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Property, not really that good an investment...


Great Guy

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I bought my flat in 2001 for £65k, I reckon it's now worth *drum roll* £85k....

I reckon after inflation it's went down in value..

Anyone else get fed up hearing about all those London/ South East knobs go on about how much their houses have went up in value? 

My flat is in a town just outside glasgow.

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A mate of mine has not worked for about 24 years. Got a payoff, redundancy, from work and invested it very shrewdly in property. Started by buying holiday lets in Scarborough. Then bought a flat in cambridge in around 2007/8.  New build and the builder blinked. Bought it for less than 200k. It is now worth half a million.  

Right place at right time and some people have done very well.  

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Buy at the right time and sell at the right time if you are going to treat it as an investment.

I have professional experience and unless somehwere is very well built, so that's no timber framed rubbish for starters, you are going to find that in many years that your rental income gets more than wiped out by voids, redecs, and maintenance bills.  New kitchen, new bathroom, new windows and guttering, new roof.   Your yield (rent / price) is actually ((rent - void - redec - maintenance) / price) and will look a lot less good like that; buy a clunker and you will find that you have a negative NPV if you get a full structural surveyor's report done about when each component is likely to need replacing.  And that is before you get any major structural work; with modern timber frame it will be cheaper just to knock it down and rebuild in forty years' time; which will be £160k for a small three bed.  Hmm, that's a lot of rent.

I keep a high level record of my own house; it needs a new kitchen and bathroom which I may get around to doing next year.  Along with the other stuff I have had to do, stamp duty and legal bills by the time I have been in it five years all the money that I have saved by not renting will have gone in maintenance.  So if I had bought it as a BTL all the rent money for the first five years would have gone in maintenance.  Any mortgage costs above that are a straight loss.  Great investment eh?  And this is with the house being basically sound: traditional 1970s block construction built onto bedrock.

Property only 100% makes sense as an investment if you do what XYY (and I) have done: buy it as your own home that you want to live in indefinitely.  Then it's an investment in your quality of life.

 

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9 minutes ago, Frank Hovis said:

Your yield (rent / price) is actually ((rent - void - redec - maintenance) / price) and will look a lot less good like that; buy a clunker and you will find that you have a negative NPV if you get a full structural surveyor's report done about when each component is likely to need replacing. 

 

For an average HMO BTl that is 

(rent - 0 - 0 - 0) / price .....

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30 minutes ago, Frank Hovis said:

Buy at the right time and sell at the right time if you are going to treat it as an investment.

I have professional experience and unless somehwere is very well built, so that's no timber framed rubbish for starters, you are going to find that in many years that your rental income gets more than wiped out by voids, redecs, and maintenance bills.  New kitchen, new bathroom, new windows and guttering, new roof.   Your yield (rent / price) is actually ((rent - void - redec - maintenance) / price) and will look a lot less good like that; buy a clunker and you will find that you have a negative NPV if you get a full structural surveyor's report done about when each component is likely to need replacing.  And that is before you get any major structural work; with modern timber frame it will be cheaper just to knock it down and rebuild in forty years' time; which will be £160k for a small three bed.  Hmm, that's a lot of rent.

I keep a high level record of my own house; it needs a new kitchen and bathroom which I may get around to doing next year.  Along with the other stuff I have had to do, stamp duty and legal bills by the time I have been in it five years all the money that I have saved by not renting will have gone in maintenance.  So if I had bought it as a BTL all the rent money for the first five years would have gone in maintenance.  Any mortgage costs above that are a straight loss.  Great investment eh?  And this is with the house being basically sound: traditional 1970s block construction built onto bedrock.

Property only 100% makes sense as an investment if you do what XYY (and I) have done: buy it as your own home that you want to live in indefinitely.  Then it's an investment in your quality of life.

 

or find a good rental and make damn sure you invest the amount that is  (Mortgage + redecs + maintenance + insurance + stamp duites + agent's fees) - rent

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3 hours ago, The XYY Man said:

I haven't signed on the line just yet Frank as still we are awaiting the formal mortgage offer.

But if we get the house, priority will be on paying it down as quickly as possible. 

At our age, it has to be paid in a maximum of 14 years, and I have applied for a 12 year term.

I am aiming to do it less than 10.

It will be our "forever home" - and so the only time what it's worth will ever be discussed will be either when we sell-up to move into a care home, or when the kids are fighting over it after the last of the two of us dies...

 

XYY

Hope it all goes to plan XYY and in ten years' time you will be able to switch to single malts.

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6 hours ago, Great Guy said:

I bought my flat in 2001 for £65k, I reckon it's now worth *drum roll* £85k....

I reckon after inflation it's went down in value..

Anyone else get fed up hearing about all those London/ South East knobs go on about how much their houses have went up in value? 

My flat is in a town just outside glasgow.

I am a South East knob and I am envious that your house has gone up in value at or about the rate of inflation! I wish they did round here.

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7 hours ago, The XYY Man said:

Cheers.

Hopefully I'll be producing my own by then mate.

There are many reasons I went for a house with a cellar...

;)

 

XYY

Does your buildings insurer know you're planning on a distillery? 😎

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45 minutes ago, The XYY Man said:

Haven't got the house yet, so no insurer.

But if we are successful, I assure you that the "water purification equipment" will be covered for its full value on my policy...

;)

 

XYY

That would make for an interesting fire damage claim.

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