What should I buy?

RHemmings

ReadySteadyPop said:

RHemmings said:

ReadySteadyPop said:

Uriziel said:

ReadySteadyPop said:

Why would you rent out a room?

Because it allows me to make money while owning a property and living in it? You can get £7500 a year tax free. If I just live in it on my own I would not make any money from the property besides not paying rent.

Around £20 a day? Is that worth the potential hassle and lifestyle compromise of a lodger, an extra hour at work covers that for most people? In a 2 bed flat that is going to be cramped, you won`t have a room for friends to stay the night or a study if you want to WFH sometimes, and say the lodger wants to play music while you are trying to read or watch TV in another room? I really wouldn`t got the lodger route in a property that small.

An extra £600 a month seems quite attractive to me. That would cover my energy bills and pay for my groceries. 

Would you ask the lodger to contribute to energy bills or would 600pm rent cover their share?

This is a good question. I haven't really thought it through. I wouldn't be able to rent out a room in my house for £600 a month - I was just working from your example of £20 a day. 

When buying my house I considered buying one of the houses here. (I mean one of these exact houses, not just one of the same type.) 



Some have five bedrooms, and I could have two ensuite rooms on the top floor for lodgers. I hadn't done the sums carefully, but I was thinking that not only are these houses not too old and are reasonably well insulated, but with lodger income coming in, that would definitely cover a chunk of living expenses. 

Looking on SpareRoom.com, even rooms quite a bit less than £600pcm are typically bills included. Hence, that £600pm would be bills included. If I had a fancy enough house with a fancy enough room to justify £600pm. Which I don't. 

There are no houses there for sale right now, but this is a similar house in a nearby street. 

https://www.rightmove.co.uk/properties/155176385#/?channel=RES_BUY

This one doesn't quite work for me, as I prefer baths. Otherwise, the 1st floor could be for lodgers and the 2nd floor could be for my family. Bit of a run down the stairs if I find the toilet on the family 2nd floor is occupied and I have to go to the ground floor, however. Though, perhaps bedrooms 1 and 2 (both with en suites) for lodgers, and bedrooms 3 and 4 for family. That leaves bedroom 5 for storage. As per @Silvertabby's comment, I was thinking of not sharing bathrooms with lodgers. Though, if I bought the house above, the downstairs loo would be for all. The lodgers would of course share the living room, kitchen, outdoor area, and as I don't drive the what seem to be two parking spaces would both be for lodgers. (Thinking of @ButterCheese's comments.)

Going back to the OP's questions, as should be clear from above, I think that renting out a room or rooms is a good idea. Though, depending on vetting the occupants very carefully. And, doing the sums carefully in terms of increased mortgage given increased income, with the possibility of voids. 

I know  a coupe who bought a house in London in the 90s, and rented out a spare roon them. I lost contact when they left to live overseas. I wonder what happened to that house. It will be worth a LOT now. Depending on what they did, they may have used the same strategy as the OP, and had it work for them. 

SarahB16

Uriziel said:

I am really confused on what kind of property I should buy.
My options are:
1. Use my savings to buy a 2 bedroom flat.
2. Use a small part of my savings to buy a studio.
3. Use my savings and a mortgage and buy something significantly bigger.

I live alone but if I picked the first option I could rent out the spare room.
But I also wonder if I should just get the biggest property I can with my savings and mortgage since you can only get the stamp duty first time buyer benefit on the first property you buy for up to £425K.
Does anyone have any suggestions?

I know you are receiving some really good opinions so far but if I were in your shoes it would be so absolutely clear to me what I would do.  I would go with option 3 and it would be a house and not just a bigger flat.  It does not need to be a huge house but ideally try to see if you can afford a three bedroom house rather than a two bedroom and in a nice area if you can afford that.   

If you buy a house you won't have the service charges to pay (noted some freeholds do have management charges for grass maintenance, etc) but on the whole any charges will be significantly lower if you bought a house.  

I would also rent out a room too.  However, I don't know which part of the country you are in but I am assuming there is demand for a room in a house where you are looking to buy as you may rely on this income to help you pay your mortgage.  You will also need to be prepared to share your house too with your lodger.  

One other comment that I don't think has been mentioned is that house prices have historically risen at a greater pace than flats too (yes, there may be exceptions and the usual caveats apply).   

Tabieth

My advice is definitely not a studio. Harder to sell and less comfortable to live in. Personally I’d rather get something that’s big enough for me to expand into, that I can afford without a lodger, but isn’t too big. For example, I live alone and I’ve just bought a 2-bed terrace house. Originally I was open to flats or houses but houses are the better option. Having been burned in the past, I’d avoid leasehold at all costs. I could have afforded 3-beds in a less desirable area but 1) I don’t need 3 bedrooms and 2) location is key. 

Murphybear

ReadySteadyPop said:

Why would you rent out a room?

Apart from the financial aspects it could be company.  I got a woman of similar age to have the second bedroom.  We got on really well and became best friends for years.  (Sadly she died from cancer 30 years ago and I still miss her)(.  

Uriziel

Tabieth said:

My advice is definitely not a studio. Harder to sell and less comfortable to live in. Personally I’d rather get something that’s big enough for me to expand into, that I can afford without a lodger, but isn’t too big. For example, I live alone and I’ve just bought a 2-bed terrace house. Originally I was open to flats or houses but houses are the better option. Having been burned in the past, I’d avoid leasehold at all costs. I could have afforded 3-beds in a less desirable area but 1) I don’t need 3 bedrooms and 2) location is key. 

I noticed that I can afford 3 bedroom houses. The thing is that I would not want to stay there permanently and plan on buying something bigger in a few years. If I buy a 3 bedroom house in London is it likely to sell for a profit? The plan is to continue saving money and get a couple of payrises so that I can buy a larger house later down the line.
If I want to sell it on a profit I would have to make enough money to pay off the mortgage with the interest rate. Are house prices going up faster than the interest rates? I'm not sure if this would work or not.
People seem to be very unhappy with leaseholds and are saying that houses go up in price more than flats.

Herzlos

If you're planning on moving again to something bigger in a few years, I'd try and buy the bigger house now.

Because you'll save on having all the fees and hassle associated with moving and house prices are only going to trend upwards.

TroubledTarts

Uriziel said:

Tabieth said:

My advice is definitely not a studio. Harder to sell and less comfortable to live in. Personally I’d rather get something that’s big enough for me to expand into, that I can afford without a lodger, but isn’t too big. For example, I live alone and I’ve just bought a 2-bed terrace house. Originally I was open to flats or houses but houses are the better option. Having been burned in the past, I’d avoid leasehold at all costs. I could have afforded 3-beds in a less desirable area but 1) I don’t need 3 bedrooms and 2) location is key. 

I noticed that I can afford 3 bedroom houses. The thing is that I would not want to stay there permanently and plan on buying something bigger in a few years. If I buy a 3 bedroom house in London is it likely to sell for a profit? The plan is to continue saving money and get a couple of payrises so that I can buy a larger house later down the line.
If I want to sell it on a profit I would have to make enough money to pay off the mortgage with the interest rate. Are house prices going up faster than the interest rates? I'm not sure if this would work or not.
People seem to be very unhappy with leaseholds and are saying that houses go up in price more than flats.

You should ideally move as few times as possible and that would lead me to say find a 3 bed house in the right area that can be extended to suit your future needs. Don't spend money moving and use that money to refurbish, renovate and extend.

The trick is finding the perfect area first time

ReadySteadyPop

Murphybear said:

ReadySteadyPop said:

Why would you rent out a room?

Apart from the financial aspects it could be company.  I got a woman of similar age to have the second bedroom.  We got on really well and became best friends for years.  (Sadly she died from cancer 30 years ago and I still miss her)(.  

Company (with the right person) would be a better reason to house share than the financial aspects in my opinion, trying to "make money from a house" by letting random strangers share your living space probably doesn`t end up like your situation for most people? Flat shares are one thing, there are multiple people to shift the dynamic a bit, one other person in your living space would be very intense unless you got along extremely well as happily you did in your situation.

ReadySteadyPop

TroubledTarts said:

Uriziel said:

Tabieth said:

My advice is definitely not a studio. Harder to sell and less comfortable to live in. Personally I’d rather get something that’s big enough for me to expand into, that I can afford without a lodger, but isn’t too big. For example, I live alone and I’ve just bought a 2-bed terrace house. Originally I was open to flats or houses but houses are the better option. Having been burned in the past, I’d avoid leasehold at all costs. I could have afforded 3-beds in a less desirable area but 1) I don’t need 3 bedrooms and 2) location is key. 

I noticed that I can afford 3 bedroom houses. The thing is that I would not want to stay there permanently and plan on buying something bigger in a few years. If I buy a 3 bedroom house in London is it likely to sell for a profit? The plan is to continue saving money and get a couple of payrises so that I can buy a larger house later down the line.
If I want to sell it on a profit I would have to make enough money to pay off the mortgage with the interest rate. Are house prices going up faster than the interest rates? I'm not sure if this would work or not.
People seem to be very unhappy with leaseholds and are saying that houses go up in price more than flats.

You should ideally move as few times as possible and that would lead me to say find a 3 bed house in the right area that can be extended to suit your future needs. Don't spend money moving and use that money to refurbish, renovate and extend.

The trick is finding the perfect area first time

Very unlikely you will find value increases the way people would have done pre-rate rises in any area, maybe a very top end exclusive post code but not the average areas that most people live in.

TroubledTarts

ReadySteadyPop said:

TroubledTarts said:

Uriziel said:

Tabieth said:

My advice is definitely not a studio. Harder to sell and less comfortable to live in. Personally I’d rather get something that’s big enough for me to expand into, that I can afford without a lodger, but isn’t too big. For example, I live alone and I’ve just bought a 2-bed terrace house. Originally I was open to flats or houses but houses are the better option. Having been burned in the past, I’d avoid leasehold at all costs. I could have afforded 3-beds in a less desirable area but 1) I don’t need 3 bedrooms and 2) location is key. 

I noticed that I can afford 3 bedroom houses. The thing is that I would not want to stay there permanently and plan on buying something bigger in a few years. If I buy a 3 bedroom house in London is it likely to sell for a profit? The plan is to continue saving money and get a couple of payrises so that I can buy a larger house later down the line.
If I want to sell it on a profit I would have to make enough money to pay off the mortgage with the interest rate. Are house prices going up faster than the interest rates? I'm not sure if this would work or not.
People seem to be very unhappy with leaseholds and are saying that houses go up in price more than flats.

You should ideally move as few times as possible and that would lead me to say find a 3 bed house in the right area that can be extended to suit your future needs. Don't spend money moving and use that money to refurbish, renovate and extend.

The trick is finding the perfect area first time

Very unlikely you will find value increases the way people would have done pre-rate rises in any area, maybe a very top end exclusive post code but not the average areas that most people live in.

We have been at 5% interest rates and under before and prices still risenand they rises further in the more popular areas of that this is no historical factual doubt.