22 year old wind fall

22 year old wind fall

Author
Discussion

RedroPodriguez

Original Poster:

7 posts

97 months

Sunday 14th February 2016
quotequote all
Hello,

I made a second account as I'd like to keep 'some' sort of privacy, I am a long-term PH user I promise!

I'm 22 and am in line for an inheritance windfall of around £60k.

This is a sizeable amount of money and, based in Warrington, could easily get me on the property ladder.

Options:

1/ Put it all in to a flat - looking at 60% LTV and reasonable mortgage payments pcm. This is the safe option I guess. Flat could be in Salford, Manchester or even Warrington (any local advice gladly received).

2/ Buy a 3 bed house for £150k. Be a 'live-in' landlord, renting out the two bedrooms. I'm in a shared house now so wouldn't be much more hardship. Rough figures here are a £150k house could see £400pcm per room. Two rooms, £800, mortgage covered and effectively free living for me.

3/ Combine options 1 and 2. Split the money in half, buy a house and get that set up whilst living in for a few months. Then buy a flat elsewhere.
I guess I'd get laughed out of the bank if I asked for a 2nd mortgage at 22....

4/ A crack pot idea suggested by a random bloke on a car forum (high risk, best avoided).


Any advice would be gladly accepted.

Thanks in advance


gd49

302 posts

170 months

Sunday 14th February 2016
quotequote all
The only thing I'd add to your thoughts is what your long term plans are? Is where you are now where you want to stay, or will it be beneficial to be moving around for your career for the next few years? Whilst it may not be the end of the world to have the money tied up as equity in a house if you end up choosing to live somewhere else, it's might be better to keep the money in high interest accounts until you know if this is a factor.

If you definitely want to buy where you are, assuming your salary is high enough to get the mortgage, I'd go for option 2. A 3 bed is where you're likely to want to end up anyway so if you can make the numbers work you may as well do it now.

RedroPodriguez

Original Poster:

7 posts

97 months

Sunday 14th February 2016
quotequote all
gd49 said:
The only thing I'd add to your thoughts is what your long term plans are? Is where you are now where you want to stay, or will it be beneficial to be moving around for your career for the next few years? Whilst it may not be the end of the world to have the money tied up as equity in a house if you end up choosing to live somewhere else, it's might be better to keep the money in high interest accounts until you know if this is a factor.

If you definitely want to buy where you are, assuming your salary is high enough to get the mortgage, I'd go for option 2. A 3 bed is where you're likely to want to end up anyway so if you can make the numbers work you may as well do it now.
Thanks

Good point - I should add I can't see myself being in Warrington long term. My girlfriend lives in Philadelphia and I have vague plans to emigrate, but I'd like to do something with the money.

If I was to go option 2, would there be much difference if I was to go from live-in landlord to a live-out landlord of a multiple occupancy house?




Gareth79

7,628 posts

245 months

Sunday 14th February 2016
quotequote all
If you are staying in the area for the foreseeable future then option 2 is a good bet. Flats are cheap, but with a house you can have your own driveway to keep your car safe(r), lots of room and space to make noise and mess doing any projects etc.

If you are fine with housemates then great, it will save you a huge amount of money, and you will always have the option of turfing them out if you find you could easily manage all the outgoings (although you won't get a mortgage these days if you cannot afford the basic costs).


Pferdestarke

7,179 posts

186 months

Sunday 14th February 2016
quotequote all
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.


Ozzie Osmond

21,189 posts

245 months

Sunday 14th February 2016
quotequote all
Just buy yourself a place to live - the tax advantages are massive.

Or if you don't want to do that, invest it on the stock market. You can do £30,500 of ISAs in the next couple of months. And if you're a 40% taxpayer I'd pocket some higher rate tax relief on pension contributions too.

Buy-to-let-is-not-the-answer-to-every-question!

Nickyboy

6,700 posts

233 months

Sunday 14th February 2016
quotequote all
RedroPodriguez said:
Thanks

Good point - I should add I can't see myself being in Warrington long term. My girlfriend lives in Philadelphia and I have vague plans to emigrate.
Don't get too excited about that option, You've got marriage and Job offers to come before you even think about moving over there.

DonkeyApple

54,919 posts

168 months

Sunday 14th February 2016
quotequote all
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.
This is good advice.

It's also worth asking yourself if you actually want the hassle of owning a property at 22? It's a massive ball ache and ties you down. I doubt you yet know where you even want to live yet so it's entirely possible that converting the money into a property could transpire to be the worst thing you ever do in your life.

Don't piss it away and don't let it be a boat anchor. Be happy to sit on it until you've settled into a career and know exactly where and how you want to live.

CrouchingWayne

682 posts

175 months

Sunday 14th February 2016
quotequote all
Just my opinion, but I like option 2. If you're happy with live in tenants there are certain tax advantages I believe. If you could find a house that you might be happy in later in life and afford it in the short term by leasing the rooms out now it saves a move from a flat to a similar house in future (less stamp duty, fees, hassle, likely lower house price)

Eric Mc

121,768 posts

264 months

Monday 15th February 2016
quotequote all
How many of us who are older live in the same locality we did when we were 22?

CX53

2,964 posts

109 months

Monday 15th February 2016
quotequote all
Eric Mc said:
How many of us who are older live in the same locality we did when we were 22?
Most people I know do, to be fair - be that friends, family or colleagues. I moved away from home when I was 17 and don't plan on staying where I moved to (I'd move 'home' in a heartbeat if there was work for me and cost of living wasn't so high), but I don't think most people like moving around much do they?

Simpo Two

85,147 posts

264 months

Monday 15th February 2016
quotequote all
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.

worsy

5,776 posts

174 months

Monday 15th February 2016
quotequote all
CX53 said:
Eric Mc said:
How many of us who are older live in the same locality we did when we were 22?
Most people I know do, to be fair - be that friends, family or colleagues. I moved away from home when I was 17 and don't plan on staying where I moved to (I'd move 'home' in a heartbeat if there was work for me and cost of living wasn't so high), but I don't think most people like moving around much do they?
I do, but did spend 15 years living away where the work was.

bmwmike

6,918 posts

107 months

Monday 15th February 2016
quotequote all
Couple of years round the world trip, you're only young once. You won't spend as much as you think, depending on your job a year in Australia would pay for itself plus a bit more.


anonymous-user

53 months

Monday 15th February 2016
quotequote all
Buy a house for around £150k.

You will not get laughed out of the bank, I had two mortgages by the time I was 24 or 25, as long as you have a 30k+ salary.

Potentially split it across two properties, I would avoid flats as they are generally lease hold, building upkeep (communal) etc and you might not get a say in the work being completed.

Coming from the North West, I would look for a large employer in a reasonable area (think Airbus in Broughton or UniLever in Port Sunlight) and look for a decent property with a 4-5% yield post fees.

As you are only 22 and I don't know if you have a job or a career, but I would spend 40k on a deposit, 5k slush fund, rent it out and spend 15k on a year travelling.


RedroPodriguez

Original Poster:

7 posts

97 months

Monday 15th February 2016
quotequote all
Thanks to everyone for your responses so far. It's really good to get a range of opinions, I can see all sides of the discussion.

Let me give some more context

I'm a Graduate Civil Engineer and earn £24,500. I'm investing in company stocks so take home pay is £1500pcm.

My relatively low salary is the sticking point. What could I realistically borrow against it, £110k at a push?

Nickyboy said:
RedroPodriguez said:
Thanks

Good point - I should add I can't see myself being in Warrington long term. My girlfriend lives in Philadelphia and I have vague plans to emigrate.
Don't get too excited about that option, You've got marriage and Job offers to come before you even think about moving over there.
I've done some research in to VISAs etc and you're right, it's a struggle. I work for an American firm so transferring internally is an option too.


DonkeyApple said:
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.
This is good advice.

It's also worth asking yourself if you actually want the hassle of owning a property at 22? It's a massive ball ache and ties you down. I doubt you yet know where you even want to live yet so it's entirely possible that converting the money into a property could transpire to be the worst thing you ever do in your life.

Don't piss it away and don't let it be a boat anchor. Be happy to sit on it until you've settled into a career and know exactly where and how you want to live.
This is my concern. I'm worried as to how much hassle it will actually be. I'm half tempted to sit on it and bide my time.

What would you say the 'minimum' amount of time to own a place is? The point at which the fees, savings on rental and stuff are outweighed. Is there such a thing? My guess would be 1 year.


Trexthedinosaur said:
Buy a house for around £150k.

You will not get laughed out of the bank, I had two mortgages by the time I was 24 or 25, as long as you have a 30k+ salary.

Potentially split it across two properties, I would avoid flats as they are generally lease hold, building upkeep (communal) etc and you might not get a say in the work being completed.

Coming from the North West, I would look for a large employer in a reasonable area (think Airbus in Broughton or UniLever in Port Sunlight) and look for a decent property with a 4-5% yield post fees.

As you are only 22 and I don't know if you have a job or a career, but I would spend 40k on a deposit, 5k slush fund, rent it out and spend 15k on a year travelling.
My rough plan was this

Buy 3/4 bed place for £140k with a £30k deposit. Live in it, let out spare rooms and bide my time. See what happens with USA, moving within the UK etc. If I move out, let out the remaining room and it'd pay for itself indefinitely.

In terms of local knowledge, I'd be buying in close proximity to Birchwood Park - it's huge and the young professionals room rental market round here is very strong.



Edited by RedroPodriguez on Monday 15th February 17:23

DonkeyApple

54,919 posts

168 months

Monday 15th February 2016
quotequote all
'This is my concern. I'm worried as to how much hassle it will actually be. I'm half tempted to sit on it and bide my time.

What would you say the 'minimum' amount of time to own a place is? The point at which the fees, savings on rental and stuff are outweighed. Is there such a thing? My guess would be 1 year.'

How long is a piece of string? wink

It's just so dependent on what type of property you buy, what area, how well you buy it, how well you rent it etc.

As a civil engineer I would have thought that as your career gets under way you are more than likely as a professional to move locations for career progression and you have to be careful that owning a property at an early stage might just hamper your willingness to move for work.

However, if you were to run it as more of a bedsit type operation where in your own mind you are just one of the renters (or if really smart, you keep sponging off hotel parents for as long as possible) and get the property running efficiently over the next couple of years, learning how to source the right tenants efficiently, how to deal with all the standard problems and setting up a good business relationship with a local handyman then it might work the other way around and be a smart asset that actually gives you more freedom to move with work etc.

At the end of the day you know yourself better than anyone and as long as you don't rush anything, sit on good ideas to make sure they are actually good and most importantly are honest with yourself then you can't go far wrong. Just avoid unecassary leverage as that can tie you down and also keep you awake at night.

Chapppers

4,483 posts

190 months

Monday 15th February 2016
quotequote all
E46 m3 £12k, 20 sets of cheap tyres £5k, airfield hire £20k for a week or so. Become drift superstar, ????, profit. 200% yield guaranteed.

Simpo Two

85,147 posts

264 months

Monday 15th February 2016
quotequote all
Just remember that house prices generally go up, so while you're thinking about it for six months, or swanning off round the world, the size and value of the house you eventually get will be that much smaller.

RedroPodriguez

Original Poster:

7 posts

97 months

Monday 15th February 2016
quotequote all
DonkeyApple said:
'This is my concern. I'm worried as to how much hassle it will actually be. I'm half tempted to sit on it and bide my time.

What would you say the 'minimum' amount of time to own a place is? The point at which the fees, savings on rental and stuff are outweighed. Is there such a thing? My guess would be 1 year.'

How long is a piece of string? wink

It's just so dependent on what type of property you buy, what area, how well you buy it, how well you rent it etc.

As a civil engineer I would have thought that as your career gets under way you are more than likely as a professional to move locations for career progression and you have to be careful that owning a property at an early stage might just hamper your willingness to move for work.

However, if you were to run it as more of a bedsit type operation where in your own mind you are just one of the renters (or if really smart, you keep sponging off hotel parents for as long as possible) and get the property running efficiently over the next couple of years, learning how to source the right tenants efficiently, how to deal with all the standard problems and setting up a good business relationship with a local handyman then it might work the other way around and be a smart asset that actually gives you more freedom to move with work etc.

At the end of the day you know yourself better than anyone and as long as you don't rush anything, sit on good ideas to make sure they are actually good and most importantly are honest with yourself then you can't go far wrong. Just avoid unecassary leverage as that can tie you down and also keep you awake at night.
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!