22 year old wind fall
Discussion
Simpo Two said:
Get on the property ladder. Take lodgers in spare bedrooms if you wish. You can move house if your job moves. You can't predict the future so don't try to - because it will be different.
I got my first house when I was 25 and have absolutely no regrets at all.
^^^ This, this, this.I got my first house when I was 25 and have absolutely no regrets at all.
As so often in personal finance, "it may not look sexy, but it works".
Pferdestarke said:
Sit on it for 6 months and don't do a thing until you're sure.
I hate to see young people in fortunate positions line the pockets of others with legal fees, front loaded mortgage interest, renovations etc.
Just be careful what you buy and see the bigger picture.
Sage advice.I hate to see young people in fortunate positions line the pockets of others with legal fees, front loaded mortgage interest, renovations etc.
Just be careful what you buy and see the bigger picture.
DonkeyApple said:
The only thing I would add is that the most efficient 'bedsit' model in terms of yield etc would generally be the kind of place that a young professional man would not want to be living. Let's put it politely, it's not typically the accommodation of champions. 
^^^ Totally agree. 
Couple of comments
- I think you MAY struggle to get a BTL mortgage, however affordable it looks on paper, if a large chunk of the property purchase price is coming from a one-off inheritance rather than earned through salary. I am speaking based on my recent experience of a relatively routine rearrangement of my existing mortgages and the proofs of incomes and tax paid (SA302) for the last 3 years I've been having to dig out this time ... they seem to have got MUCH stricter. You don't have the history/proof to show that you can keep repaying the BTL if things go a bit wrong.
- The arrangement fees on BTL mortgages are MASSIVE these days. £1000 is common, £2000 less so, but still on some products. You can add these fees to the loan but then you have higher repayments; you can put them down on your tax return; but either way make sure you allow for them. Also the exit penalties if you do not choose your product wisely. I think these fees will dramatically change the "1 year" period you are talking about as the minimum that its worth it for.
- Ordinary residential mortgage may not allow lodgers, need to check the small print. You could do it without telling them, but then expect some pain when you come to remortgage in a few years, they will figure out that something doesn't add up about your imcome, they're not stupid.
- Hope you have allowed for tax in your calculations. It's getting hostile and the days of winging it and not declaring the income are getting short. The killer is Payment On Account, if you get to the end of the year and find you have to pay extra income tax, they whack you for the following year's *expected tax* then and there as well. Serious ouch if you don't plan for that.
- I think you MAY struggle to get a BTL mortgage, however affordable it looks on paper, if a large chunk of the property purchase price is coming from a one-off inheritance rather than earned through salary. I am speaking based on my recent experience of a relatively routine rearrangement of my existing mortgages and the proofs of incomes and tax paid (SA302) for the last 3 years I've been having to dig out this time ... they seem to have got MUCH stricter. You don't have the history/proof to show that you can keep repaying the BTL if things go a bit wrong.
- The arrangement fees on BTL mortgages are MASSIVE these days. £1000 is common, £2000 less so, but still on some products. You can add these fees to the loan but then you have higher repayments; you can put them down on your tax return; but either way make sure you allow for them. Also the exit penalties if you do not choose your product wisely. I think these fees will dramatically change the "1 year" period you are talking about as the minimum that its worth it for.
- Ordinary residential mortgage may not allow lodgers, need to check the small print. You could do it without telling them, but then expect some pain when you come to remortgage in a few years, they will figure out that something doesn't add up about your imcome, they're not stupid.
- Hope you have allowed for tax in your calculations. It's getting hostile and the days of winging it and not declaring the income are getting short. The killer is Payment On Account, if you get to the end of the year and find you have to pay extra income tax, they whack you for the following year's *expected tax* then and there as well. Serious ouch if you don't plan for that.
RedroPodriguez said:
Some very good points here, thank you for taking the time, I really appreciate it.
I feel like, if I buy somewhere and let out the rooms individually, I could make a good go of it. I'd treat myself as one of the tenants while potentially getting a nice top-up on the salary whilst having my mortgage paid for me (this is the ideal scenario).
The other side of this is unexpected costs, terrible tenants and a big mess. I want out within 6 months, can't/don't want to afford mortgage payments without tenants and am forced to sell the place. As you valuably suggest, it's down to me.
Career mobility is a huge factor and a primary concern of mine. If the America plans come to fruition, I have no idea how I'd manage a house from the other side of the Atlantic. Perhaps swap to long-term letting in this situation. Even if America doesn't happen or she comes over here, if the dream job comes up tomorrow, I want to be able to go at the drop of a hat - this is an argument against buying.
What I've done is convince myself that both options are a great idea. Help!
Good points for sure, but I have never lived in one of my properties and lived in the other for 3 months (after 10 months renovation), a new opportunity came along and I moved to another country, it really is as simple as you want it to be.I feel like, if I buy somewhere and let out the rooms individually, I could make a good go of it. I'd treat myself as one of the tenants while potentially getting a nice top-up on the salary whilst having my mortgage paid for me (this is the ideal scenario).
The other side of this is unexpected costs, terrible tenants and a big mess. I want out within 6 months, can't/don't want to afford mortgage payments without tenants and am forced to sell the place. As you valuably suggest, it's down to me.
Career mobility is a huge factor and a primary concern of mine. If the America plans come to fruition, I have no idea how I'd manage a house from the other side of the Atlantic. Perhaps swap to long-term letting in this situation. Even if America doesn't happen or she comes over here, if the dream job comes up tomorrow, I want to be able to go at the drop of a hat - this is an argument against buying.
What I've done is convince myself that both options are a great idea. Help!
I see a house as a savings account rather than a burden, my financial safety net should the worst happen.
If you think it will be a burden then investigate the cost of a fully managed property and hold back a slush fund for any repairs (circa 5k).
Although as a caveat I am lucky in that I bought where my parents live so my father is actually managing the house for me and will manage any rework etc. Just investigate the cost of a letting agent Vs the purchase cost.
Personally I wouldn't like the idea of renting rooms and does it not fall under a HMO (house of multiple occupancy) and as such the regulations are different?
Simpo Two said:
Get on the property ladder. Take lodgers in spare bedrooms if you wish. You can move house if your job moves. You can't predict the future so don't try to - because it will be different.
I got my first house when I was 25 and have absolutely no regrets at all.
But you've ridden a once in a century boom.I got my first house when I was 25 and have absolutely no regrets at all.
oyster said:
Simpo Two said:
Get on the property ladder. Take lodgers in spare bedrooms if you wish. You can move house if your job moves. You can't predict the future so don't try to - because it will be different.
I got my first house when I was 25 and have absolutely no regrets at all.
But you've ridden a once in a century boom.I got my first house when I was 25 and have absolutely no regrets at all.
Thanks all for the continued variable, but valuable, words of wisdom. I'm in a much better frame of mind with this now.
It seems like the general feeling is to go with option 2 - buy a house and rent out rooms, this will generate highest yield and seems too good to be true (i'm sure it won't be). I'll take it easy and bide my time, the right house will make a huge difference.
My parents are peddling the house-buying plan, they can't see why I'd be dropping £££ rent down the drain each month when I've got a deposit ready and waiting. They own a few places themselves and are watching me like a hawk, so they should act as a good conscience.
My questions are as follows:
Length of mortgage - 25,30,35 years??? Should I go as short-term/high payments as I can afford or strike a balance? Can I set a 30yr term to keep basic payment down and overpay when possible?
Mortgage terms - What should I be aware of, that may affect me?
HMO rules - I checked, and if landlord lives in the house, it shouldn't be a problem. Anyone with experience in this?
It seems like the general feeling is to go with option 2 - buy a house and rent out rooms, this will generate highest yield and seems too good to be true (i'm sure it won't be). I'll take it easy and bide my time, the right house will make a huge difference.
My parents are peddling the house-buying plan, they can't see why I'd be dropping £££ rent down the drain each month when I've got a deposit ready and waiting. They own a few places themselves and are watching me like a hawk, so they should act as a good conscience.
My questions are as follows:
Length of mortgage - 25,30,35 years??? Should I go as short-term/high payments as I can afford or strike a balance? Can I set a 30yr term to keep basic payment down and overpay when possible?
Mortgage terms - What should I be aware of, that may affect me?
HMO rules - I checked, and if landlord lives in the house, it shouldn't be a problem. Anyone with experience in this?
oyster said:
But you've ridden a once in a century boom.
It happens every few years. Round here prices doubled between 1999 and 2008 before the bankers f
ked up. With all investments timing helps, but a house is simply an investment you live in. The downside is that you can't buy and sell at a whim; the plus side is you get a home and the money you pay every month is buying some of it rather than feeding a landlord.OP I was in a similar situation to you, I had a reasonable chunk of money quite soon after graduating. In my career it's fairly standard to move around in the first few years to gain different experiences. I stuck the money in high interest accounts and ISAs, did a few different jobs and some travelling over 5 years, met someone I liked and ended up buying a property with them. The money I had let us go several steps up the property ladder than we would have done otherwise.
If I had purchased a house earlier, even if it had been to rent out, I'm not sure I would have been quite so willing to move around the country for different roles, and either myself or my partner would almost certainly had to compromise our careers if we'd wanted to live in the house I would have had. I might have done better financially out of it than I did by saving the money in accounts, but if I'd brought badly or being caught out by housing crash I could have ended up much worse off.
I guess what I'm saying is that you don't have to do anything with the money, and you shouldn't consider renting dead money if you aren't ready to commit to an area. You might do very well out of buying but you might not, it's a risk you have to be willing to take.
If I had purchased a house earlier, even if it had been to rent out, I'm not sure I would have been quite so willing to move around the country for different roles, and either myself or my partner would almost certainly had to compromise our careers if we'd wanted to live in the house I would have had. I might have done better financially out of it than I did by saving the money in accounts, but if I'd brought badly or being caught out by housing crash I could have ended up much worse off.
I guess what I'm saying is that you don't have to do anything with the money, and you shouldn't consider renting dead money if you aren't ready to commit to an area. You might do very well out of buying but you might not, it's a risk you have to be willing to take.
RedroPodriguez said:
HMO rules - I checked, and if landlord lives in the house, it shouldn't be a problem. Anyone with experience in this?
HMO states that there can be 3 urelated/independent parties in one property. More than this and you need to confirm to various fire regulations (fire doors etc.) So that's yourself + 2 lodgers. I'm 25 and have been letting 2 rooms for a year now. As you've mentioned the benefits are great and I'd never look back. Lodgers so far have been good guys and I've been lucky enough to be able to have friends lodge aswell as randoms. Only drawbacks so far have been having to coach Tennant's on hygeine from time to time and the odd bit of plumbing. Feel free to PM if you have any questions.
DonkeyApple said:
The only thing I would add is that the most efficient 'bedsit' model in terms of yield etc would generally be the kind of place that a young professional man would not want to be living. Let's put it politely, it's not typically the accommodation of champions.
Most amusing observation! 
RMCA said:
HMO states that there can be 3 urelated/independent parties in one property. More than this and you need to confirm to various fire regulations (fire doors etc.) So that's yourself + 2 lodgers.
Wrong, dead wrong.If the property contains 3 unrelated people sharing bathroom, kitchen, toilet facilities then it's classed as an HMO.
What type of civil egineer are you, working for the contractor or the consultant?
This is what I would do... As a Civil Engineer working for a contractor.
Buy a house 30k down the rest on morgage, put the remainder in a isa....
rent out a couple of rooms in your current house.
When you project moves and you go live somewhere else, buy a cheap property with the other 30k your subsistance will pay for the new morgage and you should do it up during the job.... then once it's done up, rent out a few rooms to collegues. once the job is complete, either remorgage to get a deposite for your next house at the next job, and rent out the house, or just sell up and take the money.
This is what I would do... As a Civil Engineer working for a contractor.
Buy a house 30k down the rest on morgage, put the remainder in a isa....
rent out a couple of rooms in your current house.
When you project moves and you go live somewhere else, buy a cheap property with the other 30k your subsistance will pay for the new morgage and you should do it up during the job.... then once it's done up, rent out a few rooms to collegues. once the job is complete, either remorgage to get a deposite for your next house at the next job, and rent out the house, or just sell up and take the money.
2 is a good option I did it back in the day if you don't mind sharing having someone else paying a chunk of your mortgage is a great move. It's also tax free money. I bought my tenant with the house.
I wouldn't stick it all down as a deposit unless you have other savings. Keep an emergency fund.
I wouldn't stick it all down as a deposit unless you have other savings. Keep an emergency fund.
cowboyengineer said:
What type of civil egineer are you, working for the contractor or the consultant?
This is what I would do... As a Civil Engineer working for a contractor.
Buy a house 30k down the rest on morgage, put the remainder in a isa....
rent out a couple of rooms in your current house.
When you project moves and you go live somewhere else, buy a cheap property with the other 30k your subsistance will pay for the new morgage and you should do it up during the job.... then once it's done up, rent out a few rooms to collegues. once the job is complete, either remorgage to get a deposite for your next house at the next job, and rent out the house, or just sell up and take the money.
Using a subsistence allowance to pay a mortgage is genius, but unfortunately I'm a consultant and have no such luxuries!This is what I would do... As a Civil Engineer working for a contractor.
Buy a house 30k down the rest on morgage, put the remainder in a isa....
rent out a couple of rooms in your current house.
When you project moves and you go live somewhere else, buy a cheap property with the other 30k your subsistance will pay for the new morgage and you should do it up during the job.... then once it's done up, rent out a few rooms to collegues. once the job is complete, either remorgage to get a deposite for your next house at the next job, and rent out the house, or just sell up and take the money.
gd49 said:
OP I was in a similar situation to you, I had a reasonable chunk of money quite soon after graduating. In my career it's fairly standard to move around in the first few years to gain different experiences. I stuck the money in high interest accounts and ISAs, did a few different jobs and some travelling over 5 years, met someone I liked and ended up buying a property with them. The money I had let us go several steps up the property ladder than we would have done otherwise.
If I had purchased a house earlier, even if it had been to rent out, I'm not sure I would have been quite so willing to move around the country for different roles, and either myself or my partner would almost certainly had to compromise our careers if we'd wanted to live in the house I would have had. I might have done better financially out of it than I did by saving the money in accounts, but if I'd brought badly or being caught out by housing crash I could have ended up much worse off.
I guess what I'm saying is that you don't have to do anything with the money, and you shouldn't consider renting dead money if you aren't ready to commit to an area. You might do very well out of buying but you might not, it's a risk you have to be willing to take.
These are some very good points, and while I agree on many of them, it feels like sitting on it for a bit is a safe bet. A small amount of risk could see some good returns and get me a few years down the line on a mortgage. If I had purchased a house earlier, even if it had been to rent out, I'm not sure I would have been quite so willing to move around the country for different roles, and either myself or my partner would almost certainly had to compromise our careers if we'd wanted to live in the house I would have had. I might have done better financially out of it than I did by saving the money in accounts, but if I'd brought badly or being caught out by housing crash I could have ended up much worse off.
I guess what I'm saying is that you don't have to do anything with the money, and you shouldn't consider renting dead money if you aren't ready to commit to an area. You might do very well out of buying but you might not, it's a risk you have to be willing to take.
It's important to see both sides of the coin and your sentiment is certainly one side of it and the post below is the flip-side!
RMCA said:
I'm 25 and have been letting 2 rooms for a year now. As you've mentioned the benefits are great and I'd never look back. Lodgers so far have been good guys and I've been lucky enough to be able to have friends lodge aswell as randoms. Only drawbacks so far have been having to coach Tennant's on hygeine from time to time and the odd bit of plumbing. Feel free to PM if you have any questions.
Thanks for your input, it's very interesting to hear. I may well have some more specific questions for you at a later date.Did you find any particularly large unexpected costs?
I'm imagining, a few grand to fit the place out, a month or so to find some tenants and running costs being relatively low. Obviously council tax + bills + TV & broadband would be much much higher than I'm paying now so I'd need to budget.
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