Getting on the property ladder in London

Milky_Mocha

Pal, I would describe you as a highly risk averse person which is not a bad thing. Therefore I suggest you not get out of bed in the mornings for risk of stumbling over your slippers and crashing into...

Anyway there are many people who buy properties all over the world to let, taking advantage of the glories of modern day technology to stay in touch with property agents as far as any possible ups or downs that may occur. These incidentally happen to be some of the wealthiest businessmen in the world. Hence buying in another part of the country cannot be such a scary thing, obviously depending on the individual.

A place like Ashford, Kent with good economic prospects which is within an hour's drive of London (an hour and twenty mins by train) could be a good investment in my humble opinion. Measures can be taken to mitigate the "problems of BTL" - be selective when choosing tenants, don't buy something that would stretch your finances to the limit, buy in a good area (location, location, location I think is a brilliant programme and should only be taken as a guide anyway).

Travelqueen

There was a similar episode where a couple bought in Leicester & commuted in. Crazy IMHO

Other options include:

Buying with a friend / relative

Getting a guarantor mortgage - if your parents / relative would be prepared to do this.

Also - graduate mortgages from Scottish Widows etc - based on affordability not wages.

For my particular case IFAs & brokers didn't manage to find me as good a deals as I got myself, and also remember some banks don't work with brokers eg. HSBC

Good luck anyway, and research your areas - in London some places still seem to be in a bit of a time-warp price wise, and they're not all crack dens!

TQ

Milky_Mocha

Yikes! A Leicester to London commute? That's about 2.5 hours isn't it? I know some people commute from Portsmouth to london but I guess that's only about 1.5 hours.

I think buying with a relative is treading on dangerous ground. With a parent is not so bad, with a brother or sister - maybe. However you run the risk of falling into the same trap as people who lend money to their relatives. I've heard it breaks up families - sad. Still it could be a fair option.

MarkyMarkD

Yikes! A Leicester to London commute? That's about 2.5 hours isn't it? I know some people commute from Portsmouth to london but I guess that's only about 1.5 hours.

Not hard to guess that you live south of Watford is it? About 1 hour 15 mins actually - so nearer to London that Portsmouth by train. Quite commutable - but I wouldn't choose to do it myself.

Pal

Pal, I would describe you as a highly risk averse person which is not a bad thing. Therefore I suggest you not get out of bed in the mornings for risk of stumbling over your slippers and crashing into...

Anyway there are many people who buy properties all over the world to let, taking advantage of the glories of modern day technology to stay in touch with property agents as far as any possible ups or downs that may occur. These incidentally happen to be some of the wealthiest businessmen in the world. Hence buying in another part of the country cannot be such a scary thing, obviously depending on the individual.  

A place like Ashford, Kent with good economic prospects which is within an hour's drive of London (an hour and twenty mins by train) could be a good investment in my humble opinion. Measures can be taken to mitigate the "problems of BTL" - be selective when choosing tenants, don't buy something that would stretch your finances to the limit, buy in a good area (location, location, location I think is a brilliant programme and should only be taken as a guide anyway).

Actually I am not risk adverse at all, but I will take reasonable steps to control risk where I can and will ensure that a financial risk is worth taking before I commit myself. Sensible, controlled financial risks are well worth taking, and I agree that BTL can be a very good investment in some cases.

However, the example you provide ("wealthiest businessmen") is not typical and does not apply to the LLL example.  A wealthy businessman is either a lucky fool, or will have plenty of risk control mechanisms in place.  For example, bulk purchasing of cheaper fixed rate mortgages, use of limited companies to minimise tax and limit personal exposure, ability to buy properties very cheaply as a cash buyer without requiring mortgage approval, their own legal team that can move very quickly, very good access to estate agents and letting agents that will provide services for much lower fees than normally available and so on.

You may argue that these people had to start somewhere, however I guarantee that none of them started during the last two years when house prices have been so high, so the increase in notional value of their portfolio has given that an enormous financial safety net to expand from.

The example provided by LLL was of one individual entering the BTL market, buying a house that would not earn them a great deal of profit each month, but they would still have all the financial risks of running the BTL (mainly service costs and vacancy periods).  

All of this was being done in the hope that property prices would continue to rise such that the BTL could be sold at a future date to enable the individual to buy a home for themselves.

So the assumption is not only that house prices would continue to rise in general, but that they would continue to rise in the BTL area, while rising by less, or even falling, in the owner's home area.  That is a heck of an assumption.

What if the BTL price drops, the individual cannot find a tenant and they cannot sell due to negative equity?  What happens to their homeowning dreams then? A good one for an "LLL revisited" programme perhaps?

"Here is someone whose life we ruined...."

If someone wants to risk BTL as a long term business venture then go for it.  There are good profits to be made.  But gambling someone's financial future just in order to get the on the housing ladder is irresponsible.

Presumably you believe that "Tonight with Trevor McDonald" is a great current affairs programme?  

Milky_Mocha

You may argue that these people had to start somewhere, however I guarantee that none of them started during the last two years when house prices have been so high, so the increase in notional value of their portfolio has given that an enormous financial safety net to expand from.

Hola Pal

Actually I did just that just under two years ago and that is how I was able to get myself a decent place in London so I was trying to drop the hint that it could easily work. Guess I was just lucky huh? People have been predicting for years that house prices are unsustainably high. Yet they continue to rise. The longer I'd waited the more I'd have been priced out of the market.

Milky_Mocha

Not hard to guess that you live south of Watford is it?  About 1 hour 15 mins actually - so nearer to London that Portsmouth by train.  Quite commutable - but I wouldn't choose to do it myself.

You guessed right, MarkyMark D!! South of the River I am. I suppose the travelling time largely depends on which part of London you are commuting to, after all it would easily take a good hour and 15 mins to commute from South London to North London!

MarkyMarkD

Ah that's so true. Applies to any commuter from any direction though, I suppose.