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Is this the right decision with a propsective house purchase

Discussion in 'Serious' started by PHILIP1193, 9 Feb 2011.

  1. PHILIP1193

    PHILIP1193 a Self Confessed HP Server Lover!!

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    This isn't in general as its a "serious" decision for me and one im not taking litely. Hence the long post to try and explain my thoughts and background fully.

    The situation im in is one where at the ages of 23.5 years of age i am looking to buy my first house, this is buying it by my self (on purpose), as i have no GF. I am in a situation where by i have the deposit money to buy the house (albeit £8000 borrow from the family interest free with a 3-4 year time limit on paying it back).

    The house is 16 miles from where i work in the main town, it is about 10 miles from the two other towns that surrounds it also. So while it is in a small village, with a good school, pub and spar in the middle of no where, it isn't too far from anywhere large the people may work in. The village is also getting a by-pass soon, so traffic will be quiet.

    The house is £85,000, and i get a gifted 5% deposit from the developers of £4250, making the true cost of the house to me £80750. It is a brand new built 1 bedroom house (not flat), on an established housing estate, that has no crime (police.uk) and according to (upmystreet.co.uk) is in a generally well off area, which lots of green area's around it, nor are the houses packed in.

    The house is under a 106 planning restriction, which in this scenario means its affordable housing for local people. For those who aren't sure what this means, its simply means, its been sold under market value (on purpose) and is only available for local people (people within 15 miles of the village), but this restriction also applies when i come to sell it.

    While my initial concern is the re-sale value because of its location and the fact its for local people only, my other concern is, whether or not buying a house is even the right thing to do at 23.5. Ami trying to rush into it all too quick or am i making a wise decision? I think the latter personally and i feel the resale value shouldn't be an issue in the next 2-3 years because even though i have to re-sell under market value, i bought it under market value too so its not like im loosing anything in the first place.

    My mortgage is only £370 a month so more than affordable and my job is secure as far as im aware (Ive asked). I have basic things like beds etc left over from when i used to rent so that reduces my up front costs too.

    The house will come carpeted, and has a small garden in the front of it which looks onto fields, which no obvious way of builders getting there as access is zero to non.

    The reason for not buying a shell in the local town i work in, which could 'potentially' sell for more, is simply the cost, i don't have the money to spend £85,000 on something that then needs another £10,000 - £15,000 spending on it to get it to the same standard this new one is now! £85,000 is enough money as it is! The same type of house new would also be about be about £110,000 ish instead of £85,000.

    My plan is a 2-3 year one and live here now while i have the deposit money to hand, it may not be available in 2-3 years time and as i see it, its cheaper than renting anyway.

    I'd like peoples thoughts on this and whether they thing im been wise or naive and not thinking it through.

    Philip
     
  2. Cthippo

    Cthippo Can't mod my way out of a paper bag

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    It comes down to how long do you plan to live there. Owning a home makes sense as a long term investment, but if you just need a place to live then maybe not.

    As for resale value with the restrictions, I would guess it's probably not an issue, but it should be possible to see if other restricted houses have sold at what would otherwise be fair market value i.e. the same as non-restricted homes. Unless your town is actively shrinking, there should continue to be people in the market for this sort of home.
     
  3. memeroot

    memeroot aged and experianced

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    what type of mortgage are you looking at - will it still be affordable when rates go up?

    also when rates do go up house prices will fall as other people will not be able to pay either.

    1 bed is unlikely to last a relationship - as you'll need somewhere for kids.

    If you're buying now its not an investment... but as you say its less than rental value and if its a new build you should have somewhere nice to live in a nice village and such options may not be present far into the future.
     
  4. Nexxo

    Nexxo * Prefab Sprout – The King of Rock 'n' Roll

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    You also need to weigh it against the alternative. How does £370,-- mortgage plus home maintenance costs compare to the expense of renting?

    Property prices will remain level for a while; don't expect a profit if you sell within the next 3 years, and don't feel an urgency to get on the property ladder right now. But also keep in mind that even if you were to sell at a loss you will reclaim some expenses whereas when you rent there is no return on that money at all.

    On the other hand renting gives you the flexibility to up and move at short notice --an important consideration if at this early stage of your career you have to be flexible about moving to where the next job is. If you are allowed to rent out this property that may not be much of a problem (keep in mind this may change the conditions of the mortgage also), but if there are restrictions on that then it may be better to rent.
     
    mjm25 likes this.
  5. memeroot

    memeroot aged and experianced

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    rental restrictions are definately something to look at - could you only rent to local people... feeling like in league of gentlemen here...
     
  6. PHILIP1193

    PHILIP1193 a Self Confessed HP Server Lover!!

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    So much good advice here. I think i'll possibly hold off. If nothing else i know exactly what people want to lend me (mortgage in principle), i know how the legal system works and i know what i can afford and not. So going through the motions has been worth while.

    Maybe what i do is buy that dilapidated property and do it up over 5 years time with a view to live in it with my future partner nad then sell it in 10 years time. Hmmm.
     
  7. BRAWL

    BRAWL Dead and buried.

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    I'd go with this. It's a decent long term investment, but if you're going to be moving around alot or if your job changes and it does at our age! then you might think of renting and saving abit more cash for later down the line :)
     
  8. adam_bagpuss

    adam_bagpuss Have you tried turning it off/on ?

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    do you currently live at home or rent already?

    i ask because to me with steep selling restrictions and the fact its only a 1 bedroom i doubt you would make money on the property and selling could be tough when you come to leave.

    first time buyers are usually couples with or without kids and i would say 2-3 bedroom is the normal for buyers in this area.

    +1 to the above comments too about researching property similar to it.a few question i would be asking myself are:

    have other houses struggled to sell with the same restrictions ?
    how well do 1 bedroom houses sell in your area ?
    how long has the property been on the market ?
    why is the developer gifting a 5% deposit ? (maybe its not selling ?)
    how long do you intend to live there ?
    what are your mortgage options
    extra costs besides mortgage like council tax, utilities, services (BB, phone etc), insurance ?

    these are all the things i had to think of when i bought my first house which was only just over a year ago. (£75000, 3 bedroom terrace with a rather large 15% deposit)

    also regarding mortgages be very very careful and research the options as much as possible.
    A bank will not advice you on the best option for you, merely give you a selection of its products and let you decide. The bank looks after number 1 regardless of what they tell you.

    They also have to point this out using a goverment form so you understand, the bank will not advice not the latter bit.
     
  9. Nexxo

    Nexxo * Prefab Sprout – The King of Rock 'n' Roll

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    If you take the long-term development approach, always buy the worst property in the best street. Profit!
     
  10. sparkyboy22

    sparkyboy22 Web Tinkerer

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    BUY!
    I rented cause I thought its only 3 years and will cost me more to buy.
    That was in 2002! Huge Mistake.
    Prices aint gunna go down now, 18 months ago I would have been saying wait it out a bit.

    New build is going required next to no maintenance for the next 10 years.

    BUY
     
  11. whisperwolf

    whisperwolf What's a Dremel?

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    Depends on the area house prices in edinburgh and glasgow are still decreasing up here, but more areas have levelled off.
    And new builds actually tend to have quite a bit of maintenance in the first 2 years, either from poor fitting quality or electrics / plumbing kitchen fittings, which gets repaired slowly by the builder, or by the building settling in, which is why the recommend not painting and decorating a new house for the first year so the walls stop moving and won't crack paintwork. but it does mean you will tend to need to repaint in the second year after it was built, after that settling period they're normaly maintenance free.
     
  12. yodasarmpit

    yodasarmpit Modder

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    I think you, and most of the nation, need to stop thinking of a house as an investment - it is a home you are buying (somewhere to live you can call your own).
    Obviously if you decide to move elsewhere in the future you don't want to be out of pocket, however as you have pointed out you are purchasing the house under the market value so all things considered in 2 to 3 years the value will most likely have risen slightly, but in line with any other house you may wish to buy into.

    If the value falls, so will all other houses in the area, unless of course the value drops due to a waste incinerator being build next door :)

    My advise is to buy, you are getting in on the ground floor at a reasonable and affordable price.
     
  13. memeroot

    memeroot aged and experianced

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    house prices haven't fallen because interest rates are so low... if they rise then they'll fall fast.

    but then again I bought simply because I knew I wouldn't be moving for a bit.
     
  14. logonui

    logonui Minimodder

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    I would check to see if you can rent it out.

    If you can, then you're getting a new house whilst you are still at a young age that is potentially providing you with income to rent a place of your own. Then if you have to move around because of new jobs/relationship changes you are still getting money in on your property. If transport links are good from there into the main town then there are bound to be professionals looking for a place closer to work.

    If I had the money to buy a place then I would definately do so, if only to gain an extra income
     
  15. Da_Rude_Baboon

    Da_Rude_Baboon What the?

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    Are you familiar with the UK housing market? The UK has over a million fewer houses than it needs so demand will always be there. If its an area you want to stay in then I would buy it. The wife and I bought our first place in 2004 when we were 25 and 23 respectively and it was the best thing we ever did. The way the market took off we would never be able to afford what we bought now. We bought a property that was dated and had a damp problem so we renovated it over 5 years and sold it for a 100% profit during the "slump". A good property will always sell and get on the property ladder when you can as you might never get the chance again.

    If you have the option to buy somewhere that needs work then that would always be my preference as a first time buyer. It will be a much better investment in the long run. bare in mind though that renovating is a lot more work and a lot more expensive than television would suggest. The people in programs like property ladder must lie abut how much they have spent to makes themselves look good as their prices are very unrealistic.
     
  16. Nexxo

    Nexxo * Prefab Sprout – The King of Rock 'n' Roll

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    I would not get bogged down in how much you'll make or lose on a property.

    Think of it this way: how much money will you lose if you rent? Three years at £370,-- a month clocks up to £13.320,-- pure loss. Even if you buy the house for £80.750,-- and end up selling it for as little as £69.430,-- (assuming a £2000,-- commission to the estate agent) you still break even.

    In reality, in three years you are more likely to sell it for the same amount as you bought it for, perhaps a bit more. In effect you will have saved yourself at least around £10.000,-- in rent you did not pay.

    There is a lot of speculation about what house prices will do. Mortgages are hard to get so prices are depressed --or more accurately, the housing market has self-adjusted to a more accurate representation of what houses are actually worth. Before 2007 houses were way, way overvalued. Many of them still are.

    Interest rates are likely to go up in the next few years. This means that there will be more motivation for banks to lend, but mortgage interest rates will go up also. This means that house prices will remain low.

    Couple this to uncertain economic times (about 50% of UK employees believe their jobs to be at risk) and most people will decide to stay put. It has become a slightly better market for first-time buyers with a big deposit, but second-time buyers will find the leap in mortgage debt too big to move up the ladder. Everybody who has a house is staying put and investing in their current property (seeing as savings earn you F.A. at the moment).

    In conclusion, unless you have a job that requires quick and frequent relocation to climb up the career ladder, now is the time to buy, but not the time to sell. If you buy this house, do it with the view of staying put at least 5 years or more.
     
    SteveyG likes this.
  17. Archtronics

    Archtronics Minimodder

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    Just a quick point a house that you live in is not an investment because it costs you money.

    Are you able to rent the house out maybe when you decide to upgrade ?
     
  18. Teelzebub

    Teelzebub Up yours GOD,Whats best served cold

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    I would buy in the long term you cant lose money and if you want to move on rent it out simple.

    I bought a few houses back in 1990 and lived in one and rented the rest within 6 years I got the money they cost me back after that pure profit apart from the tax man :waah:
     
  19. memeroot

    memeroot aged and experianced

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    Nexxo - you forgot interest charges - 3 years at 5% would cost 12750
     
  20. Nexxo

    Nexxo * Prefab Sprout – The King of Rock 'n' Roll

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    True. So he would have to sell the house at the same price that he bought it to break even. And there may be early repayment charges to consider.
     

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