developer is still the owner? Did they just rent this one out?

15 years means that warranties will have run out and the building will be showing signs of wear and tear - so it won't be quite as "low maintenance" as an actual newbuild property.

Yeah, basically they rented it out and are now selling it. The surveyor is giving me the full report shortly although the first signs he said all are good. I am kinda looking at is as essentially like renting but I have that deposit invested in property during that period. I am looking to stay for a long period hopefully.

seven-day-weekend

What is the length of the lease?

PurpleSpud

seven-day-weekend said:

What is the length of the lease?

It's 109 years at the moment

elsien

What does it say about putting the charges up and by how much? 

PurpleSpud

elsien said:

What does it say about putting the charges up and by how much? 

I'm just waiting for the management pack to be sent through. In the last 15 years the charges have gone up around £400 so about £30 a year.