22 year old wind fall
Discussion
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
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 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.
ThanksIf 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.
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?
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?
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.
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.
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.
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.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.
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. 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.
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.
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 thisYou 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.
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 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?
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.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?
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.
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!
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?
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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