Is this a sensible thing to do or have I gone mad?

(17 Posts)
Propertyquandry Wed 29-Jun-16 12:09:55

Just about to exchange on the sale of our house next week. The owners of the house we were buying have pulled out so we're moving into rented. Plan was to rent for 6mths whilst finding something else.

Now last night I had the idea of staying in rented and buying somewhere else-in the SE. Basically, we're in a good area but no way has it kept up with London and the SE. I wonder if in 20yrs, the gap may be even wider and therefore we'd do better financially if the money was in the South. If it matters, we have about 380k equity so would be buying something for around 550k. We were thinking somewhere such as St Albans or similar with a strong housing market and a large rental base to limit it being empty for too long. I phone a StA EA this morning who said they can't get enough rentals at the moment. Am I missing something huge? We'll buy as if we're buying then let (we've actually done that before in a different situation of working abroad but wanting to keep a foot in the market to avoid needing a more expensive buy to let mortgage)
All opinions welcome. We don't actually want to move to the SE and 2 of our 3 children are already in secondary here so this is home. Thanks

Propertyquandry Wed 29-Jun-16 12:11:11

Just to add that with the equity, we'd get a good mortgage rate and the rent would be far higher than the mortgage.

LineyReborn Wed 29-Jun-16 12:16:22

Where would you stand though on being able to say it's your main home (for tax purposes, under the new btl rules) and how would your mortgage provider view your wanting to let it out?

Propertyquandry Wed 29-Jun-16 12:21:07

Well we'd say it was our main home as we won't own any other properties at that point. The mortgage we have in principle for the home we were buying is slightly higher and in their paperwork it says letting out is allowed after 1month mortgage payment and paying them £150 admin.

Propertyquandry Wed 29-Jun-16 12:21:27

Meant to say, thanks for replying smile

Tweennightmare Wed 29-Jun-16 12:30:51

To be honest I don't think this is the right time to be buying speculatively unless you are a massive risk taker. If this is your plan I would hang fire for 6 months and see how the market is . St. Albans market is driven by London demand . If the banks start pulling their head offices out of London and the economy dips as predicted this may start affecting demand and house prices will fall. Rental is one thing but you don't want to be sat on £££ of negative equity

LineyReborn Wed 29-Jun-16 12:31:18

That makes sense. I can see why you're tempted to do this. Although many people on here are predicting a priority price fall and 'readjustment'.

Will you be happy being an absentee landlord? That's the other thing to think about.

namechangedtoday15 Wed 29-Jun-16 12:35:12

On paper, I think it makes sense, although you need to factor in the expenses - would the rent be classed as income (I think it would and therefore tax), plus any void periods, management fees if you're not local enough to carry out repairs etc.

On the other side, you'd have to come to terms with being in rented for the long term. Not being able to have the house as you want it, potentially being forced to move with 3 children at regular intervals. I can understand why you're considering it, but your home is about more than financial gain.

tootsietoo Wed 29-Jun-16 12:39:35

We've done this. It works for us. The figures all stack up. And we can rent a really lovely house which we couldn't afford to buy. You will need to factor in the time and effort in managing the rental, even if you pay managing agents.

It is a wobbly time to be buying a house though - who knows what will happen to the economy in the next 5 years! You probably can't go far wrong in London and the SE though. Our rental properties are in the frozen north, which will be much more badly affected if the economy tanks.

Propertyquandry Wed 29-Jun-16 13:00:57

Thanks everyone. We'll be buying anyway as I wouldn't want to be out of it long term. It's whether to buy here in a good area of the Midlands or in the South east. My thinking is that if the market crashes big time it will be the south that bounces back quicker. Well that's what history tell me anyway.

Propertyquandry Wed 29-Jun-16 15:36:47

Tootsie, I think that's why we're worried about the Midlands. I'd just feel like my money was safer long term in the south east. Much as it pains me to admit that. grin
The absentee landlord thing worries me slightly but we'd only be 2hours Max away and we'd pay the EA to manage the property so the tenants would have peace of mind if anything went wrong. Plus we'd be renting it out for about 10yrs which might appeal to some tenants.

HereIAm20 Wed 29-Jun-16 21:08:00

I own a property 2 hours away andmanage it myself. As and whenI need a tradesman I have dorted a "team" I can call on and just use estate agents for finding tenants. In 8 years one day void of rent only as tenant moves to new place before end of notice period and new tenant moves in snd I refund rent to previous tenant. That is the SE commutable to London rental market. I think you are doing the right thing although I might wait 6 months at the moment as I suspect market will drop or there may be bargains to be had offerwise as people will be reluctant to buy.

HereIAm20 Wed 29-Jun-16 21:08:39

Excuse all the typos - stubby fingers on i phone

Propertyquandry Wed 29-Jun-16 21:20:04

Thanks, HereIAm20!
It might be the right thing to wait 6mths. We're due to complete mid July so as we get towards Christmas the market should be clearer.

traviata Wed 29-Jun-16 21:25:45

the mortgage co might adjust your interest rate to their normal btl rate once they are aware that it isn't your home, so do your calculations based on a commercial rate.

Propertyquandry Wed 29-Jun-16 21:32:24

Thanks. The paperwork just says we cannot let until after 1mth of mortgage payments have been made and we've paid £150.

jaffajiffy Thu 30-Jun-16 06:36:09

I assumed the tax would make it less attractive. I thought a main residence included one for which you have a tenancy agreement? Also echo pp who say it's an uncertain time to buy.

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