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First Time Buyer Advice Sought

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Hi everyone. First time post on this forum.

I am a prospective first time buyer and seeking some advice on whether this is a good time to buy or continue renting.

My situation is that i am currently renting a 4 bedroom house in Tyrone for £115 per week. However, i have recently been offered the house to buy from my landlord for £110,000 although i am sure i could get it for a bit less.

I have the cash to buy outright without the need for any mortgage. So basically, i would be getting a rental yield on the house of about 5.5% ( the rent i could save if i owened the property)

At the moment my 100 k is in the bank earning just under 3% gross or £2,400 per year net.

If i bought the house i would be paying out say 100k and getting £5,700 gross this year in rental savings.

The worry i have is the capital value of the house. Are things likely to get worse for house prices over the next 5 years as that is the period i am looking at as after then i would probably wish to move house.

In terms of my situation would would people suggest i should do bearing in mind if i bought the house i would like to sell it on 5 years time.

Thank you for reading and i look forward to your replies.

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If you are going to move in 5 years then I think buying is not such a good idea, have you budgeted for the additional costs of ownership, rates, buying, selling, updates, repairs?

If you are doing this as an investment then it should be you day job, if its just a home then you need to think of it as a cost. That cost could be the loss in value over the 5 years or it could be your rent. If its increasing in value then buying is always better and thats what got us where we are today, with over priced houses because banks didn't see any risk, but it is more likely to decrease IMO. Say it decreased by 40% that would be £44,000 over 5 years, obviously renting is much cheaper then and you won't have lost half of your savings.

However if its just a home then the value change doesn't matter that much, this is why I think 5 years is too short to be buying a house for, and certainly to approach it as an investment is wrong unless you are an expert. If you need to be flexible / portable then renting is for you, it is also the lower risk option for non-experts.

Edited by Ride_on

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Hi guys, sorry i could not reply sooner but as a new member i had a little bit of trouble signing in.

Thank you for the kind welcome to the site and thank you even more for taking the time to reply with your advice. I should say my post was probably a little unclear. I am not looking at buying a house simply as an investment. I only mentioned such things as yields, capital prospects and rent as these are the things i need to weigh up together with current interest rates on my savings as i am a cash buyer and will not be requiring a mortgage.

The biggest uncertainty i am finding at the moment is not the prospect of house prices falling, as i think they will. I would hope to factor any likely downside in capital value of any house in my offer. The biggest problem i have is how do you put a value on a house in the northern ireland market which seems distinct from other regions because of the crazy boom here and the fact that many sellers seem to be hanging onto illusionary past high prices.

I saw a thread about rateable values of houses here on another site. I never knew such a thing existed but after looking at most of the houses on local estate agents websites ( probably over 150 houses) and comparing them with 2005 rateable values i was really surprised what i found.

I know 2005 rateable values are only valueable in giving a general guide to house prices 5 years ago it was not so much the fact that prices today were far higher but most house prices were not valued today at the same factor of those past values. Two houses a few doors from each other had both rateable values of 60k but today one seller is looking 95k while the other is asking 145k. They are the same house types.

It seems a lot of sellers need to wise up and get real about fair values before buyers can get back in the market.

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I checked about 100 local house prices against their rateable values which although was 5 years ago seems a good starting point for todays prices.

Some folk may argue todays prices should be a bit higher or a bit lower than the 2005 rateable values which is fair enough but thats more a question about outlook. However, what you would expect is that those houses valued at rateable values in 2005 should all have increased or decreased by the same multiple factor.

Yet, out of 100 house i checked over 90 were valued more in multiple factors ranging from 25% to over 100%.

Only one house had a lower present value than rateable value. Coincidentally it was a house i have viewed. It was rated at 300k in 2005 but today is on for 265k with the estate agent making it clear that a lower offer would be accepted. It was previuously on for 375 18 months ago the property having been bought at peak times by a developer for well over that. I loved the house but things changed when i was told the developer only bought the property in the first place as he needed to taper a small part of the garden for a very big private development site to the rear of the property, which although will not go ahead soon due to the present climate will be built upon at some time.

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Thank you Doccyboy for your input and useful hints. I like to think i have a good grasp of economics but dont mind admitting i am very inexperienced when it comes to buying a house. Your help is much appreciated.

The house i mentioned was actually my ideal house. To be fair to the estate agent he was very open and honest about the side issues and recent history of the house. Basically the developer needed to buy the property for the sole intention of access for the big development site he had acquired behind the property. It was on a main road and he needed a tapered access point for his other development. This meant taking away a small part of the grounds to the front of the house i viewed. To be honest that did not detract very much from the overall property. It was more the size of the future development.

The house itself still is a real bobby dazzler. http://www.stanleybestestateagents.co.uk/50-moneymore-road-cookstown/2280

I would be interested what you think of it. In a better location set back from a main road and without any concerns about the future planned development i would have bought it in a second although under those circumstances it might have been outside my budget.

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The biggest problem i have is how do you put a value on a house in the northern ireland market

The value is arrived at by people buying and selling and negotiating on price. There is no other way, we can have opinions and historical averages but at the end of the day it is negotiation that does it. Houses sales, however, are depressed generally because buyers are not prepared or able to pay anywhere near the prices sellers are asking, obviously there are exceptions with some people with cash or BOMAD deposits (bank of mum and dad) able to buy.

Generally sellers will not drop much more than 10% below the asking value, so you simply have to wait for a decent sale price to get good VFM. Don't forget to budget for updates/renovation, there are many on at below DCV but need alot of work, these don't really represent any better VFM than the more expensive ones in better condition.

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I bought last year, a 3 bedroom house in an-ok-but-not-great area for £45k last year. Being a cash buyer (especially if you have 100k) means that you definitely have a trump card in any negotiations. For a bank, or desperate seller, it might even mean getting 10-15% off the purchase price.

Also, I would look at whether it's cheaper to buy or rent. Let's assume you can get this place for £100k. Then let's then say you get a mortgage of £92k (assume 8% deposit) and you take out a safe 25 year mortgage at a rate of 4%. Looking at a mortgage calculator http://www.drcalculator.com/mortgage/ your repayments will be £485 a month. Now considering you're already paying £115 a week, it actually looks like it's slightly cheap for you to buy, rather than rent.

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I bought last year, a 3 bedroom house in an-ok-but-not-great area for £45k last year. Being a cash buyer (especially if you have 100k) means that you definitely have a trump card in any negotiations. For a bank, or desperate seller, it might even mean getting 10-15% off the purchase price.

Also, I would look at whether it's cheaper to buy or rent. Let's assume you can get this place for £100k. Then let's then say you get a mortgage of £92k (assume 8% deposit) and you take out a safe 25 year mortgage at a rate of 4%. Looking at a mortgage calculator http://www.drcalculator.com/mortgage/ your repayments will be £485 a month. Now considering you're already paying £115 a week, it actually looks like it's slightly cheap for you to buy, rather than rent.

not if you figure in rates which the landlord probably pays

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not if you figure in rates which the landlord probably pays

And not if your special introductory teaser rate ends and you go onto a normal variable rate.

And not if you factor in other LL responsibilities.

And not if you factor in the deposit

And not if the NIHE stop supporting rents for the bottom end with their current policies

Its nearly always cheaper to buy in the very long run, but that length of time has been getting longer and longer, if you look at more expensive properties, rents are about 1/3 of mortgage cost, because they are not supported by NIHE. It is truely representative of what people here can afford.

Cash purchases/no chain do indeed give you an advantage in negotiations, but sellers will still mostly not budge much. You will have to be a very good negotiator to get 15% off, and even then only a few sellers will accept that, and most 'feel' they 'need' a certain figure. This is the risk factor in buying, you may not be able to sell when you want to if you paid over the odds. Renting is a much lower risk, and its not set by the LL's mortgage its set by the market.

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And not if your special introductory teaser rate ends and you go onto a normal variable rate.

And not if you factor in other LL responsibilities.

And not if you factor in the deposit

And not if the NIHE stop supporting rents for the bottom end with their current policies

Its nearly always cheaper to buy in the very long run, but that length of time has been getting longer and longer, if you look at more expensive properties, rents are about 1/3 of mortgage cost, because they are not supported by NIHE. It is truely representative of what people here can afford.

Cash purchases/no chain do indeed give you an advantage in negotiations, but sellers will still mostly not budge much. You will have to be a very good negotiator to get 15% off, and even then only a few sellers will accept that, and most 'feel' they 'need' a certain figure. This is the risk factor in buying, you may not be able to sell when you want to if you paid over the odds. Renting is a much lower risk, and its not set by the LL's mortgage its set by the market.

Solicitor’s fees.

Estate agent fees.

Mortgage setup costs.

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It seems a lot of sellers need to wise up and get real about fair values before buyers can get back in the market.

I couldn't agree more. You could also include some Estate Agents in that bracket. I sold my house recently at what I would call a more realistic price. When I say realistic I mean a price that gets viewers/potential buyers through the door in my area. This was valued by 3 separate estate agents with 2 of them giving a valuation within £5k of each other - to be fair these valuations seemed ok. The 3rd guy was unrealistic, you know the type that talks like ' I could sell your house for 1 million dollars and I'll relocate you to the moon'.

Unfortunately these type of estate agents sell themselves to home sellers, who buy into the hype and then willingly hand over £200-£300 of an initial charge to eagerly await the stampede of buyers through the door ... which doesn't then come.

I think I have done well in my house sale ... but only because I think the prices are coming down. By how much ... who knows. I wish I had a crystal ball because it would make life a lot easier for me lol! I plan to rent for the next year or so and my idea is to buy another property for long term ownership when I am happy that the market has settled. House prices could rise ... but given all the many different variables to consider such as job cuts, spending squeeze, interest rate rises that seems ever more unlikely.

Its only my opinion but I would recommend renting for the short term ... I also think that you could prob negotiate towards getting a reduced rent as well.

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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