My plan

daverave7

Got myself in a bit of a mess here and trying to think how I can get out of this in the long term.

2 years ago myself and my partner put a 10 % deposit of 20K on a 200K flat bought off plan. The flat is in the Swansea SA1 waterfront area - part of a new £400M development. We are putting a further 30K deposit down and getting a mortgage for 150K.

I anticipate that prices will crash... in particular for new build flats. I don't know by how much. Anyones guess I suppose. I'm anticipating no more than 30 % for my particular flat. Swansea's original marina has always held it's price well (relatively speaking) and Swansea has a strong growing university - expanding by possibly building a new campus near the waterfront development.

For personal reasons I don't want to live in the flat for much more than 3 years. So in this time I anticipate the flat would be worth at least 140K. Im hoping 160K. I would not like to sell it at this price based on the hope that prices will eventually recover. Is it feasible to remortgage as a buy to let and rent it out to students (possibly) after this 3 year period? I understand I would have to find a further deposit for this remortgage. And then I'd like to sell when house prices have recovered - Can anyone see any problems with this plan? Or is it a potential financial suicide?

pinkshoes

If you have enough equity in the property, and the rent would easily cover the mortgage, then you might be able to change to a BTL mortgage.

daverave7

pinkshoes wrote: »

If you have enough equity in the property, and the rent would easily cover the mortgage, then you might be able to change to a BTL mortgage.

The rent would cover the interest part of a mortgage (based on a rate of 6.5 %). The equity would depend on how much house prices fall i suppose.

pinkshoes

daverave7 wrote: »

The rent would cover the interest part of a mortgage (based on a rate of 6.5 %). The equity would depend on how much house prices fall i suppose.

I think a lender would probably want the rent to cover at least 1.3 times the interest on the mortgage.

You have to allow for the property being empty for periods of time inbetween tenants, and spare money to fix any problems etc...

PasturesNew

daverave7 wrote: »

Got myself in a bit of a mess here and trying to think how I can get out of this in the long term.

2 years ago myself and my partner put a 10 % deposit of 20K on a 200K flat bought off plan. The flat is in the Swansea SA1 waterfront area - part of a new £400M development. We are putting a further 30K deposit down and getting a mortgage for 150K.

I anticipate that prices will crash... in particular for new build flats. I don't know by how much. Anyones guess I suppose. I'm anticipating no more than 30 % for my particular flat. Swansea's original marina has always held it's price well (relatively speaking) and Swansea has a strong growing university - expanding by possibly building a new campus near the waterfront development.

For personal reasons I don't want to live in the flat for much more than 3 years. So in this time I anticipate the flat would be worth at least 140K. Im hoping 160K. I would not like to sell it at this price based on the hope that prices will eventually recover. Is it feasible to remortgage as a buy to let and rent it out to students (possibly) after this 3 year period? I understand I would have to find a further deposit for this remortgage. And then I'd like to sell when house prices have recovered - Can anyone see any problems with this plan? Or is it a potential financial suicide?

I can't see anything wrong with the mathematics or thinking. It would work. But it seems a shame to have lost £60k over the next 3 years.

The alternative would be: pull out now if you can and just lose £20k
Over the next 3 years you can rent cheaper than the £40k.
In 3 years you would be free of property, to do what you wanted with your life ... and if you simply MUST have one of those flats, pop over and pick it up at the £140k price.

Of course everything partly hinges on the future value of a Swansea flat. I have no idea how that market has performed in the past or will perform in the future. And I will resist typing a doom/gloom opinion here as it doesn't add value to my posting.

Good luck

daverave7

PasturesNew wrote: »

I can't see anything wrong with the mathematics or thinking. It would work. But it seems a shame to have lost £60k over the next 3 years.

The alternative would be: pull out now if you can and just lose £20k
Over the next 3 years you can rent cheaper than the £40k.
In 3 years you would be free of property, to do what you wanted with your life ... and if you simply MUST have one of those flats, pop over and pick it up at the £140k price.

Of course everything partly hinges on the future value of a Swansea flat. I have no idea how that market has performed in the past or will perform in the future. And I will resist typing a doom/gloom opinion here as it doesn't add value to my posting.

Good luck

Thanks all.

I have my solicitor looking into the pulling out part. Something I don't really want to do (from a personal level- it's closer to work and it would be great to live in this area whilst me and my partner are still young!) and I think we heve been a bit stitched up in our contract. The deposit is non-refundable and we are liable to costs incurred including any loss in value of the flat if the seller re-sells within the next 12 months. Could be more like 40K.

PasturesNew

daverave7 wrote: »

Thanks all.

I have my solicitor looking into the pulling out part. Something I don't really want to do (from a personal level- it's closer to work and it would be great to live in this area whilst me and my partner are still young!) and I think we heve been a bit stitched up in our contract. The deposit is non-refundable and we are liable to costs incurred including any loss in value of the flat if the seller re-sells within the next 12 months. Could be more like 40K.

If you pull out, it will seem a big hit now ... but you might be grateful in 2-3 years' time when you see the resale prices falling further and, potentially, scum moving into the area.

One of the problems with new builds is, you don't know who your neighbours will be until it's too late. Buy into an established area/block and you've got a better idea of what you'll be living among.

It's a tough decision. Good luck in making your final choice.

daverave7

PasturesNew wrote: »

If you pull out, it will seem a big hit now ... but you might be grateful in 2-3 years' time when you see the resale prices falling further and, potentially, scum moving into the area.

One of the problems with new builds is, you don't know who your neighbours will be until it's too late. Buy into an established area/block and you've got a better idea of what you'll be living among.

It's a tough decision. Good luck in making your final choice.

It's an extension of the original marina. I find it hard to believe the potential of 'scum' moving to this area. This never happened to the original marina during the crash in the 90s.

Anyway, it's a gamble whatever I decide. Obviously will depend on how the market will do - judging by most threads on here it's pretty much doom and gloom.

Jorgan_2

daverave7 wrote: »

It's an extension of the original marina. I find it hard to believe the potential of 'scum' moving to this area. This never happened to the original marina during the crash in the 90s.

Anyway, it's a gamble whatever I decide. Obviously will depend on how the market will do - judging by most threads on here it's pretty much doom and gloom.

As Pastures New has said, no one can predict what the market will do. My only concern with SA1 is that one developer has claimed to have 90% of their apartments to investors, it probably explains why there are quite a few for sale at the moment. With such an oversupply of letting properties, the only way these investors can make their property stand out to a potential tenant is to lower the rent, and then your on a nasty, downward spiral.

Good luck with whatever you decide.

daverave7

Jorgan wrote: »

As Pastures New has said, no one can predict what the market will do. My only concern with SA1 is that one developer has claimed to have 90% of their apartments to investors, it probably explains why there are quite a few for sale at the moment. With such an oversupply of letting properties, the only way these investors can make their property stand out to a potential tenant is to lower the rent, and then your on a nasty, downward spiral.

Good luck with whatever you decide.

Thanks Jorgan. Do you have a link to the "one developer has claimed to have 90% of their apartments to investors"?

The only time I have come accross this is someone stating it on this site or misinterpreting what I had said about 90 % being sold.

Thanks

Jorgan_2

daverave7 wrote: »

Thanks Jorgan. Do you have a link to the "one developer has claimed to have 90% of their apartments to investors"?

The only time I have come accross this is someone stating it on this site or misinterpreting what I had said about 90 % being sold.

Thanks

I haven't unfortunatley. I saw your post about your situation on another thread last week and did a search but couldn't find anything. There was an article in the local paper (Evening Post? - I've got family living in the Swansea area & get bits & pieces 'saved' for me), also a friend was looking to invest in SA1 and the sales office came out with that bit of information. I advised my friend not to buy.