dawn Posted October 12, 2007 Share Posted October 12, 2007 I am quite new to this so please bear with me. Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions Quote Link to comment Share on other sites More sharing options...
Lone_Twin Posted October 12, 2007 Share Posted October 12, 2007 I am quite new to this so please bear with me.Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions awooga? . ST Quote Link to comment Share on other sites More sharing options...
£7 Note Posted October 12, 2007 Share Posted October 12, 2007 (edited) Sounds like you are trying to get every last penny you need to cough up cash to get a house to me. I will give it to you straight: Mad. Have you checked area prices over the past 12 months using the postcode for this new place?. Do some research, because I reckon you are about to fall into it neck deep by the looks of things. Edited October 12, 2007 by £7 Note Quote Link to comment Share on other sites More sharing options...
deadman Posted October 12, 2007 Share Posted October 12, 2007 Go for it! Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted October 12, 2007 Share Posted October 12, 2007 (edited) If you have to ask the question then that's an answer in itself. The whole country is talking about house prices dropping. If you think they might, then wait. Here's a simple example of how much better off you might be. Say you have a house worth £100,000 and you want to buy a house worth £200,000, that's £100,000 extra you need to find to buy it. If the market drops ( which it appears to be doing ) by 10% then your house is worth £90,000 and the one you want is worth £180,000, meaning you now only need 90K extra to buy. If the market plummets, say 50%, then your place is worth £50,000 but the one you wanted is worth £100,000, meaning you now only need to find an extra 50K to buy. It's a simplified model but you can get the jist of it. In my opinion dropping house prices is good for this reason. If you believe the prices are dropping then why would you jump in now? Wait till you think they will go up, or at least, stop going down. Or at least make a silly offer on the place you want. Buying a house is like buying a car, most people do it with their heart, but if you dont get the one you want then there will be another one you like/want, just around the corner. So, to answer you question, "Am I Mad?"....Maybe a little. Edited October 12, 2007 by TheCountOfNowhere Quote Link to comment Share on other sites More sharing options...
Disillusioned Posted October 12, 2007 Share Posted October 12, 2007 We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Doesn't your existing property have a garden? Quote Link to comment Share on other sites More sharing options...
Mina Posted October 12, 2007 Share Posted October 12, 2007 Sounds to me like you know deep down that your house won't sell at £115k. Quote Link to comment Share on other sites More sharing options...
starsign Posted October 12, 2007 Share Posted October 12, 2007 We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. how would you feel if the house you bought continued to fall in price? Quote Link to comment Share on other sites More sharing options...
Belfast Boy Posted October 12, 2007 Share Posted October 12, 2007 Even if you don't want to know about the credit crisis, subprime, inter-bank lending and mortage resets... ... just look at what is happening in America, Spain and the Republic of Ireland already. And they have a long way to go yet. Quote Link to comment Share on other sites More sharing options...
babesagainstmachines Posted October 12, 2007 Share Posted October 12, 2007 It's a falling market, and you want to double your exposure to it by owning two properties? Quote Link to comment Share on other sites More sharing options...
Dubbya Posted October 12, 2007 Share Posted October 12, 2007 I am quite new to this so please bear with me.Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions Why not take all the "equity out of it" ie sell it and buy the other house. It's what folks used to do in the olden days I believe Quote Link to comment Share on other sites More sharing options...
Mr Nice Posted October 12, 2007 Share Posted October 12, 2007 I think one of the first things you'd need to do is find out how much rents are currently for the house you want to let. I wouldn't even consider it at this point if the rental income isn't enough to cover the costs of the mortgage, maintenence etc. Then I would get the lowest price you can for the new home. preferably at least %30 off of the peak prices. Rates are very likely to go UP in the mid term even if they do come down a bit in the short term. You ultimately could end up paying a lower house prices if you wait, but higher mortgage costs. OR just sell your current house now, and rent a bit for yourselves. THEN by the house you are looking at once prices have stabilized. Quote Link to comment Share on other sites More sharing options...
Orbital Posted October 12, 2007 Share Posted October 12, 2007 (edited) I am quite new to this so please bear with me.Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions Sell the first one, then buy the second. If you can afford the mortgage comfortably and you want it then go for it. Simple as that really. Holding out for the chance to save some money just seems a bit greedy. We dont like greedy on this site. Well, only when it doesnt relate to BTL. Then greed is good. But seriously, what would you hope to gain from a drop in prices, your place will drop, the new one will drop. As yours is the cheaper you will be better off. But by how much? The thing with deflation is it typically delays us all from making purchases. Why buy now if it will be cheaper later? But how much to you really hope to save? A few 10k? How much of a difference will that really make? What if prices dont drop? At best it will take years and your kids will have grown up. Life happens whilst you make plans. Get on with it imo... Edited October 12, 2007 by Orbital Quote Link to comment Share on other sites More sharing options...
Guest The_Oldie Posted October 12, 2007 Share Posted October 12, 2007 I am quite new to this so please bear with me.Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions Why not sell the one you've got, bank the money and rent a house with a garden for a few years? Quote Link to comment Share on other sites More sharing options...
ae589 Posted October 12, 2007 Share Posted October 12, 2007 We are thinking of switching our mortgage to a BTL, renting it out and buying another family home. Only do this if you are absolutely certain house prices will rise*, otherwise you will have two leveraged depreciating assets. But if this really an opportunity to get the house you love, do it, just go in with open eyes (you could easily be in 20k of negative equity next year). * and event the hardiest bulls are talking about a standstill. Quote Link to comment Share on other sites More sharing options...
A.steve Posted October 12, 2007 Share Posted October 12, 2007 Just do the sums... £185K for a house you like is good value as long as you can afford it. Keeping the old house and renting it out - I doubt that would work out well... but, I suppose you can try it out and see. Don't forget to include depreciation on fixtures and fittings; void periods; letting agency fees (most good tenants prefer to rent through an agency than deal direct.) - and, of course, likely BTL mortgage costs for however long you think it will take you to earn £234K (after tax, after servicing your investment in rental property.) In your position, assuming I was sure I could afford £185K (and if £10K makes that much of a difference to you, you should think long and hard about this) I'd act aggressively - I'd make a conditional offer demanding: 1 - Confirmed exclusivity. 2 - Understanding that the purchase is conditional on the sale of your property for within X% of its market value. Depending upon how desperate you are to buy the better house defines X for your personal situation. I'd talk to mortgage lenders first, of course, the vendor will probably want an agreement in principle from your mortgage lender - if they have any sense. Quote Link to comment Share on other sites More sharing options...
council dweller Posted October 12, 2007 Share Posted October 12, 2007 Are you sure you can retain your current income given that the economy is likely to slide in to recession? House prices and the economy will fall together I think. It's nice having a garden but not nice enough to risk getting yourself deep in debt. Quote Link to comment Share on other sites More sharing options...
AteMoose Posted October 12, 2007 Share Posted October 12, 2007 (edited) as most BTL make a loss at current interest rates (is the mortgage costs more than amount you take in rent), you would be better off selling the house and moving to a bigger house. Why do you want to spend extra subsidizing your tenants? If you sell and buy the bigger house you would have a mortgage of 120k, doesn't sound too bad, how much do you earn? Edited October 12, 2007 by moosetea Quote Link to comment Share on other sites More sharing options...
dawn Posted October 12, 2007 Author Share Posted October 12, 2007 as most BTL make a loss at current interest rates (is the mortgage costs more than amount you take in rent), you would be better off selling the house and moving to a bigger house. Why do you want to spend extra subsidizing your tenants?If you sell and buy the bigger house you would have a mortgage of 120k, doesn't sound too bad, how much do you earn? Well i've made an offer of £25k less and they've rejected it. Said they wanted asking price!!!! haha told them given we are the only people that have viewd the property in 4 months- thats unlikely!! Oh well will stick to living in tiny shoe box and keep fingers crossed for a fall! Quote Link to comment Share on other sites More sharing options...
Mr Nice Posted October 12, 2007 Share Posted October 12, 2007 Well i've made an offer of £25k less and they've rejected it. Said they wanted asking price!!!! haha told them given we are the only people that have viewd the property in 4 months- thats unlikely!!Oh well will stick to living in tiny shoe box and keep fingers crossed for a fall! It really sounds like two seperate operations anyway. !. moving to a bigger home - if you can afford it and get a good price reduction, why not? 2. BTL'ing your existing home - that is the riskiest part, and I doubt few here would recommend it. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted October 12, 2007 Share Posted October 12, 2007 (edited) Well done. 25K under asking was a good offer in the current market. Maybe they will panic and accept it by Monday. I'd have gone in with a 35K under asking to see how desperate they were, thats only 18% and maybe haggled up to 25K. Then not bought the place. Maybe if someone else offers 35K under asking next week they might think twice about your generous offer.... Edited October 12, 2007 by TheCountOfNowhere Quote Link to comment Share on other sites More sharing options...
DabHand Posted October 12, 2007 Share Posted October 12, 2007 Get a friend to do so Quote Link to comment Share on other sites More sharing options...
peahead Posted October 12, 2007 Share Posted October 12, 2007 1.) Sell yours first - market is rubbish - might take some time NEXT 2.) Agree to buy new one - pull out at last minute, prior to exchange and offer to rent at ridiculously low rent NEXT 3.) Rent for at least 2 years and buy at rock bottom Then again, if nobody else has touched it, could be overpriced for starters and could be a sod to sell should you ever need to. p.s. I wouldn't do the above... I'm far too nice Quote Link to comment Share on other sites More sharing options...
A.steve Posted October 12, 2007 Share Posted October 12, 2007 Get a friend to do so It is an interesting strategy... not sure how ethical, or legal (if the offer never intends to be met) - but it might work. I found a place at £250K - and I'd buy it at £200... assuming it is anything like the place advertised. There is similar (though very slightly less desirable) house nearby - that's been on the market for £230K for at least a couple of months. I'm expecting prices in the area to fall though over the next 6 months... so I'm probably best to just wait and see. Quote Link to comment Share on other sites More sharing options...
Benedict Posted October 12, 2007 Share Posted October 12, 2007 I am quite new to this so please bear with me.Am i crazy to be considering putting an offer in on ahouse? Our situation is this: We are thinking of switching our mortgage to a BTL, renting it out and buying another family home.We have a very small mortgage £49k- current market value of £115000?? We are thinking of taking some equity out of this and putting it down on a deposit for another property. We have seen a house we like- starterd off at £195000, recently droppped to £185000. We know he has already bought another house and must be getting quite pressed to get rid of this house. We are scared of making the wrong decision at the wrng time BUT i desperately want a garden for my little toddler to play in next summer and we love the house!!! Are we stupid to be putting an offer in in the current climate?? Please give me youre opinions Whatever the analysis of the new purchase, why on earth keep your existing place? If you're unsure about it then at least hedge your bets a bit by selling your current place, otherwise you're doubly exposed. Quote Link to comment Share on other sites More sharing options...
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