ed the dead

Just wondering really if anyone has an experiance of doing this. Story goes.... my parents are looking to move a abroad for about 5 years which means that me and the other half can live in their house while they are away.... for a much reduced rent .

We were thinking about buying somewhere of our own in the relatively near future anyway (when the housing market goes down, which I think it will).

So, the plan is.... live in parents house, wait 'till property prices go down a bit, buy a cheepish flat and rent it out for 5 years while living in parents house, when the olds come back sell the flat and use the proceeds of the sale + the accumulated profit from the rent to buy our own place.

Anyone else done something simular? Does it sound realistic? The way interest rates are going at the moment I think mortgages are a pretty good buy and if property prices fall in the near future then go up again we'll be laughing

edzt

it should work .you will need 20-30% deposit
do the place up and any work-costs etc. can be set against tax.use an agent they charge 10-15 % of the rent you will have to give the tenants 6 months notice etc.
Bristol &West are good
ed

polarbearit

it all depends on house prices, I personally feel that currently rental income in the south of England is not high enough to justify buying to let, unless there is a 20% + rise in rentally income it really doesn't make that much sense...

good though if prices drop before you buy!

Wouldn't hold my breath though. My parents do letting on a medium - large scale in the NW and though it returns ok money, it is not as good as it initially looks and they tend to spend a lot of time decorating/cleaning/tidying properties inbetween tenants. None of them leave their houses in a state their ever happy with!

Also Agents have been a nightmare, you shouldn't have to pay more than 10% for a managed service, but you really can expect to be messed around! They have yet to find an agent that they are happy with and my mum has had to study property law and take people (agents and tenants) inorder to get money owed.

Mail me if you want more info, I can tell you about loans and real costs etc!

Jon

mook

Ed, my brother makes a very good income from small scale property development, which might well give you a better return for your investment, but does involve a lot more effort and organisation on your part.

He buys older/unique type properties that are pretty much run down but in good areas and spends a reasonable amount of money sorting out structural upgrades and providing good decoration. For example, he purchased an old chapel for £30k, spent £50k and a year sorting it out then sold it for £235k! This is based in Cornwall mind so it's all a bit cheaper all round. He's recently bought another chapel and a mill as his next projects

I would imagine you could get mortgages these days designed specially for that purpose, it's just a case of do you want the work of organising a 'build' and keeping tabs on builders, etc. from start to finish.

hth

polarbearit

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by mook:
<B>Ed, my brother makes a very good income from small scale property development, which might well give you a better return for your investment, but does involve a lot more effort and organisation on your part.

He buys older/unique type properties that are pretty much run down but in good areas and spends a reasonable amount of money sorting out structural upgrades and providing good decoration. For example, he purchased an old chapel for £30k, spent £50k and a year sorting it out then sold it for £235k! This is based in Cornwall mind so it's all a bit cheaper all round. He's recently bought another chapel and a mill as his next projects

I would imagine you could get mortgages these days designed specially for that purpose, it's just a case of do you want the work of organising a 'build' and keeping tabs on builders, etc. from start to finish.

hth [/quote]

I definately agree there, I am half way through restoring my house (4 bed victorian job) which cost me 60% of what a good one would when I bought it last year. Spent 5k so far and don't think I'll spend more than about £3k more finishing it, which amounts to around 10% of the cost of the house, and in the time since I bought it it has gone up by the same amount or more, so definately a better investment than renting! Again Banks like big deposits on houses in bad condition, but usually if you only have one you stand a good chance of being able to negociate with them, I did mine with a 10% deposit, which meant I could get a good rate and no big charges.

Jon

jon hill

<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:<HR>Originally posted by ed the dead:
<B>

(when the housing market goes down, which I think it will).
[/quote]

mmm... this is the big one. But why should they go down ? Mortgages are at their lowest for a thousand years, so the purchase price is high but servicing the loan is cheap - the result is that you just have to save longer and harder for the deposit; a 5 year fixed with insurance is affordable - which gives security and the problems of ten years ago should not resurface; many affluent older folk are sticking cash into property as a punt coz the stockmarket isnt given the returns it once did; couple that with (relativley, compared to europe) low stamp duty and no capital gains (i know its not that simple) on property it still looks good; demographic factors - more single people, older singles, more folk wanting to own homes.

There may be pressure at the top end with the investment bankers loosing their jobs, but at the realistic end of the market i'm not so sure.

Everything I've been reading is saying that the growth will slow dramatically - but that is very very different to saying that prices will come down.

(and yes, tomorrow i'll be arguing this the other way.... )

ed the dead

Thanks for the comments guys! We are only thinking of doing it on a small scale i.e. buying 1 studio flat our finances aren't huge, as long as we make a bit of a profit on the rent and enough to top up our deposit when we sell that'll do us

ed the dead

Good points. My thinking is that the type of property we are looking to buy to let(studio/small & cheap one bed) will have been brought by young people when the interest rates are low. If the interest rates go back up again I think many people will become unstuck and find they can no longer afford the increased re-payments. This should mean a fair few repossessed flats on the market, for lower prices.

Of course, it's all speculation anyway, the way things are going at the moment we could all get nuked tomorrow