Which would you buy?

Kteeteee

We're faced with a decision on which fmat to buy and wondering what you'd lean towards-

1. Flat 1
103sq metres, on at 328K on the outskirts of London, in a rough area but theres an underground link and it seems lots of artists live there and are moving there.
Zoopla says its worth 312K
I think we can get it for 290K as they are finding it difficult to sell.
We'd borrow around 175K in that case.
The flat is cheap as the monthly charges are high (£450,) they're on collective heating, but they are about to have the energy looked at and works decided in order to improve the energy rating, this will probably mean external insulation and a new heating system that we'll pay for if we buy it. Comparatively, new flats the same price are around £600K off plan.
Even though the area is a bit grimy, we like it, theres a couple of nice restaurants and venues and artists studios (which we like). I work from home and my partner would travel to work (roughly 40mins one way). 
Monthly charges should go down after the work is done of course.
We can easily afford it as we have a good deposit and we could do some work to the interior and afford nice furniture.
It has a small communal garden.
The flat has a nice, calm atmosphere, there will be a new flat block built at the back around 100m away, it wont surpass our level.
We imagine we'll live there at least 5 to 6 years.
We know its a risk to expect the market to rise here, but we believe all the gentrification signs are there.

2. Flat 2
105sq meters, on at 580K, but we think we can get it down to 500K.
We would have to borrow around 260K
Zoopla says in its condition it should be around 489K.
It could do with some 'refreshment' (like the other flat°, but this one is in a calmer and quieter spot, with a London postcode.
Monthly charges are £350, collective heating
The area is calm, in a more expensive area (more expensive restaurants°.
Its at the top of our budget, so we wouldn't be able to do much inside straight away, its quite old inside but liveable, and has great light and floors, we could do the works in a couple of years or so.
There are no flats immediately opposite and its quite green.

I guess even though its a stretch, we may make more money on the more expensive flat if we sell in 6-8 years?, but we will be paying interest all that time.

What haven't we thought of here? What would you do?

Thank you so much in advance for your help!

Kteeteee

* travel to my partners work from the second flat is roughly 30mins

RHemmings

How can it be that the first flat should be buyable for £290k and you would  borrow £175k, but the second one is probable buyable for £500k but you would only borrow £260k? Why not buy the first one and only borrow £50k? 

KiKi

You might make more on the second flat, but you might not.  You have to live here, and it has to be your home for that time.  Just from reading your descriptions, your heart is in flat 1.  Imagine you didn't get it - how upset would you be?  Use that to make your decision and go for it.  (Personally, I wouldn't buy somewhere without outdoor space, or somewhere where I didn't have the money to do work if needed.  What happens if the freeholder suddenly announces Big Works?  I'd rather have money aside to spend if needs be.)

Kteeteee

RHemmings said:

How can it be that the first flat should be buyable for £290k and you would  borrow £175k, but the second one is probable buyable for £500k but you would only borrow £260k? Why not buy the first one and only borrow £50k? 

Because there is work to do on the first flat.

koalakoala

Flat one ...

Albermarle

 Comparatively, new flats the same price are around £600K off plan.

That does not make any sense. How can they be the same price and £600K at the same time?

ThisIsWeird

Kteeteee said:

We're faced with a decision on which fmat to buy and wondering what you'd lean towards-

1. Flat 1
103sq metres, on at 328K on the outskirts of London, in a rough area but theres an underground link and it seems lots of artists live there and are moving there.
Zoopla says its worth 312K
I think we can get it for 290K as they are finding it difficult to sell.
We'd borrow around 175K in that case.
The flat is cheap as the monthly charges are high (£450,) they're on collective heating, but they are about to have the energy looked at and works decided in order to improve the energy rating, this will probably mean external insulation and a new heating system that we'll pay for if we buy it. Comparatively, new flats the same price are around £600K off plan.
Even though the area is a bit grimy, we like it, theres a couple of nice restaurants and venues and artists studios (which we like). I work from home and my partner would travel to work (roughly 40mins one way). 
Monthly charges should go down after the work is done of course.
We can easily afford it as we have a good deposit and we could do some work to the interior and afford nice furniture.
It has a small communal garden.
The flat has a nice, calm atmosphere, there will be a new flat block built at the back around 100m away, it wont surpass our level.
We imagine we'll live there at least 5 to 6 years.
We know its a risk to expect the market to rise here, but we believe all the gentrification signs are there.

2. Flat 2
105sq meters, on at 580K, but we think we can get it down to 500K.
We would have to borrow around 260K
Zoopla says in its condition it should be around 489K.
It could do with some 'refreshment' (like the other flat°, but this one is in a calmer and quieter spot, with a London postcode.
Monthly charges are £350, collective heating
The area is calm, in a more expensive area (more expensive restaurants°.
Its at the top of our budget, so we wouldn't be able to do much inside straight away, its quite old inside but liveable, and has great light and floors, we could do the works in a couple of years or so.
There are no flats immediately opposite and its quite green.

I guess even though its a stretch, we may make more money on the more expensive flat if we sell in 6-8 years?, but we will be paying interest all that time.

What haven't we thought of here? What would you do?

Thank you so much in advance for your help!

5-6 years is not a lot of time for 'gentrification' to occur, but should be long enough to indicate that it's at least heading in the right direction, and that should reassure future buyers that they'd be wise to take a punt on it. Just as you are considering doing.
Would you sell in 5-6 years, or possibly rent it out for a while longer - to allow further gent'ing?!
Flat 1 has surely more potential for making money on the purchase? As well as seemingly costing you less to begin with - notwithstanding the cost of the insulation and heating upgrades. But that should be money well spent.
Flat 2 is presumably at its local market value, and will likely just continue to reflect that, up or down? No big swings. No great speculation.
Flat 1 has the added potential of being in an up-and-coming area, which can be quite transformative - if and when it happens. (After 30 years, my bro is only recently seeing this happen in his area of Kennington...)
Allowing for the 'rough' area, would you be happy in Flat 1?

Of course, we'd love to see links to both :-). 

Kteeteee

Albermarle said:

 Comparatively, new flats the same price are around £600K off plan.

That does not make any sense. How can they be the same price and £600K at the same time?

Sorry typo - same size!

prettyandfluffy

Flat 2; it sounds like a much nicer option to live in now rather than buying flat 1 and waiting for the area to improve.  We bought our first house in a rough area and it really was no fun; the area did get better but nevertheless in the 12 years we were there we experienced burglary, car broken into, garage broken into, attempted theft of OH's motorbike, vandalism.  Every day we wondered what we would come home to.

Herzlos

How long do you envisage you'd want to stay in flat 2? If it's longer than 5-6 years, then that's the one you actually want.