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Crashbunny

Advice Needed - House Purchase Imminent!

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I've read everything Andrew Farlow's ever written on houses plus a host of other stuff and I know houses are about to take a massive dive, probably over the next 4/5 years. That's why I STR in 2003 and have been renting ever since quite happily. Thing is, I moved from abroad a year ago and now I'm cosily settled in a house I rent and it's perfect, as is the area - the whole place is like one giant play park with beaches and woods etc.. and, only 30 minutes from work. The house itself everyone who knows me says has me written all over it. The owners (it's their 2nd home/holiday home) will sell it to me for 250K (it was on for £280K a year ago but no-one has even offered since then). It would mean a mortgage that on a 10 year fix would take up just under half my salary but my heart is in this house! I swear, I am as happy as a clam here and have a secure job, as secure as they get these days anyway. I can't even blame having kids or a nagging partner - I have neither.

How big a mistake do you guys think I'm making? There are very few places locally to rent - and anyway, I'd miss the atmosphere here and folk I know. They will almost definitely ask me to leave in the Spring when my tenancy runs out, or I'd keep renting.

Sincere advice would be deeply appreciated.

One other thing - I actually think in my heart the place is a bargain since all the surrounding property's are over 5ooK.

Crashbunny

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if you did the STR thing you have all the equity the market owes you..

you can buy with Karma..

Equity is the key..

Remember.. there is no inflation so do not think that anyone will pay of your mortgage but you.. The next decade looks to be an economic downturn so IR's may change..

Sipps is gone and BTL we are told..

FTB's are at a record low..

So the market does need buyers for all of those overstretched speculators who can't quite cover their cost's with and interest only mortgage..

Man they need you..

Get out there.

buy something...

anything..

£500,0000 average

With no inflation meaning no equity to allow people up the ladder..

borrow 4 times multiples.. hmmnn...

cool.. your neighbours will be all of those people on over £125,000

Thats what it will require when the current "Havent I made a fortune" fraternity get dilluted as the years pass..

soon you will need everyone who buys to have that sort of cash..

It can work

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Its your decision, but if you are living somewhere that you like and you plan to be there for the next ten years or so and you have your STR equity I would say buy it and good luck.

Your post suggests to me that you have already made your mind up. Sounds like you are looking for a settled home and not to make any capital gains. Sounds like you are extraordinarily lucky to be offered it at 50% of the price of the neighbouring properties. Too good to be true?

Buy the place and enjoy it.

Edited by paradox

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The owners (it's their 2nd home/holiday home) will sell it to me for 250K (it was on for £280K a year ago but no-one has even offered since then).

One other thing - I actually think in my heart the place is a bargain since all the surrounding property's are over 5ooK.

You may believe in your heart that the property is worth £500K but the property market does not appear to agree with you - "it was on for £280K a year ago but no-one has even offered since then".

This means that, whatever you and the owners think, the property is overpriced at £280K (within the current market) - how much is it overpriced though, why hasn't anyone made offers on the property? If you live there you must have some idea of what might be putting off potential buyers.

I ask these questions because in order to determine whether £250K is a bargain or not you need to find out what it would sell for on the open market, in other words what someone would be prepared to offer for it.

The other way to find out how overpriced it is would be to go on nethouseprices.com and find out what the owners paid for it. I wouldn't be surprised if you discovered they bought it for £140K or something simply because many people nowadays are pricing in a £100K profit as market value and then trying to make a profit on top of that. This may not apply in your case but its worth finding out.

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Hello

I think you are super brave for postng that you want to buy on here! But for what its worth I think the last couple of points bear careful thought. In addition, to me 50% of your income seems a large amount tp pay on a mortage and you'll have other upkeep you don't have with renting. You also admit yourself that you believe property will take a tumble in the next few years. How would you feel if your property is worth 30% less in a few years and your still shelling out that 50% (sorry just under) from your wages? I guess if it doesn't bother you then maybe you should go ahead but I just can't believe its the only property you'll fall for. There'll always be another....

LL

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if i took a 1 month trip on a cruise liner i would not be able to buy it.

its out of your price range. thats why its so good.

try not to be as picky and find a nice 2 up 2 down terrace in the closest town or city.

(as best you can).

AWOOOOOGA !!!!!

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Are you talking about a 10 year repayment mortgage? If you can afford this on half your salary then you can afford the house in my view, and you will be paying good chunks off the mortgage even in the early years. If you love the house I would go for it.

If its going to take 1/2 your salary for interst only then forget it. Any unforssen financial problem and you are stuffed.

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if you love the house then buy it because you love it not because you think it's a bargain.

best of luck

My sentiments exactly.

Hello

I think you are super brave for postng that you want to buy on here!

Dear lovely lolly,

I hope you had a nice soak in your bath. I think you will find that many people on here want to buy. It is all a question of motive, expectation and timing. Very few posters on this site are committed to renting in principle until the day they drop.

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Sorry Crashb. but, yoo hoo administrator! I can't post a new topic - I changed my password & still comes up with an error, please help!

BTW Bird Flu confirmed in Turkey.

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My sentiments exactly.

Dear lovely lolly,

I hope you had a nice soak in your bath. I think you will find that many people on here want to buy. It is all a question of motive, expectation and timing. Very few posters on this site are committed to renting in principle until the day they drop.

hello, sure, I wasn't advocating renting forever but I guess I do believe it's currently worth waiting and I'm a bit tired of the emotional pull of property, surely we fall in love/get attached to human beings not houses?

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If your STR fund will allow a deposit of around 20% or more then it aint too much of an issue. nearly 50% of your take home on repayment does sound a lot though in my opinion. What about bills on top and maintenance as well as entertainment money and car/travel?

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I've read everything Andrew Farlow's ever written on houses plus a host of other stuff and I know houses are about to take a massive dive, probably over the next 4/5 years. That's why I STR in 2003 and have been renting ever since quite happily. Thing is, I moved from abroad a year ago and now I'm cosily settled in a house I rent and it's perfect, as is the area - the whole place is like one giant play park with beaches and woods etc.. and, only 30 minutes from work. The house itself everyone who knows me says has me written all over it. The owners (it's their 2nd home/holiday home) will sell it to me for 250K (it was on for £280K a year ago but no-one has even offered since then). It would mean a mortgage that on a 10 year fix would take up just under half my salary but my heart is in this house! I swear, I am as happy as a clam here and have a secure job, as secure as they get these days anyway. I can't even blame having kids or a nagging partner - I have neither.

How big a mistake do you guys think I'm making? There are very few places locally to rent - and anyway, I'd miss the atmosphere here and folk I know. They will almost definitely ask me to leave in the Spring when my tenancy runs out, or I'd keep renting.

Sincere advice would be deeply appreciated.

One other thing - I actually think in my heart the place is a bargain since all the surrounding property's are over 5ooK.

Crashbunny

have been renting ever since quite happily. Thing is, I moved from abroad a year ago and now I'm

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Original Poster replies (Crashbunny): I really appreciate everyone's responses and believe me, this is a real post. The thing is, I know prices are about to go down seriously, but I've moved 4 times in the last 2 years and I can't face it again. Someone mentioned the point that has really been playing on my mind - what if I lose £75K/£50k over the next 5 years? I've got a third of the £250K asking price as a deposit but obviously I don't want to lose it.

Someone else mentioned the issue of spending nearly half your salary on a 10-year fix repayment - that it's too much. But, and this is something perhaps this site doesn't take sufficiently into account, I really want to settle down. I know folk will say the head should rule the heart, but what if the crash takes 5-10 years and I've spent those years moving from one rented ding-hole to another? I'm pretty sure I'll be here for 10 years. I want to spend those 10 years being productive, not constantly sourcing broadband in naff areas and losing months of work to the necessities of re-setting up home.

Yes, the house was overvalued at £280K. The reason people haven't made offers even at £250K is that the house is an odd shape and no garden to speak of (which I love) and some damp in one dodgy room. The owners bought it for £160K in 2003, then did a cosmetic job on it. The rent is just over £700 p.month, so the house's true value relative to fundamentals is about £220K, which they'll never sell for for at least another 2 years when the pips will really be starting to sqeak.

I'm being indecisive but this is arguably the biggest financial choice of my life - so all advice from you folk is much appreciated. I'm asking this site because everyone else I talk to has financial blinkers on.

Bubbles are driven by irrationality but the market can stay irrational longer than I can stand being moved around! Talk me out of a mistake if I'm making one, but tell me to jump in if you think I should.

In genuine quandry

Crashbunny

One final detail - surrounding houses range from 290K (2 up 2 down) to over a million. This one at 250K is now priced well (it's 4 bed) relative to other houses for sale around the area. 'Course that won't help if the market tanks.

Crashbunny (oroginal poster)

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Original Poster replies (Crashbunny): I really appreciate everyone's responses and believe me, this is a real post. The thing is, I know prices are about to go down seriously, but I've moved 4 times in the last 2 years and I can't face it again. Someone mentioned the point that has really been playing on my mind - what if I lose £75K/£50k over the next 5 years? I've got a third of the £250K asking price as a deposit but obviously I don't want to lose it.

Someone else mentioned the issue of spending nearly half your salary on a 10-year fix repayment - that it's too much. But, and this is something perhaps this site doesn't take sufficiently into account, I really want to settle down. I know folk will say the head should rule the heart, but what if the crash takes 5-10 years and I've spent those years moving from one rented ding-hole to another? I'm pretty sure I'll be here for 10 years. I want to spend those 10 years being productive, not constantly sourcing broadband in naff areas and losing months of work to the necessities of re-setting up home.

Yes, the house was overvalued at £280K. The reason people haven't made offers even at £250K is that the house is an odd shape and no garden to speak of (which I love) and some damp in one dodgy room. The owners bought it for £160K in 2003, then did a cosmetic job on it. The rent is just over £700 p.month, so the house's true value relative to fundamentals is about £220K, which they'll never sell for for at least another 2 years when the pips will really be starting to sqeak.

I'm being indecisive but this is arguably the biggest financial choice of my life - so all advice from you folk is much appreciated. I'm asking this site because everyone else I talk to has financial blinkers on.

Bubbles are driven by irrationality but the market can stay irrational longer than I can stand being moved around! Talk me out of a mistake if I'm making one, but tell me to jump in if you think I should.

In genuine quandry

Crashbunny

One final detail - surrounding houses range from 290K (2 up 2 down) to over a million. This one at 250K is now priced well (it's 4 bed) relative to other houses for sale around the area. 'Course that won't help if the market tanks.

Crashbunny (oroginal poster)

Have you tried offering them £220K ?? How do you know they won't accept.

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Original Poster replies (Crashbunny): I really appreciate everyone's responses and believe me, this is a real post. The thing is, I know prices are about to go down seriously, but I've moved 4 times in the last 2 years and I can't face it again. Someone mentioned the point that has really been playing on my mind - what if I lose £75K/£50k over the next 5 years? I've got a third of the £250K asking price as a deposit but obviously I don't want to lose it.

Someone else mentioned the issue of spending nearly half your salary on a 10-year fix repayment - that it's too much. But, and this is something perhaps this site doesn't take sufficiently into account, I really want to settle down. I know folk will say the head should rule the heart, but what if the crash takes 5-10 years and I've spent those years moving from one rented ding-hole to another? I'm pretty sure I'll be here for 10 years. I want to spend those 10 years being productive, not constantly sourcing broadband in naff areas and losing months of work to the necessities of re-setting up home.

Yes, the house was overvalued at £280K. The reason people haven't made offers even at £250K is that the house is an odd shape and no garden to speak of (which I love) and some damp in one dodgy room. The owners bought it for £160K in 2003, then did a cosmetic job on it. The rent is just over £700 p.month, so the house's true value relative to fundamentals is about £220K, which they'll never sell for for at least another 2 years when the pips will really be starting to sqeak.

I'm being indecisive but this is arguably the biggest financial choice of my life - so all advice from you folk is much appreciated. I'm asking this site because everyone else I talk to has financial blinkers on.

Bubbles are driven by irrationality but the market can stay irrational longer than I can stand being moved around! Talk me out of a mistake if I'm making one, but tell me to jump in if you think I should.

In genuine quandry

Crashbunny

House with no garden. That knocks it on the head for many buyers even with no children. So restricted market. Damp, again many have a fear of that even though cure is often simple and not too expensive.

Odd shape can't be disguised and is memorable so affects comparisons with other properties.

Are you being seen as an "easy buyer"?

Do they own it or have a mortgage?

If they own it you could do the pay a year's rent in advance to give yourself time.

Or and this is a bit leftfield and others here may know more but what about offering an option to purchase at market value in a years time. You pay say £5k which you lose if you don't buy after the year or is knocked off the price if you do buy. Of course valuing may be the sticking point but currently market value isn't known because it's still for sale.

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I say you should buy it. Full asking price or a bit more, to make sure you don't "miss out".

the boats leaving. You will be forced to live in squalid student digs till you are 80 unless you buy this sh!tehole now. TTRTR has already put an offer on it. The damp room alone can house 16 'City Gents' if 'bunked' properly. Buy it NOW or forever be the focus of sniggering in the pub.

Where do I send my invoice?

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Guest Cletus VanDamme

One final detail - surrounding houses range from 290K (2 up 2 down) to over a million. This one at 250K is now priced well (it's 4 bed) relative to other houses for sale around the area. 'Course that won't help if the market tanks.

Crashbunny (oroginal poster)

OK let's break this down

Positives

------------

Its a 4 bed house for a substantially lower price that a 2-up 2-down

You love the place and so will probably want to stay there for the next 10 years (true?)

You're in a secure job which will allow you to stay there for 10 years, or, if you want to leave your job, you can easily get another one in the nearby area that will pay the mortgage and give you enough to live on(true?)

It's in a highly desirable area (must be if nearby houses are fetching 1million)

Negatives

------------

It's an odd shape and has damp in one room, so the market could be limited if/when you do want to sell

It's likely/possible that the value may drop 30-40% over the next 5 years

There's a recession on the way so you're taking a big risk overstretching yourself now

If you can honestly answer 'yes' to all the positives, I would say buy the place, because if you are planning on staying put then you can ride out the next property downturn, so long as your employment is relatively recession-proof.

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The rent is just over £700 p.month, so the house's true value relative to fundamentals is about £220K

Uh? No way.

£725 x 12 = £8.7k rent per year

A reasonable gross rental yield would be 10%. This would make the house a good investment for a landlord. For your house to yield 10%, the price should be ..... £87k. That's fundamentals for you. Even at a 5% yield (which, given what you said would make it very hard to acheive even positive cashflow) the price should be £174k. I don't know where you get the £220k figure from.

So either you're getting an amazing deal by renting or the price of the house is WAY too high.

Whereabouts in the world is your house, CB? It does make a difference. If you're in the SE, the crash is here already whereas in Scotland/NI, you could still be mid-boom.

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  • 302 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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