To think buying a flat is the right idea

[Losttheattitude]

Morning,
I have one DD, her dad passed away just after her 8th birthday, at the time we were living close to London in a big frankly disgustingly expensive house. My late DH did have life insurance which covered the remaining mortgage and left a little.
A year after he passed I got offered a job in rural North Yorkshire that I couldn’t pass, sold up the house and bought an equally lovely one for less than half the price!
All the remaining money was put into various investments for my DD. DD is now 19, she’s in her first year of uni in London. The money left from the house sale has gone to various things, a car, a gap year, uni fees etc.
DD wanted to stay in uni accommodation for her first year, easier to make friends. She loves it and loves London.
The money has been gathering interest the whole time so we now have over £750,000 (taking off the uni fees which are in our mind already “spent”).
Obviously it’s London so depending on where you look that could get anything from a 3 bed terrace with a garden to a studio flat!
DD has fallen in love with a one bedroom flat in a lovely area, close to central, its share of freehold, has a little balcony, but it’s £650,000. I decided to talk to my family about it.
My parents think the money should be going to a house, yes it won’t be central but it will have longevity.
My brother thinks I should put the money in a pension (half for me and half for DD). He doesn’t agree with “hand outs” and thinks DD should work for a house etc. like everyone else will have to.
Now I think I disagree with my brother, the only reason she is able to have this money is because her dad passed when she was young! I’m sure she would trade it all for her dad, and if he were still here we’d probably still be living near London with the mortgage just about paid off. She has dealt with anxiety, depression, an abusive ex. She got AAA in her A-levels and has worked her but off!! I also don’t view the money as mine, I took money out the pot for holidays etc. I’m mortgage free, have extra money to put into my pension every month and don’t stress about money at all.
I do see my parents point but I worry that a house further out would be more maintenance than DD would like and be a bit of dampener on the social life. I’m sure DD could just sell in a few years if she wanted that.
Does anyone have any insight that might make us change our mind before we go full steam ahead with this flat? AIBU to think the flat is the right idea? Should we be considering something else?

I think a flat is the right choice but £650,000 does seem very very expensive? Is there nothing cheaper?

I would compromise. Cheaper flat. And some.in both of your pensions if enough remaining.

Cheaper flat plus pension contribution. It'll sort your DD out for now and later.

Plus in a few years, if she stays in London, she'll be tired of central London life, and an extra room or two really comes in handy.

I don’t understand why your entire family has a say in what you do with your money. Frankly it’s none of their business. If, as you say, you’re financially secure and don’t need to add to your pension pot, why do it? A centrally located flat is the perfect solution for her, particularly if she intends working in London after graduation. It’s likely to be much lower maintenance than a house too.

Cheaper property 100% she can always sell down the line and upgrade.

I think a central London flat will never lose value and will be easier to maintain. I would be aware of maintenance charges etc if it is a leasehold and that she could afford maintaining the flat.

Buy A flat now, surely your parents are aware of the concept of selling & moving???

DD is young, she wants to live in Central London & enjoy her life, not be in a terraced house outside the centre!

in 20 years (if you buy well now) she can see & buy where she wants to live then.

other peoples views are interesting, but that's all. Your brothers view is fine, for himself, but 🤷🏻‍♀️ you asked for his opinion, he told you, but you get to choose.

There logic isn't really sound.

I would imagine she is unlikely to want or need a house further out for at least 10 years from now. It's not like you won't see appreciation on a flat that can then be put into a house. As long as the valuation for the flat is in line with local values and there is no reason to believe the area is going to swan dive in price more than any other area, it's really not going to be a bad investment. Obviously watch out for any cladding or other issues specific to flats when flat hunting.

Regarding your daughter's pension. Is she generally sensible with money, do you think you can rely on her to put money away once she is earning for that. If so, with no rent or mortgage to pay, assuming she gets a decent graduate job she should have more than enough to chuck into a pension and live well in the present too at least until kids come along!

My god, a beautiful flat in central London is the absolute dream. Do not let someone talk her in to having a dull house in suburbia just to future proof herself. A flat in central London will hold its value

can you link it OP?

With a flat remember there are usually maintenance fees and it seems some owners ( of the block) are using this as a license to print money

Flat in London.

It will only go up in price anyway and she can sell it in the future to move out, buy somewhere nice half the price and still have money left over, a bit like you did, but later in her life obviously.

Show us the flat please 😃

Your bother is wrong, quite apart from the fact it’s none of his business. Loosing a parent young is so hard, let her have at least some monetary gain from sad circumstance.

Property is always a good investment, as long as you can keep it long enough to weather any storms in the market. And if it’s central London she wants, then thats the price tag. Let her have a fun few years, as you're well aware we’re not all destined to make old bones, life is for enjoying. Suggest she put any money saving in rent/mortgage into a pension/ISA.

So sorry for both of your losses. Your DD has done amazingly to grow into such a sensible young woman after such a shock in her childhood.

Your brother has, as you say, completely lost a sight of the fact that your DD’s circumstances are special. You absolutely should be doing whatever you can with that money to make her life a bit easier compared to that of her peers who still have the emotional support of both parents, as they work to fund their own first home.

You asked your parents. Are your DH’s parents still in the picture? If they are, and they get on well with you and DD, might they have some thoughts to offer on what your DH might have wanted? (It’s ultimately your decision of course but I am just thinking that if you have involved one set of grandparents you might also involve the other for balance).

Turning to the flat, this sounds like it might be a period property? Those can be a bit more of a pain re upkeep but it will probably hold its value better than a new build. On the other hand there are some lovely new builds in London at the moment with nice communities growing up around them, think Stratford are (I own a rental property in E3 bought off plan and it has held its value well over the last 10 years). It really suits the mature student and young professional tenants that I have had over the years.

Would DD like to live alone or with a flatmate? if the latter, a property with 2 bathrooms would be nicer. I’d probably advise shared living as it was a real formative experience for me, and her mates will bite her hand off if she has a nice place. Could be lonely living alone even if in a nice flat.

Does she think she might want to work in London after University?

I would buy the flat in London. I lost my mother very young and inherited a large amount of money. I bought a property in central London with part of my inheritance when I got my first job. It's worth an eye watering sum now so turned out to be a very good investment.

I'd get a two bed, I live in a one bed and having a second bedroom for working from home would make life so much better.
For the same money she'd still have plenty of nice areas to choose from and get a second bedroom.

Which also gives the flexibility of having a lodger if she finds living alone lonely.

Cheaper flat with second bedroom to rent to student.

I'd try encouraging her to find a 2 bed flat at least this would give her future options for if she had a child or sharing/renting it out.
Obviously be careful with service charge small print, cladding etc.

But lovely idea for your daughter to be central, I hope it works out well for her.

Investment in property is always a good thing.
I'd be inclined however to get a property that has 2 bedrooms though, she doesn't want to be walking f around / going out and coming home at night on her own, if there's 2 students living together they'll keep safety in numbers.
Also, she should settle in and check where her friends / others at the uni are living as she'll want to be relatively close to them too

I'd probably look for a 2 bed, but if she wants a flat in Central London then let her. What area is she looking in? Please don't encourage her to get a house further out, so boring for a 19 year old.

I would let her, and wouldn't care about what my family had to say.

At 19 it would be such a fabulous opportunity to live in Central London, she can always go to suburbia when she is older.

It's am investment decision first and foremost, and that means looking at how buying compares to renting in the area. What you want to figure out is the price-to-rent ratio: that is, the price of a property calculated in multiples of the annual rent for an equivalent property. Internationally, mostly a ratio of below 15 annual rents would be considered good value; over 20, don't do it unless you want to live in it and rental apartments are near to impossible to secure. That's because at these ratios, you'd be much better off continuing to rent and investing your money in broad-based funds instead which will carry much less of a cluster risk. I don't see this discussed much on MN - I assume because nationwide house prices are much more affordable than renting, but it seems the opposite is true of London. Yes, real estate will appreciate - but so do other asset classes. (As an aside, I really hope you haven't had this gigantic sum gather dust for years in an interest account?! )

https://www.investopedia.com/terms/p/price-to-rent-ratio.asp

Thanks everyone.

For those saying a two bed, does anyone know anywhere in central-ish London that could tick DDs boxes without being more than 650-700k.

She is studying at UCL - so ideally not a pain to get there, she plays tennis too, so some public tennis courts reasonably close and not too difficult to get to either Islington tennis centre or the west way sports centre for winter tennis. She also likes to run so a park nearby is a must (but it’s London so this shouldn’t be hard!)
DD likes Pimlico a lot, bit worries it will be too quiet, she’d love the Paddington/Bayswater area but is definitely out of budget!
I agree a two bed would be better but I think DD would rather prioritise it having the right feel!

Central London flat all the way. Just watch out for places with service charges, which can get very high, very quickly. Avoid if poss

Personally I’d look for at least a two bed - whilst I agree if it’s central enough it likely won’t depreciate, everyone I know whose bought a one bedroom flat in London has had a nightmare reselling them especially post covid