UK property market

TheLedge

right! for any of you who own a home or have investment property(ies!) I need you to tell me if my logic is right here.

i previously posted about having 10k to invest... :rolleyes:

thinking of buying a house in the UK(either birmingham or manchester), where I currently reside. I'm renting but could buy a house for 100-130k stg. If i got an interest only mortgage for 2 yrs with alliance & leicester my repayments would be 330 odd a month. If i made a few improvements to the property and rented a room in it while i'm at it(about 200pm in rental income) I could then sell it on at a profit(not necessarily a large one) provided housing market prices remain reasonably stable and interest rates dont go up big style.

So i'd sell it on in 2 yrs, hopefully make a few quid. Is my logic ok? I'm a total newbie!

I'm a first time Irish buyer, would this affect my first time buyer status back home?

Are there many pitfalls i havent considered?

Cheers guys!

Jim Kernsey

There are no guarantees with property, the old saying "safe as houses" doesn't always ring true. That said I think it’s a good idea.

Another similar idea lies with property price speculation, If you buy a property from plans (foundations not even started), you only have to put a deposit down, about 5K, this deposit is often fully refundable.

Wait for 6 -9 months until the builder asks for the next installment, about 10% of the cost price. At this point take check.

If house prices have gone up as they are predicted to, either resell the property or pay the 10 % to hold out for a greater return.

If house prices are stagnant or have gone down cancel the deposit and lose nothing.

It’s important that prices have to go up enough to cover solicitor’s bills and estate agent fees.

You have to speculate to accumulate!

TheLedge

Cheers for the advice!

Even if house prices were to fall, I'd have been paying rent anyway, so this would offset any loss in property value, right?

Property speculation is something that really interests me!

holmsey

Yea its a good idea alright

But be careful as estate agents fees can run at around 2% and solicitors 2K. Shop around first. Location is most important.

madramor

holmsey wrote:

Yea its a good idea alright
But be careful as estate agents fees can run at around 2% and solicitors 2K. Shop around first. Location is most important.

its is a bad idea

1:
you are getting an interest only mortgage, so you are only paying
the interest on the loan not the capitical.
therefore you need the price of the property to increase inorder
to pay of the loan and cover costs.

2:

TheLedge wrote:

Even if house prices were to fall, I'd have been paying rent anyway, so this would offset any loss in property value, right?

if you buy the house you will be paying,
interest only mortgage
house running costs
house rates
mortgage protection
house repairs
even if you get a lodger it will still be the same as paying your rent now

3:
the only way you will make any money is if the house price increases
enough to cover all your costs

Cost Estimates
House Cost:120,000
Mortgage Cost:7,920(2 years)
Buying Costs:2,000
Selling Costs:3,000
Rent from Lodger:4,800(2 years)
Maintenance/Rates/Running/Updating:4,000(over the 2 years)

so if you buy a house for 120,000 and sell it in 2 years time it will need
to increase by
7,920+2,000+3,000+4,000-4,800=12,120

12,120-4,800(the rent you would have payed in renting)=7320

so the house would have to increase by 6.1% over the 2 years
before you make a penny

(no money set aside for as unforseen problem, like if you buy a dodgy house)

4:
interest rates in UK will be going up again
+
house market overall is going down

5:
property has had a great run lately, but should always be
seen as a long term investment

TheLedge

Thanks BigDog for your calculations. Its great to see the flipside. Buying costs, ans esp. selling cost are something i hadnt seriously considered.

So do you think it would be a better idea to put the money i am accruing into savings and buy a house in Galway in 2 years? Thats my long term goal when i've done my travelling bit you see. The market in Galway at the moment is similar to Dublin. It's next to impossible to get on the ladder without the help of a parental deposit!

Cheers for your advice again.

stiofanD

TheLedge wrote:

I'm a first time Irish buyer, would this affect my first time buyer status back home?

I'd be careful here. A mate of mine used to live in London where he owned a flat. When he moved back to Ireland and went to buy a house here, he was told by his solicitor that he was no longer a first time buyer. Apparently to get 'first-time buyer' status, it must be your first time to buy ANY property, not just Irish property.

paulocon

Hi all,

Surely there are other costs such as Stamp Duty and CGT to be included in these estimations...