Offer accepted today. Shall we buy another? What do you think? Help!!

[Febes]

In jan we put an offer on a 3 bed terrace on L Rd. It was accepted and we put our 2 bed terrace on the market. Ours was on the market at 270 but we knew we would probably drop it to below 250 because of the stamp duty issue. L Rd house was 335 and although morgage was promised over the phone we couldn't get it for that amount and had to pull out of the house.

We accepted an offer today for 247 so quite pleased. Also found out the L Rd is still on market and has dropped to 300. L Rd needs new kitchen, bathroom and do up through and we want to convert in to 2 flats and go up into the loft so make top flat 2 large bedrooms over first floor and loft and bottom flat 1 bedroom and large garden. DH is the worker and has done a great job on our current house and would beable to do almost all the work.

In the current market we should be able to sell both flats for above 200. Area is SW london zone 3. 5 mins from train and 15mins from northern line tube plus buses. House 2 down has been converted in same way but in a terrible state (was also on the market so we had a look at it in Nov). We plan to do the work in next 6-12months then sell and immigrate. If we don't buy L Rd we will rent for next 6 months and then immigrate. (NZ)

Do we buy L Rd? Is it crazy in current housing market? DH very keen. I'm keen but a bit of a worry wart. We have 5 month old DD.

Hope this makes sense. Sorry its so long. It has risks but potential to make some money.

It's a tough one. I can't decide yet if I think prices are going to actually drop significantly in London. They have yet to do so round our way SW london/Surrey borders.

I know theres such a housing shortage. Its a bit good to pass up I think but if price go tits up...

If you can't sell the 2 flats and have to rent them out, or have to shift them at way below your expectations, what will happen to your NZ plans?

I still want to go to NZ early next year so if they don't sell we would have to rent. Rent of 2 flats will cover morgage and then some and letting management fees. But don't want to do that if poss as would rather not have money tied up here when we are there.

To just cover costs we would have to sell flats for 175 each. Flats in the area at the moment sell for 200 for 1 bed and 240 for 2 beds. So there is room for cooling market but potential for big bucks.

I think, for me, there wouldn't be enough margin in it to justify the risk to my long term plans.

If you're converting a house to 2 flats + doing a loft, you will easily blow 50k on the redevt, won't you? Then you've got stamp duty, estate agent fees, legal fees, structural engineer fees, contingencies in case anything else comes up...

So if you have to take a hit on the sale price for either/both flats you could easily make nothing.

Wouldn't keeping it as a family house make more sense? Easier devt, less competition from glut of flats affecting most areas?

Also, make sure you are using Land Registry sales data, not estate agent valuations! (I'm sure you are). Sounds fantastic value for Zone 3 London nr transport, though!

Bump

I have been developing for years and have now stopped as it is too risky.Also is there any way of giving the bigger flat garden access as a 2 bed is more likely to be bought by someone who has kids and would want a garden.The 1 bed would be fine with a patio.However I would still say be cautious as you are already quoting prices for the finished product and in a dodgy market you may get much less.

We had second look and it is such a good property. The prices haven't dropped much in this area. We are very tempted but going to sleep on it for next week or so. We could definately split the garden and give the upstairs flat access to the garden so if we go ahead we will do that. Anyone else with advice?

I'm afraid I'd have to agree with the others. There's not massive profit in it for you and with prices predicted to fall up to 30 per cent you could end up losing money. You need to consider the worst case scenario.

I know your area isnt showing signs of a fall yet but if a real crash comes it will affect everywhere and flats will be the worst hit.