Buy now?? Big mistake??
Discussion
I've just had my mortgage offer come through for a new buy-to-let appartment I'm buying. Great buy even in the current market and I have a big enough deposit to mean that the rental income will cover the monthly repayments and service charge PM.
Now that it's got to this point - of actually signing and returning the papers, I'm wavering...... although my gut says 'good deal' go with it, my head says pull out and just do as everyone else is - hold back to see how low it can all go.
It's on the tube (5 mins walk) and in a lovely area just outside the London border / highly desirable so rental should never be a problem.. what to do? I'm using this weekend to reflect.
Now that it's got to this point - of actually signing and returning the papers, I'm wavering...... although my gut says 'good deal' go with it, my head says pull out and just do as everyone else is - hold back to see how low it can all go.
It's on the tube (5 mins walk) and in a lovely area just outside the London border / highly desirable so rental should never be a problem.. what to do? I'm using this weekend to reflect.
Generally i would avoid any type of BTL apartment at the moment as the over supply of them (certainly in the north west) is well known, to the extent that some banks/building societies won't even lend on them.
On saying this you are confident that its a good deal and you will have a decent amount of equity to ride out any short term problems. This along with the fact that the rent easily covers the mortgage payments/maintenance etc could make it a good long term move if you are buying quite abit below market value.
As its in a good area close to the tube you shouldn't have too many voids (hopefully).
If it was me i think i would sit back and see how things develop over the next few months - unless it was an exceptionally good deal.
Is the mortgage fixed?
On saying this you are confident that its a good deal and you will have a decent amount of equity to ride out any short term problems. This along with the fact that the rent easily covers the mortgage payments/maintenance etc could make it a good long term move if you are buying quite abit below market value.
As its in a good area close to the tube you shouldn't have too many voids (hopefully).
If it was me i think i would sit back and see how things develop over the next few months - unless it was an exceptionally good deal.
Is the mortgage fixed?
If you think it's a good deal & you have enough equity to put into it then why not? - ultimately it depends on if you are doing it for a shore term (0-3 years) mid, or long term gain.. on the mid to long view it should be fine. Look at if you can add value to the place too at some stage but refurbishing it or extending etc. It's normally a straight forward way of balancing out any drop in price or making it easier to sell in a difficult market.
On another note, choose your agent carefully - mystery shop them all first & see how well you are treated. I've just had 3 months with no tennant in mine because the agent isn't great & I didn't have time to move the property to another one. When it next comes up for renewal I'll be looking to move - paying more if I have to.
On another note, choose your agent carefully - mystery shop them all first & see how well you are treated. I've just had 3 months with no tennant in mine because the agent isn't great & I didn't have time to move the property to another one. When it next comes up for renewal I'll be looking to move - paying more if I have to.
Thanks for all the responses guys.. yes, it's a long term investment in reality.
No way of improving the place / adding value as it's only a couple of years old and has been finished off beautifully.. has underground gated parking and a lift from the car park. The truth is I already bought an apartment in this complex some months back for BTL but loved it so much that I ended up moving in... so when another came up after a failed sale I was contacted and it's all gone from there.
The area is Epping - 35 mins into central London; I do it twice a week into Holborn and the journey is quite pleasant. I was living in central London for years and I just love it out here - it would seem others do to; the rental side of things is very healthy. You could consider Epping to be rural but with London literally on your door step.
I know I'm getting a good deal but there's that nagging feeling that the market could do anything and although I can't see myself getting screwed by purchasing this place; I feel that there'll be other opportunities also...
No way of improving the place / adding value as it's only a couple of years old and has been finished off beautifully.. has underground gated parking and a lift from the car park. The truth is I already bought an apartment in this complex some months back for BTL but loved it so much that I ended up moving in... so when another came up after a failed sale I was contacted and it's all gone from there.
The area is Epping - 35 mins into central London; I do it twice a week into Holborn and the journey is quite pleasant. I was living in central London for years and I just love it out here - it would seem others do to; the rental side of things is very healthy. You could consider Epping to be rural but with London literally on your door step.
I know I'm getting a good deal but there's that nagging feeling that the market could do anything and although I can't see myself getting screwed by purchasing this place; I feel that there'll be other opportunities also...
Just something to bare in mind:
If you discounted capital growth from the residential property market (which I think you need to do for the next 3-5 years over Q3 2007 prices) then you wouldn't put your money in a deposit account which returned you less than 5% per annum (a good residential return). The basic rules are that unless you're considering capital growth, or want a long term investment (which would necessitate freehold not leasehold) avoid residential investment. In my opinion the Buy to Let name has been damage beyond repair, and if you consider the purchase on a purely financial basis then they must be better returns around.
The big question is WHY are you buying it? Because you like the property? Because you like the area? Because you want a property? If its because you want an investment then I would encourage to look at commercial investments instead. They are typically let on FRI leases meaning minimal landlord intervention and low cost, unlike resi you don't pay building insurance etc the tenants do and we've seen yields move out from 5-6% last summer to 8-10% at present. There is no doubt that lenders have reigned in their LTV's but from what you're saying you've got a deposit so you should be ok. Must commercial lenders are at about 65% LTV at present.
Just my 2ps worth.
If you discounted capital growth from the residential property market (which I think you need to do for the next 3-5 years over Q3 2007 prices) then you wouldn't put your money in a deposit account which returned you less than 5% per annum (a good residential return). The basic rules are that unless you're considering capital growth, or want a long term investment (which would necessitate freehold not leasehold) avoid residential investment. In my opinion the Buy to Let name has been damage beyond repair, and if you consider the purchase on a purely financial basis then they must be better returns around.
The big question is WHY are you buying it? Because you like the property? Because you like the area? Because you want a property? If its because you want an investment then I would encourage to look at commercial investments instead. They are typically let on FRI leases meaning minimal landlord intervention and low cost, unlike resi you don't pay building insurance etc the tenants do and we've seen yields move out from 5-6% last summer to 8-10% at present. There is no doubt that lenders have reigned in their LTV's but from what you're saying you've got a deposit so you should be ok. Must commercial lenders are at about 65% LTV at present.
Just my 2ps worth.
House prices have a long, long way to fall in London. Edge of a cliff.
Talk to a few estate agents right now anywhere in London and they will be expecting you to be offering a minimum of 10-15% below a "reasonable" asking price. Then ask them about current volumes and the answer will be "down 70% from last year".... they are already talking down prices themselves in order to scrape in some commission or they are out of a job.
Mortgage market wont go back to the "good old days".... until 50 years have passed and everyone has forgotten.
Talk to a few estate agents right now anywhere in London and they will be expecting you to be offering a minimum of 10-15% below a "reasonable" asking price. Then ask them about current volumes and the answer will be "down 70% from last year".... they are already talking down prices themselves in order to scrape in some commission or they are out of a job.
Mortgage market wont go back to the "good old days".... until 50 years have passed and everyone has forgotten.
I don't think we've hit the bottom of the market yet.
I'm beginning to think that some popular parts of the country for second homes are sitting on a time bomb, in terms of a potential market crash, because when the squeeze really hits these people and cash in needed, they are going to look to their 2nd properties to release some. It's not going to be pretty when these hit the market.
If your deal works for you now - go for it. But I'd be inclined to wait. Cash is king right now and I really am worried about the future at the moment. It might be carnage shortly.
I'm beginning to think that some popular parts of the country for second homes are sitting on a time bomb, in terms of a potential market crash, because when the squeeze really hits these people and cash in needed, they are going to look to their 2nd properties to release some. It's not going to be pretty when these hit the market.
If your deal works for you now - go for it. But I'd be inclined to wait. Cash is king right now and I really am worried about the future at the moment. It might be carnage shortly.
I assume you have talked to a number of letting agents to get a rental figure?
What sort of figures are similar properties going for and how many are being shown for let?
I too would not put all my eggs in one basket ie same /complex/block of flats. I would go for a totally different property (and area) - spread the risk further.
What sort of figures are similar properties going for and how many are being shown for let?
I too would not put all my eggs in one basket ie same /complex/block of flats. I would go for a totally different property (and area) - spread the risk further.
Some great comments here and you've all made points that are truly worthy of note. I am a little caught up with the situ'. On the one hand - I do feel; gut instinct, that it's a good deal but the point about not putting all my eggs in one basket is one that I may need to think on.
As for letting; the local agents who I've spoken to at length, say it should get 1000pcm. The deposit I have raised means mortgage repayments will be 760 and the service charge is 125... so I'm covered - BUT the deposit is large! And I am indeed thinking on whether that money could be better placed elsewhere.
What I may do is go ahead and just try to get a bit more hacked off the price once I'm nearing the finish line - (which is what the previous buyer they had lined up did, and the sellers didn't want to play ball) - another few weeks of :doom&gloom: headlines and I may be able to have them knock some more cash off.
The other confession that I suppose I should make is that the parking spot for this new flat is better than the spot I currently use with my place - and I was going to swap the parking spaces so that I get the better spot for my car... but of course, that would be the daftest reason ever to buy a property.
Bottom line is that however bad the market gets; these 'lower value' London properties between 150,000 / 220,000 are never going to drop passed a certain point.. I just can't see it; there'll always be demand for this bracket of property I'm sure (I hope). I see it being the 250,000 mark upwards that will be the worst hit - and I've tried to fly below that radar as best I can so far.
As for letting; the local agents who I've spoken to at length, say it should get 1000pcm. The deposit I have raised means mortgage repayments will be 760 and the service charge is 125... so I'm covered - BUT the deposit is large! And I am indeed thinking on whether that money could be better placed elsewhere.
What I may do is go ahead and just try to get a bit more hacked off the price once I'm nearing the finish line - (which is what the previous buyer they had lined up did, and the sellers didn't want to play ball) - another few weeks of :doom&gloom: headlines and I may be able to have them knock some more cash off.
The other confession that I suppose I should make is that the parking spot for this new flat is better than the spot I currently use with my place - and I was going to swap the parking spaces so that I get the better spot for my car... but of course, that would be the daftest reason ever to buy a property.
Bottom line is that however bad the market gets; these 'lower value' London properties between 150,000 / 220,000 are never going to drop passed a certain point.. I just can't see it; there'll always be demand for this bracket of property I'm sure (I hope). I see it being the 250,000 mark upwards that will be the worst hit - and I've tried to fly below that radar as best I can so far.
If your putting in a "BIG" deposit and still only just covering yourself, what makes it a good deal?
If you think the rental (circa £100/month +ve from your previous post) is good, then how hard would it be to find another deal the same? I guess it wouldn't be that hard using your "big" deposit.
If you think your getting it for a good price/has good growth potential, then is there going to be a similar or better opportunity in a few months? Even the most +ve analysts expect no capital gains for the next 6-12months.
On the other side you should never say no to a good deal.
I'm about to complete on a BTL deal (I'm a small share holder) but it needs so much work and we're putting in a big deposit so we're looking at £200 +ve cashflow/month when its ready. We're not counting on any capital gains this side of 2012 but all the better if they come??
If you think the rental (circa £100/month +ve from your previous post) is good, then how hard would it be to find another deal the same? I guess it wouldn't be that hard using your "big" deposit.
If you think your getting it for a good price/has good growth potential, then is there going to be a similar or better opportunity in a few months? Even the most +ve analysts expect no capital gains for the next 6-12months.
On the other side you should never say no to a good deal.
I'm about to complete on a BTL deal (I'm a small share holder) but it needs so much work and we're putting in a big deposit so we're looking at £200 +ve cashflow/month when its ready. We're not counting on any capital gains this side of 2012 but all the better if they come??
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