Need help buy to let or buy own house 80k deposit

[virtualtechie]

Approx. 80K deposit

INTENTIONS – invest money so don’t blow off , have more space to live for 3 years.


OPTION 1 – buy a house approx. 350K for 3 years, which gives extra space but is not in the best area This area will not be the one we want to settle in, live the house we want approx. 450-500K.


Save more deposit + let’s say house price goes up every year by 5% so 15% appreciation i.e. 50K value increased + 80K already in equity + 60K saved = 190K deposit for next house

190 K total – 60 K saved again = 130 K


Benefits – had more space to live in for 3 years , gained 15% of property price

Disadvantages – not in the best area, will have to move house again, a bit further away from station (5-10min) not a massive concern,



OPTION 2 – buy 2 buy-to-lets with approx. 40K deposit each and 120K buying price for each property


After 3 years – 80K (2 houses) equity + 18K gain @ 15% (3 years) X 2 houses + 11K x 2 houses (rent / profit @ 300 month each) = 138K deposit


Advantages – money saved, living in the same area, will only have to move house once only, close to the station.

Disadvantages – less space for 3 more years


OPTION3 – Do Nothing.

 

[Michelle Barringer]

Morning, you have clearly thought through your options - and in light of this i would assume that doing nothing is not really an option - if you buy in an area you don't want to be and then end up having to stay longer that the 3 years how would you feel - as this is a possibility - as with all the scenario planning things can change. The buy to let route seems like a good option - but the potential pitfalls are if you can't sell both at the same time and need the cash - or if you have vacant periods can you sustain the mortgage payments? and will you be happy where you are?

 

[KGeeson]

You obviously have an interest in property as an investment vehicle, so i would suggest a 4th option... stay where you are and use your funds to Buy, renovate and sell on... you can then still increase your pot of funds but don't have to worry about dealing with tenants or void periods.

 

[virtualtechie]

You obviously have an interest in property as an investment vehicle, so i would suggest a 4th option... stay where you are and use your funds to Buy, renovate and sell on... you can then still increase your pot of funds but don't have to worry about dealing with tenants or void periods.

Hi KGeeson, I didn't quite catch what you meant? do you mean buy a property to renovate? and then sell it for higher price?
if yes, it might be an option but considering my work commintment it might be an issue, and I have no experience with builders, but seems like an option I should be exploring.... any tips??

 

[virtualtechie]

Morning, you have clearly thought through your options - and in light of this i would assume that doing nothing is not really an option - if you buy in an area you don't want to be and then end up having to stay longer that the 3 years how would you feel - as this is a possibility - as with all the scenario planning things can change. The buy to let route seems like a good option - but the potential pitfalls are if you can't sell both at the same time and need the cash - or if you have vacant periods can you sustain the mortgage payments? and will you be happy where you are?

Morning, you have clearly thought through your options - and in light of this i would assume that doing nothing is not really an option - if you buy in an area you don't want to be and then end up having to stay longer that the 3 years how would you feel - as this is a possibility - as with all the scenario planning things can change. The buy to let route seems like a good option - but the potential pitfalls are if you can't sell both at the same time and need the cash - or if you have vacant periods can you sustain the mortgage payments? and will you be happy where you are?

Morning, you have clearly thought through your options - and in light of this i would assume that doing nothing is not really an option - if you buy in an area you don't want to be and then end up having to stay longer that the 3 years how would you feel - as this is a possibility - as with all the scenario planning things can change. The buy to let route seems like a good option - but the potential pitfalls are if you can't sell both at the same time and need the cash - or if you have vacant periods can you sustain the mortgage payments? and will you be happy where you are?

hi Michelle , selling both might be an issue, we should be happy where we are , apart from the space . apart from that all is good, just less space .... and in terms of able to afford payments if void period, we should be able to cope with that.... any more tips?

 

[George Kengott]

great post and informative information. Thanks for sharing

 

[KGeeson]

Hi KGeeson, I didn't quite catch what you meant? do you mean buy a property to renovate? and then sell it for higher price?
if yes, it might be an option but considering my work commintment it might be an issue, and I have no experience with builders, but seems like an option I should be exploring.... any tips??

Yes basically i mean 'flipping' a property, so buying a property where you can add value (whether it needs a full renovation, turning a house into 2 flats, adding an extra bedroom in the loft, etc). If you haven't managed a project before then I'd definitely suggest taking on a smaller project to start with (something in need of basic updating). The key is to be very through with your research and accurate with your calculations. I'd definitely recommend reading up property flipping as a strategy in more detail. There is a page with bestselling property investment books here on the forum, which you can buy directly through amazon: http://www.propertyforum.com/real-estate-books

 

[LauraHall]

Do you currently own a property with a residential mortgage?
This might have an effect on your choices as BTL lenders are more willing to lend if you already have a residential mortgage. Its not impossible to get BTL finance without resi, but can be difficult.

How about buying the property you want with renting out two rooms to pay toward your mortgage payment? The government have increased the amount of income you can keep tax free with lodgers. Obviously this has drawbacks as you have to share your home and risk overexposure financially.

If you do go down the buy to let route, you don't necessarily need to have to sell the buildings. I refinnce my properties to remove my deposit and costs .... then I have ££££ available to buy another.
One watch out though, I force appreciation by refurbishing run down buildings, the passage of time doesn't guarantee your buildings will be worth more in 3 years. Overall property is a fantastic leveraged investment but depending on the where you buy and where we are in the house price cycle, they go up and down.

 

[Ricky Bhurji]

Hi VirtualTechie,
The company I run helps source suitable property deals for investment buyers, we then consult with them about the expected returns from the investment and can also offer introductions to reputable tradespeople who we have used/recommended to our previous investment customers. Happy to run through some scenarios with you, if interested please drop me an e-mail ([email protected]). Many thanks, Ricky .

 

[George Kengott]

What is hard money ?

Hard money is a term that is somewhat mis-understood. Some people think that hard money lenders are “loan sharks” or take advantage of people.