Discussion
What should we do with this property:
We don't live in it, currently rented
Mortgage remaining is £92k
Repayment mortgage at 2.5% fixed until Jun-17
Monthly mortgage is £374
It rents for around £600 a month
If it's empty we pay around £150 council tax and £30 factor fee a month
Property is valued at £145k
It's in Aberdeen, market is still pretty ropey to say the least
We have no savings to play with and don't earn a lot. When we first started renting it the market was pretty good and it let for £900 a month but it's been a slog for the past year now
We don't live in it, currently rented
Mortgage remaining is £92k
Repayment mortgage at 2.5% fixed until Jun-17
Monthly mortgage is £374
It rents for around £600 a month
If it's empty we pay around £150 council tax and £30 factor fee a month
Property is valued at £145k
It's in Aberdeen, market is still pretty ropey to say the least
We have no savings to play with and don't earn a lot. When we first started renting it the market was pretty good and it let for £900 a month but it's been a slog for the past year now
No landlord but if the flat is empty can't you just lower the rent to attract a new tenant? 600 quid a month income on a 375 quid mortgage gives you a fair bit of leeway. If you really need the income then sell it to another landlord and have some capital to invest elsewhere if you don't want the hassle.
My thoughts:
1) You'll struggle to sell it anyway. If you do sell, be prepared for it to be on the market for a long time, and maybe sell for less than asking price. Obviously, this is general market observation as I don't know the property. If you envisage sticking it on the market and selling it for 10% over within a few days, well, that's probably not going to happen.
2) Aberdeen is at a pretty low point. It will bounce back a bit over the next year or two, rents will go up a bit, and sales will get easier again. Do you want to sell at a low point and not necessarily maximise your return? Do you cut your losses and put the money somewhere else? Do you try a BTL in a more prosperous town?
3) Accept that the £900/month rent you were getting was inflated boomtime stuff and will never come back. The demand and conditions which created those rents won't come back to the north sea. You might get a bit more than £600 as things pick up, or see fewer months with it empty in future, but you won't see £900 again I bet.
1) You'll struggle to sell it anyway. If you do sell, be prepared for it to be on the market for a long time, and maybe sell for less than asking price. Obviously, this is general market observation as I don't know the property. If you envisage sticking it on the market and selling it for 10% over within a few days, well, that's probably not going to happen.
2) Aberdeen is at a pretty low point. It will bounce back a bit over the next year or two, rents will go up a bit, and sales will get easier again. Do you want to sell at a low point and not necessarily maximise your return? Do you cut your losses and put the money somewhere else? Do you try a BTL in a more prosperous town?
3) Accept that the £900/month rent you were getting was inflated boomtime stuff and will never come back. The demand and conditions which created those rents won't come back to the north sea. You might get a bit more than £600 as things pick up, or see fewer months with it empty in future, but you won't see £900 again I bet.
Judging the best investment potential is a gamble based on not knowing how interest rates and house prices will go.
You could say over the next 25 years interest rates will go up and house prices, in aberdeen, may not, or even go down due to declining oil. This would suggest sell.
On a 'today' basis you could say sell, invest 53k and if you got 3% for the next 25 years it would be worth 110k putting no extra in.
Or, if tenants cover all your mortgage/repair costs over 25 years you should be quids in, as it's worth 145k now, so it would have to be worth 30k less in 25 years.
But there are so many variables, it's impossible to know, hence it's all a gamble and you need to go with your gut instinct.
Unless you fancy the 53k now and don't want any hassle of course!
You could say over the next 25 years interest rates will go up and house prices, in aberdeen, may not, or even go down due to declining oil. This would suggest sell.
On a 'today' basis you could say sell, invest 53k and if you got 3% for the next 25 years it would be worth 110k putting no extra in.
Or, if tenants cover all your mortgage/repair costs over 25 years you should be quids in, as it's worth 145k now, so it would have to be worth 30k less in 25 years.
But there are so many variables, it's impossible to know, hence it's all a gamble and you need to go with your gut instinct.
Unless you fancy the 53k now and don't want any hassle of course!
Thank you for your thoughts. We're under no illusions about the state of the Aberdeen market, which is a big reason why it's so difficult to know what to do..
In terms of costs when rented it's quite minimal, just over £400 per month all in.
If we did sell, the money would be used primarily to extend / renovate our house.
In terms of costs when rented it's quite minimal, just over £400 per month all in.
If we did sell, the money would be used primarily to extend / renovate our house.
ITP said:
On a 'today' basis you could say sell, invest 53k and if you got 3% for the next 25 years it would be worth 110k putting no extra in.
Or, if tenants cover all your mortgage/repair costs over 25 years you should be quids in, as it's worth 145k now, so it would have to be worth 30k less in 25 years.
I think this is the kind of long term thinking which i need to consider but I don't understand it! Long day sorry Or, if tenants cover all your mortgage/repair costs over 25 years you should be quids in, as it's worth 145k now, so it would have to be worth 30k less in 25 years.
dazwalsh said:
Its gone from 900 to 600 per month? Wowzers
Google the price/bbl of oil and you have your answer.OP - if you are confident you can weather the current storm up here, I would hang onto it - prices in Aberdeen will go back up at some point, even if not to the mad levels they were; it should at least be easier to sell. I would be doing my best to avoid having to shift a house (and I hate this phrase) in the current economic climate.
If you need the money out, I would prepare to take a scalping on the value and have a tough time selling it.
Not the nicest thing to hear I know, but I know plenty of people unable to shift property up here, even at knockdown rates. One of our neighbours has had his on at £280k (bang on valuation) for an age. An identical house a few doors down has just went under offer and was on at £248k
drab1 said:
What should we do with this property:
We don't live in it, currently rented
Mortgage remaining is £92k
Repayment mortgage at 2.5% fixed until Jun-17
Monthly mortgage is £374
It rents for around £600 a month
If it's empty we pay around £150 council tax and £30 factor fee a month
Property is valued at £145k
It's in Aberdeen, market is still pretty ropey to say the least
We have no savings to play with and don't earn a lot. When we first started renting it the market was pretty good and it let for £900 a month but it's been a slog for the past year now
Weirdly, it's ultimately an oil play. The base will be defined by what the State will pay you to house someone and the current income and future income is pretty much defined by the price of oil. We don't live in it, currently rented
Mortgage remaining is £92k
Repayment mortgage at 2.5% fixed until Jun-17
Monthly mortgage is £374
It rents for around £600 a month
If it's empty we pay around £150 council tax and £30 factor fee a month
Property is valued at £145k
It's in Aberdeen, market is still pretty ropey to say the least
We have no savings to play with and don't earn a lot. When we first started renting it the market was pretty good and it let for £900 a month but it's been a slog for the past year now
Looking at oil while it is climbing back I'm sure you know all too well that the time to bring exploration and development back on stream is years and so even if oil continues to climb it will be years before the Aberdeen industry uses up its spare employment capacity and genuine wage inflation returns and then years after that for security and euphoria to return to cause rents to grow strongly. Then there is the slight problem that many firms won't return to Aberdeen as it is an oil hub that is not linked to the outside world. Without a long haul airport that side of the industry (west Africa, US etc) is going to stay located on the M4 corridor and close to London. Especially given the new ownership structure of very many of those assets being London centric and with no intention of going anywhere near Aberdeen. Plus, many firms won't return to Aberdeen due to the SNP risk and prefer to build back up elsewhere.
So, your rental income is probably relatively stable where it is, the worst is over but I would hazard you may not ever see the yields of the past again. So, in short, if the current return works for you then fine but if you are able to sell for an acceptable price and have a better use for the capital then it might be worth cashing in.
By way of an update-
We did try to continue renting but the market was just too difficult for us. Our tenant wasn't great in paying which didn't help, and the ongoing maintenance which was needed at the same time as having a young baby was a major headache.
We put it on the market for just under value, had about 1 viewing a week and sold it to first time buyers after around 8 weeks. It was definitely the right decision for us at the moment and we couldn't be happier. Judging by some of the developments rumoured at my work the market might be slower in picking up than originally thought so I consider us pretty lucky
We did try to continue renting but the market was just too difficult for us. Our tenant wasn't great in paying which didn't help, and the ongoing maintenance which was needed at the same time as having a young baby was a major headache.
We put it on the market for just under value, had about 1 viewing a week and sold it to first time buyers after around 8 weeks. It was definitely the right decision for us at the moment and we couldn't be happier. Judging by some of the developments rumoured at my work the market might be slower in picking up than originally thought so I consider us pretty lucky
That sounds like a good result. No point in having a long term investment that stresses you.
Property can be a great long term investment but you have to have liquidity to ride out the possible negative scenarios or it becomes a much higher risk investment than many probably realise.
Aberdeen is an especially tricky market as the economy is more volatile than most cities in the UK.
Property can be a great long term investment but you have to have liquidity to ride out the possible negative scenarios or it becomes a much higher risk investment than many probably realise.
Aberdeen is an especially tricky market as the economy is more volatile than most cities in the UK.
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