Housing market your opinions?

adam1

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Ok we know the housing market isn't gonna crash...but anyone thought of investing spare dough into property....rather than the beloved motor.

Well I've got cash tied in the car which i have been advised by many people to put it into a house which might one day come useful for the little brats.

I put an offer on a house and it was accepted. Now I'm having second thoughts...It would mean i'd have to sell the car and keep the family car. The car itself would raise 22K which would go towards the 40K deposit. The house is around 150K. Plan to let it out for around £550 month. Using the best calculators out there I will be just breaking even with effectively zero profit or a loss, since the expenses will exceed the rent(if i manage to let it out) The house needs central heating, new kitchen and a eventually a drive for off road parking. Its in the suburbs. I like the house..its spacious but we wouldn';t live in it since its only 3 bedrooms...but one day it may be useful.

I'm I mad taking a risk of falling house prices for the next few years and zero or negative yields. However i can meet the payments even if i can't let it out.

However the return of investment over 10 years...if house prices say double every 7 years is more attractive....

Whats your thoughts....big decision.....
 

Dieselman

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Car values generally go one way and house values the other.

I think prices will new be steady for a while then will gradually rise again.

Bricks and mortar are still a good investment.
 

Aletank

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There's lots of people buying extra property at the moment with the intension of renting out. So there's a flood of properties on the rental market, which means its getting harder and harder to find tennant's and rents are getting lower with more and more properties with no tennant's.
I know my neighbours want to let their house out to allow them to try Australia out, they had it up for £700 a month but have had no interest and now have it up for £650 a month but still no interest so far!
 
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adam1

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I suppose it a lot will depend on the local rental market. Some people get serious into the buy to let market and this is what floods the rental market.

However I have just one house and this is very close to where i live and its more a case of i may need the house for say my retirement when i can downsize.

Lower rents may mean zero profits and even big losses. My worst case scenario is paying 5.5K in interest alone without any income(ie empty for 12 months).
The house needs a lot of work say 10K plus and i won;t be able to sell in less than 3-5 years due to market stagnating and 5 year fixed deal.

My purchase decision is guided by the desire to buy another house so if my children can't afford a new home they can have somewhere to start until they can save their own deposit and of course my retirement....will needs less rooms..it will be ideal for both of us.


Not sure if its the right decision.....I'm assuming many people are renting due to the fact that houses are expensive....but if they come down those same people will be buying.....thats the risk....or is it?
 

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there are several websites out there that give graphs of house prices over the past 6/12/24/36 months according to postcode - worth having a look and checking the local trend.

a 'crash' is a loss of 5% on the price of the house - whats that - 7 grand? nothing in the big scheme of things if you are looking at a 10 yr investment on 150K.. with a potential 2 - 10% growth the rest of the time (being pessimistic)

my own house - bought for 330K in may last year, is now worth 400ish (next door is selling similar for 410) - 21% in less than a year - in a 'slowdown' period - but then im talking southeast prices ;) (yeah - its a 1 bed maisonette :p )
 
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adam1

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Well if thats the case then it not all bad...i thought a crash which we all hear about was 20% loss.... 5-10% would not be that drastic....in real terms i have lost 6-7K in the last year on my car.

Like everyone else i have gained on my current home ... bought aug2003 and it has gained 110K in equity.
But the picture now is different...houses may stagnate for years until earnings catch up or first time buyers can afford them.
 

Steve Chafer

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Adam1

I know your situation and I was there myself some years ago, now have a little bit of property I rent out.

Two things I was told back then stand out:

"don't wait to buy real estate, buy real estate and wait"

and pehaps the best on given to me by and Estates Agent,
"if it make any kind of profit on 10 months rent per year it's a deal.

would suggest: don't fall in love with the house, central heating is good, a MODEST kitchen is OK if it really does need replacing and all bathrooms should be white , all walls should be magnolia to start with, its easy to then say "feel free to make it your own and paint it any colour you like" the next coat of Magnolia will was away all sins of taste.

Look after you tennants : answer any telephone messages promtly, do remember their birthdays and at Xmas a slab of lager and some wine is a good gesture.

find yourself a decent plumber and Electricial and look after them well !

Steve
 
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guydewdney

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Steve Chafer said:
would suggest: don't fall in love with the house, central heating is good, a MODEST kitchen is OK if it really does need replacing and all bathrooms should be white , all walls should be magnolia to start with, its easy to then say "feel free to make it your own and paint it any colour you like" the next coat of Magnolia will was away all sins of taste.

Look after you tennants : answer any telephone messages promtly, do remember their birthdays and at Xmas a slab of lager and some wine is a good gesture.

find yourself a decent plumber and Electricial and look after them well !

Steve

couldnt agree more - good tennants are hard to find

{thread stealing} - i have a shared house in slough thats in need of another tennant - anyone know of a semi-professional single person looking for nice shared accom in sluff?
 

GrahamC230K

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guydewdney said:
{thread stealing} - i have a shared house in slough thats in need of another tennant - anyone know of a semi-professional single person looking for nice shared accom in sluff?

I will let you know how my application for a job in Slough goes then!!
 
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adam1

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The problem is Steve, I've already fallen in love..with it....well including my wife.
She said if we hadn't bought our house 18 months ago she would have liked to have lived there, had it an extra bedroom for the kids of course.

The house needs a lot of modernisation..its a probably 10-15 yrs older than ours (ours was biult in the 70s?). The fires are all electric, no central heating,no bath but a non-white shower/sit up bath for disabled person....not sure if i should replace. It has uPVC which is a breath of fresh air....but maybe needs re-wiring. The kitchen has non-fitted utilities and dated fittings...BUT it is a dining kitchen thats what's won the wife over..ours isn't. The 2 reception rooms are massive for a SEMI. Lounge is 18f by 15ft and DRoom 13x12. The size appeals to us and since it needs modernisation it is priced accordingly. Whether the spaciousness factor reflects in the rental value..Im not sure but i would prefer to live there if it had a decent central heating system and modern kitchen and a drive..which it lacks...how important is that for renting...is it a must.

Not sure what the survey would bring up though.....
 

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prices are high at the moment, the market is not moving,, their is a flood of 3 and 4 bed props and nothing is happening face it ....150k is out of reach of the majority of people..and most would struggle for 110k....unless its a 30 year mortgage or more .. or some deal which will tide them over for a couple of years the prices will begin to fall as estate agent revalue houses or start to price them up to 10 grand less than the middle of last year I feel sorry for the buyers of the last two years as they will find them selves in negative equity ...its all going to happen again...agents will feel the pinch sooner than expected and that's what will bring the prices down no sale no commission as for being a landlord not for me....my moneys under the bed..............the equity is means nothing its only in the banks favour my house is worth £? means nowt till its sold .... a case of counting chickens before they hatch
 
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Adam1 you do not look at investment properties as if you would want to live there, you will loose! You should look on an investment property to see how much revenue it could generate. Two story traditional house converted to two one bedroom flats will produce more revenue than one three or four bedroomed house. If you need to generate income from your investment make it work, or sell the car and stick the money in a building society. If you don't make money, and you said in your earlier post that you would lose money, forget it. My opinion
 

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but geoff2 - in my experiance you get a better quality of tennant in a house / decent big apartment etc rather than flats. yes you are right - two flats will make more money - but i assume that adam1 has a full time job - the last thing he needs is peeps phoning him up at 10pm complaining the hoover is broke - when its just full... (I have had this)... the 'house' tennant is generally a family / couple of professionals who will care for the property better.. rather than the two bachelors having partys all night...
 

Steve Chafer

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the average stay for residents in a flat is 13 months, the average stay for families renting a house is a little over 2 years,

2 bed flats with a little parking are best

2-3 bed houses are best (4+bedrooms are active ONLY in a very thin market, even in the south east where I live they are NOT worthwhile. except in London)


guy and Geoff are both right in a way

ITS WORTH REPEATING: DO NOT FALL IN LOVE WITH THE PROPERTY - ITS A TOOL FOR FUTURE BENEFIT THATS ALL !!!!

Dont forget to enjoy doing it though ! in the game of life it's later than you think.

Am I a know it all? by no means but I have done every last one of these mistakes all to my cost !
Steve
 

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Steve's adivce is good with which i agree, I'm a prooperty developer myself and would recommend you put money into property. As for the rental market every area is different, get to know your local estate agents and find out what the demand is for your type of property in the area, how many people do they have on their books waiting for your type of property?. I think DEMAND is key when it comes to rental's. Interms of long term gain, house price's will ALWAYS go UP! they may have there low/static times through out any given year but generally the trend is always up long term. Well think about it...................How many properties do you know of that say 10 years ago was more EXPENSIVE than it is know!!! :)
 
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adam1

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Thanks for the good advise guys.

Geoff2 -- I could sell the car and put the cash into a building soceity account earning me max £2200 per year for 40K. However this will be taxed at 40% so will only make 1200-1300 per year. Return on investment is 3.3%.

The house will cost 5.59% interest on 100K mortgage. thats £5590.
If i can get rent for 10 months i will BREAK even.
Would it make sense for me to to pay off this loan in 10 years and thus reduce my interest liability but increase my 40% tax liability on the income.

I may be in love with the house but will only Sort the kitchen and central heating for now since it may need replacing few years down the line.

The fortunate thing is it will cost me max £1000 aquistion costs (legal/survey etc)and 3-4K development costs for kitchen and central heating.

If i then market it straight away the house will be worth at least 160K( thats 5K profit) not that i will unless things get tight.

The ONLY BIG question is I'm I up to it....I've never done it before and don't have the time and the skill( ie DIY) to do some easy jobs myself. I have a big time trying to get things fixed at home....so it will cost me to get people in.

But i want to have a go.......What appealed to me about b GAS IS THEY HAVE CENTRAL heating cover, plumbing, electrical cover even on rental properties so that will help although it may cost a bit.

It is a bit of a grey area for me...but having 40-50K sat in a bank is not very ambitious.
 

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Hi Adam1,
There are a frightening amount of 'IFs' in your statements. Having a large amount of capital to invest can be a worry which sounds a contradiction.

Have you looked at any local properties that are available for renting just to give you some idea of what the standard is? I would always be terrified of the tenant disappearing or trashing the property.

Cars are a good way of spending money, but certainly not a good way of making it.

Financial advisors and banks will take your money off you before you have time to blink, and then after a few years come out with the, ""We did say that your investement might go down, instead of up sir"".

While you are thinking of what to do, I would check the on-line banks, building societies etc. and check their interest rates. The returns are quite attractive and at least the money is working.

Both my bank manager and financial advisor laugh at me because I have premium bonds, but over the last twelve months they have averaged double the recommended pay-out. (Perhaps I ought to cash them and change the numbers ;) ) Both the banks investments and the financial advisors investments are only now starting to 'make money'.

Good luck with your decision,
John
 
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adam1

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Thanks John for those comments.

The property is in the area i live. I spoke to 2-3 estate agents and they say a 2 bed townhouse can be let for 300- 400/month. A 3 bed town house with ensuite and modern fittings can be let for £525/month. The house i describe can be let for 500-600 quid depending on how well i fit it out or make a mess of it. They tell me that there are lots of properties to let in the area but also that presently a lot of people are renting and not buying(due to high prices) but that is bound to change once house prices stay level for a while and earnings catch up. the interest rates will probably stay level for a few months until after May i reckon. The thing is the rental chaps say how easy it is to let...but the true picture must be something else.....


The house does need work b4 i can let it out, but i need to sort that b4 summer is over otherwise it will be empty all year.

Would it make financial sense to invest in property even if that property was empty for long periods but you could easily meet the mortgage payments in the long term. I mean i payed 459/month for 3 years on a car loan without problems and will probabaly pay something similar if i buy another.....would it be wise to pay that on a interest only mortgage on a house instead even though you make no real money........... The bonds/dep accounts appeal to me but it is a bit boring......less risk but not exciting.....i have been saving like that for 15 years hence no mortgage.
 

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adam1 said:
Would it make financial sense to invest in property even if that property was empty for long periods but you could easily meet the mortgage payments in the long term.

I am not the ideal person to ask because I am loosing that 'risk factor'. An empty house will be a major worry from both vandals and squatters. When our previous house was empty for an extended period I had to inform the insurance company and up went the premiums. The house also got very cold and had that horrible empty feeling.

I used to love watching my investments going up in value, but these last few years have managed to remove that grin from my face.

The property we now own like everyone else's has now over trebled in value and is worth crazy money, but will this carry on? (I think so)

If you own a £25000 and it doubles in value then it is £500,000, so the more valuable your property the more it is worth.

Are you really happy with your own house? Have you considered moving?

Renting out properties is a risk and I agree with those that have stated just how important a good tenant is. Do you have a hospital nearby that perhaps could offer favourable rental terms?

Good luck though with your decision,
John
 

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