Get on property ladder now, or wait?

[LadyShapes]

Wasn't sure where to put this - so hope this is about the right place.

Ok, so me and DH are late 20's now. We live in a house provided by his work (very low rent). DH is planning on keeping this job long term, 10 - 15 years hopefully, and it seems secure for now.

We have £30,000 saved up at the moment and at the moment we're saving about £800/month.

I want to buy a house, but he doesn't. I thought we could buy a flat to rent out and get on the property ladder that way.

My other idea, which is what I really want to do, is to buy this farmhouse that I have seen for sale. It needs doing up inside, and I thought we could do that over a few years. When DH has left the job he's in now we can live there permanently. (We both grew up in the country and we definitely both want to move to a house like the one I've seen in the future). And until then, work on the house ourselves and use it as a holiday home if we get it finished. (It's about 1.5 hours from where we are now)

DH doesn't want to do anything for now. He wants to wait for a few years and build up a big deposit before we buy something.

Has anyone got any suggestions on what would be a sensible thing to do? I would appreciate an outside perspective!

Thanks!

[cheeznbreed]

Hello,

I read your post and it prompted me to register for the site in order to reply.

Assuming you have no compelling reason to buy other than a desire to get on the 'ladder', I'd say you should take full advantage of the situation you find yourself in, ie 'very low rent' and saving a decent chunk a month. There are few couples in their twenties who can save over £9k a year.

As for buying a flat to rent out, consider the maths. I don't know which area you are in, but in many places flats are crashing in price, and for good reason. Think of the debt you would be taking on, and the risks to your hard-earned capital. If a 2 bed flat costs £90k, say, and it drops in value by a 10%, well there's a third of your combined life savings vanished. Are you comfortable taking on that sort of levereged risk? The property market is not in a good state of health at the moment. Do not assume that if something has dropped in price it is now 'a bargin'. Property is still expensive historically, and interest rates will likely rise this year which will put further pressure on that.

Also, even without the overall market situation you would still have to rent it out, maintain it, pay (sometimes substantial) management/agents fees, cover the mortgage in periods when it was empty etc. I'm not trying to tell you what to do, just pointing out that you would have to make sure that the maths worked out. The last situation you would want would be to find yourself in is one in which you own a flat but either break even or lose money, and not be able to sell it to stem the losses. There are plenty of landlords out there who are nursing losses on flats and are in this exact situation.

I'd suggest you look at the following. The first is a link to the land registry database, showing previous sold prices over the last 10 years or so:

www.houseprices.co.uk

type in the postcode and away you go. If you have flats nearby, take a look at how prices have changed. It may be a surprise. eg, in my neck of the woods, put in 'SN2 1FD' and look at numbers 16 and 26:

16/02/2010 £74,000 Flat 26, Brunel Crescent, Swindon, SN2 1FD

27/02/2009 £82,000 Flat 16, Brunel Crescent, Swindon, SN2 1FD

Last sold during the boom:

17/08/2007 £154,950 Flat 16, Brunel Crescent, Swindon, SN2 1FD

03/08/2006 £105,500 Flat 26, Brunel Crescent, Swindon, SN2 1FD


As for the farmhouse idea, well again it depends on how much etc. If you have to borrow money to buy it, so will be paying debt interest on a property that you will be unable to live in for a few years, you ought to consider very carefully whether the fun of doing the place up is again worth the risk to your capital. You do not wish to find yourself with a project that runs over time and budget, which becomes a millstone around your neck both financially(could you sell it half-finished if your circumstances changed?) and on your free time.

The bottom line is: You seem to be in a brilliant financial situation at the moment, and as such you should be extremely hesitant to change that unless you have a compelling reason to do so. Remember renting is no more 'dead money' than mortgage interest.

Apologies if this is not what you wanted to hear, but hopefully it is of some use nevertheless.

[cheeznbreed]

PS if you use Firefox web browser, install 'Property Bee' (google it) which will insert a history box beside the listings on Rightmove and allow you to see how long a property has been on the market for, prices changes etc. Just allows you to be more informed.

[beautyspot]

There is no "ladder"

[LadyShapes]

Wow, thanks for the detailed reply.
Slightly annoying that you're agreeing with my husband!
What with the tax implications of buying to let, plus all the admin and expense of management fees and maintenance it seems like a right PITA!
I just like the idea of having my own place - especially with another decade of renting ahead. Plus that money's burning a hole in my pocket!

It's very good advice though and maybe we should think about popping our savings in some kind of bond to keep our greedy mits off it and squeeze some more interest out of it.

Oh, and I will definitely look at Property Bee. I have been keeping my eye on another house in Devon that has just dropped in price from £155k to £115k!

[cheeznbreed]

Good stuff, am sorry you're slightly annoyed :o)

Just remember that you are in a great position at the moment. Renting is a pain, but at the moment your position is becoming better and better by the month, and your biggest asset is your flexibility as you have no long-term spending commitments to large debt. Use that advantage while the going is good.

Obviously changes in circumstances can make force you to reevaluate plans, but if you're both doing well at the moment, roll with it I'd say. Once you have Property Bee you'll see that plenty of the stuff on the market has been there for a good while, and there's little prospect of it going anywhere soon.

Perhaps a home for your cash is worth looking at, but again be wary of tying yourself into something which reduces your flexibility to get at it without penalty. There are some savings bonds about (cannot comment with much authority on best deals etc I'm afraid). Discipline is required, but remember you are allowed to treat yourself now and again!

[tyler80]

In your position I would remain in rented.

We're renting and looking to buy but only because renting in this area is more expensive than a mortgage for a similar property and we'd like some long term stability.

If it were significantly cheaper for me to rent rather than buy as it sounds like in your case then I'd stay renting.

[FruitSaladIsNotPudding]

We're in a similar position and there is no way we will buy now. Prices are falling everywhere, even in our fairly affluent part of London and I can't see how they can do anything other than fall further.

Buying is far far more expensive than renting at the moment, so we are sitting tight and saving. You are very lucky to be able to save that much a month!

[cass31]

Similar situation here, i have a 40 percent deposit saved plus cash for fees and an emergency fund and i could afford to pay the mortgage that i would be getting on the property, but i will in no way be parting with any more of my hard earned money than i really have to.

In my opinion their is definitely a sizeable crash coming, in my area houses have dropped 20 to 30 percent in the last year and those that havent are still sat on the market getting zero interest due to the laughable price tag, and in the last few months even the cheaper houses arent selling. A big rush of houses have come onto the market in the last few weeks in my area (spring bounce apparently) and 90 percent of them come with the laughable price tag attached so how they are going to get a buyer if the cheaper houses cant is beyond me.

So i see absolutely no reason to rush in and buy a home in a falling market, a pound saved is a pound saved from a bankers pocket in my eyes.

[Celibin]

I am no expert like the other people above :all i have is some common sense and the knowledge that we are in a dire economic depression at the moment . i know lots of Estate Agents who 20 years ago advised to trade up in a falling market and trade down in arising one which was correct advice BUT NOW noone knows what is going to happen!Doctors, nurses, the police are losing their jobs so nothing is secure. Of course interest rates are low so saving not as good as before and it is beleived we will never see large int rates like those in the past But you are in an enviable position of possibly being able to scoop up a good property deal as the market falls : things will go back up but when? Wait and keep your eyes open as you are young enough to do so . Perhaps save your money with any potential future mortgage lenders so they can help you move quickly when the time comes ?