£50,000 to buy first house / South Wales / Very unsure how to proceed

Discussion in 'General Property Investment Discussion' started by Spetznaaz, Aug 22, 2017.

  1. Spetznaaz

    Spetznaaz New Member

    Hello,

    Just to pre-warn people this is likely to be very long as i have tendency to fail at being concise and ramble on.


    I hope i have come to the right place - There doesn't seem to be too many active forums out there for this.

    Bit of background. I have wanted to invest in property all my life - Buy to renovate and sell and buy to let. Suffice to say it had not gone to plan as i am now 29, unemployed and do not have much money. My partners Mum and my Mum have decided to gift us a house (or the money for a house, however it is done) up to a maximum of £50,000. My partner has health issues that prevent her from working so there is no chance we will get a mortgage and we are looking to buy outright with cash.

    I am currently trying to start a business however i have read that i would need to be doing it for 2-3 years before even thinking about getting a mortgage. We live in Bristol currently and part of the business is selling things on gumtree and collection only items on eBay. Being located in Bristol it's a lot harder and slower than you would imagine selling items on eBay as collection and Gumtree but they are vital to the business being profitable.

    My Sister and Nieces live in Caerphilly Wales, the rest of my family in Cornwall and my partners Family in London so our current location is ideal. I would absolutely love to buy a house in Bristol and know it would be a good investment and there are excellent rental opportunities due to the two Uni's plus i know Bristol very well.

    Unfortunately with a budget of £50k it's looking like the only viable option is South Wales (or potentially Birmingham but i have a feeling there's a reason the houses are cheap.. same with Wales i guess, but Brum is further out).

    My big concern is the business - It's hard enough doing it in Bristol (buying and selling) a big city with good links, what if we move to wales and find it near impossible and end up in a situation of yeah we own a house but we are stuck on benefits with no way to escape, no jobs, no business etc.. Due to this we are trying to get as close to the bridge as possible but for £50k the closest you're getting is an hour away from my current home in Bristol. This leaves us pretty much the Valley areas of Wales.

    What we would really like is this - Somewhere we can buy, live in and renovate to a very high standard, save for about 2 years then sell on for at least a small profit and buy somewhere in a better location with a better budget or if the location is good and we love the house save to buy another house to renovate and/or let.

    We found a lovely place for £50k corporate sale (the ones where you can be outbid up until exchange of contracts) but showed our surveyor some photos and he says there is clear structural movement.

    Everywhere else we look at is either already renovated, terrible areas (to be honest most the areas seem so.. depressing... full of chavs, clearly no opportunities full of people who are stuck their due to circumstance) or needs way too much work than we should take on for a first project on a tight budget. We need somewhere that needs work but can be lived in and the work undertaken over time.

    Is it just me or is it impossible to flip properties in South Wales now? We look at a run down house on a street for say £50k that needs 10k work where other houses already renovated on the same street are only getting £60k..


    While we want to buy a home we also do not want to waste this opportunity and really want to make the best and smartest investment given our circumstances that can hopefully be the start of a good future portfolio.

    We have only been looking at private and corporate sales so far, perhaps we should give auctions a shot?

    If anyone has any advice about the Welsh property market / investment or any advice on properties in general i would be very appreciative. What was my dream is slowly turning into a hell of a lot of stress and disappointment. In the mean time i'm going to browse this site and see what resources are on offer.

    Many thanks :)
     
  2. realdeals

    realdeals Active Member

    Have you thought of part ownership with say a housing association where you would have the option to increase your equity stake in a property when you have funds further down the line?
     
  3. Spetznaaz

    Spetznaaz New Member

    Thanks for the reply,

    I'll be honest i haven't looked too much into it. A big thing to us is owning our own place and being able to do whatever we want to it which wouldn't be the case with shared ownership.

    Every shared ownership place i have seen is already renovated to a high standard and they are usually like 25 - 40 percent so we wouldn't even own the majority.

    Maybe it is something we should look more into but i know my partner is quite against it and it really wouldn't be nice knowing we didn't really own what we had.
     
  4. totallyproperty

    totallyproperty Administrator Staff Member

    Hello and welcome to the forum :)

    It sounds like you have 2 scenerios here and i'm not sure which one you are really after...

    Do you want to use the £50k to buy a nice home, and build an online business to create your income (with hopefully an uplift in property prices if you buy a property that you can add value to).... or... is your priority to get into the property game and create an income from property?

    The reason I ask is that my advice would be very different for both.

    If you are buying a property to live in as a home, that is in need of some renovation (so you can add value) you have to be very careful about location. You need to buy in an up-and-coming area, which is where careful research will be involved. Buying a house just because it's cheap, or it fits in your price range will not achieve your dream of selling it for a profit in 2 years time. Rightmove can tell you how much property prices have risen in a certain area within the last 5 years... it will even give you this detail by postcode... this allows you to see which parts of a city are rising, which have leveled and which might be falling.

    As a general rule, if buying in Bristol (as an example) is too expensive, I would have a look at surrounding towns to start with, specifically looking at:

    - Those with good transport links into Bristol by rail / bus.
    - Those will good amenities (shops etc)
    - Those where industry is building and things are happening (ie. are new houses going up there from developers, are new businesses moving to the area or are the shops and industrial parks half empty?)

    Compare those points with house price changes over the last 5 years on Rightmove, and you should start to identify the best places to buy in. You'd be better buying a smaller house than you'd like (if it's all you could get for your £50k deposit) in an area that ticks all those boxes, than you would buying a larger house in an area that has nothing going for it. If you want your money to grow.

    But when buying a property as an investment, you should never totally rely on Capital Growth (as anything could happen within the next year which could massively affect market stability). Ideally, you should invest for cashflow (ie. rental income).

    If i were in your position, I would buy a property and turn it into an HMO. Rental incomes from HMOs (Houses with usually 3-5 rooms all rented to individuals) are higher and therefore more profitable than a standard buy-to-let. You could make £300 - £600 profit per month from owning a HMO if you have £50k to play with... you would then get a monthly income to help your lifestyle now (which would be very helpful if starting your own business) and it would (hopefully) build capital growth at the same time.

    Getting a buy-to-let mortgage would be your best bet. Yes being self employed can effect things but with a buy-to-let property I believe if the deposit is large enough this wouldn't neccessarily be an issue (as rental income is taken into consideration). We do have a mortgage expert on the forum who i will invite to join in on this conversation though to help.

    Please let us know how you get on and what you decide! And if you'd like specific advice we have plenty of experts on here in different fields that I can tag in this post for you :)

    Kelly
     
  5. Longterminvestor

    Longterminvestor Administrator

    Some pointers to take into consideration:-

    If it looks too good to be true, be very cautious - it probably is too good to be true!
    HMOs can create high yielding rental income streams
    Cash is King but cashflow is just as important

    One mistake many investors make, as Kelly has suggested, is to focus on capital growth which is not guaranteed. Rental income gives you back bone and cashflow for the future - do not under estimate it.
     
  6. Nicholas Wallwork

    Nicholas Wallwork Editor-in-Chief Staff Member Premium Member

    I would keep the money safe for a few months and look into educating yourself in property investment first. It's the first step to uncovering all the opportunities and strategies that will make that £50k go further...

    One example is a long lease option. This is where you rent the property first (lease it) for a good amount of time (giving the landlord some income) and having the ability to do (often pre-agreed) works so you can make it your own / improve it. You would then have the guaranteed "option" to purchase the property at a fixed price (set at the start) at a later date having already added significant value which is your equity to keep...

    that's just one example of a strategy that might work for you, if you combine that with say an HMO (House of Multiple Occupancy) property purchase you can add significant investment value quite quickly. I would also put off looking for your own home to start with... this will restrict your early investment and limit your options. Do 3/4 investment deals first with your capital to get going and then you'll have a larger deposit in the future for your own home anyway! Win/Win... you could even live in each property as you do them up and as they'll be your principal primary residence you won't pay any capital gains tax when you sell (provided you only own one at a time).

    So education and advice is where to start and I hope we have helped a little towards that!
     
  7. Longterminvestor

    Longterminvestor Administrator

    Can you tell us more about the leasing option Nick, it sounds very interesting as a way to get started.
     
  8. Jason Guest

    Jason Guest New Member

    What about bespoke investment deals with guaranteed returns, there are options out there for investors wanting to invest, make some money but not get their hands dirty, certainly at present student investments are looking strong
     
  9. Jason Guest

    Jason Guest New Member

    Even if its a cash only deal due to size? Most student 'studios' are below 30sqm and cannot be mortgaged...Whats the difference between those deals and a lettings company that offers guaranteed rents to landlords? (Such as a well known national franchise)
     
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