My Property Journey: From A Flat To A House

My last blog post regarding my first property has been retweeted a fair bit recently so I thought I would follow it up with an update on my property journey.

I recently sold my flat that I referred to in my previous post. A friend of mine that lived in the same block of flats as me told me that she had seen flats in the same block selling for about £36,000 more than I bought mine.

Ever the opportunist; I decided to put my flat up for sale, within one day of putting it on the market I had several offers on the table. Within one week I had accepted an offer, and by the time I knew it I had sold my flat for a handsome profit and was back looking for my next investment.

Throughout the selling process; there were a couple of moments where myself, friends and family questioned whether selling the flat was the right thing to do. However, in the end I went back to the age old mantra, “no risk no reward”.

As a result of taking that risk I turned my initial £6750 deposit into £36,000.

Owning a property at such a young age came with it’s trials and tribulations but I have learnt many lessons and I have some brilliant memories of that flat and I can genuinely say all the ups and downs have moved me a step in the right direction to becoming a man.

Following the sale of my flat, I have now embarked on my next property investment. I have just joint ventured with a good friend of mine and purchased a two bedroom detached house.

The plan is to develop the house into two two bedroom flats.

Similar to my first flat, this house has been purchased below market value (BMV) 

Purchase Price: £245,000

Deposit: £24,500 (10%)

Cost of proposed work: approx £100,000

Forecasted selling price: £260,000 per flat. (Total £520,000)

I’m looking forward to embarking on this new journey with the hope that this will be one step toward my aim of rivalling organisations such as Berkeley Group and Barratt Developments.

A couple tips I picked up along the way:

1. Move fast
2. Don’t let people discourage you from taking risks
3. Sometime it’s better to invest in an asset than contribute to an ISA
4. Never get too comfortable with being in one place
5. You don’t always need to know how you will achieve your goals, you just have to have the belief that you will achieve them 

I’m 24 now and I can’t wait to see what God has in store for me when I reach 25.

Follow @PropertyCohort on Twitter to be kept up to date with UK Property News and Investment Advice.

Help To Buy Helped

I thought it was about time I followed up my 1st blog post with a 2nd one.

Thanks to God, I managed to buy my 1st property in July so I've decided to provide a brief breakdown on what the costs were and some key lessons learnt along the way. Hopefully it will make young people realise that it is in fact feasible to get on the property ladder at a young age. (I did it at 22)

Property Price

Price property advertised - £140,000

Initially I offered £130,000 which got rejected 

In the end I negotiated for £135,000

Mortgage

I would advise buyers to speak to a mortgage consultant before you begin house hunting. It will give you a good idea on what you can afford and will help you understand what your monthly costs are likely to be.

Luckily I had an excellent mortgage adviser. I never had to speak with Halifax once as the mortgage adviser sorted everything for me and kept me updated with any information I needed to provide.

(My mortgage repayments are £700 a month) – (I was saving £700 prior to the mortgage)

Conveyancing (My conveyancer seemed to be incompetent at times)

Responsibilities include;

·       Communication with the sellers’ solicitor

·       Legal Work (I.e. Preparing contracts & searches)

·       Registering new owners with the Land registry

·       Exchange of Contracts

·       All monies due I.e. mortgage loan, stamp duty & search fees are paid to your conveyancer who then pay all monies to the seller/HMRC

Basic Costs

Cost	Price
My deposit was 5%	£6750
Stamp Duty 1%	£1350*
Conveyancing	£2352
Mortgage adviser	£395
Halifax product fee	£999
Halifax Valuation fee	£315
TOTAL**	£12,161

*Halifax were doing a deal at the time where they paid for stamp duty (I had to pay it first then they refunded me the money)

**This total doesn't include the cost of furnishing/refurbishing the property

How long did it take?

I think I was one of the lucky people as it only took me about two months to find a property that met my needs/wants.

The whole process (from my initial offer to completion took about 3 months.)

Key Tips

1. It is important to have all paperwork to hand as lenders will want to see

·       3 months pay slips

·       Passport

·       3 months Bank statements

·       Proof of deposit

2. Don't forget banks will only lend you approximately 4- 4.5 times your salary 

3. Consider adding someone's name to the mortgage if you don't earn enough to get a suitable mortgage (however, please note that the banks have your best interest at heart so do not add someone's name to your mortgage if you know you can't afford the payments alone)

4. There are several monthly costs involved with owning a property that need to be considered e.g. mortgage, council tax, utility bills, service charge (if it’s a flat) My total costs for the month (including travel, food & phone & gym bill comes up to approximately £1300.(I think a good aim is to have at least £500 left after all costs)

5. 3 months prior to applying for a mortgage be frugal with your spending. Lender will want to see your spending habits and new rules coming in October mean your bank statements will be under even more scrutiny 

6. A good conveyancer / solicitor with excellent communication is key. Ask for recommendations. Don't just go for the cheapest deal!

http://www.theguardian.com/money/2013/feb/15/choosing-conveyancer-2013

7. LOCATION ... Consider present & future transport links. I.e. Crossrail, local amenities etc.

Conclusion

In total I spent approximately £14,000. In my opinion that is affordable and achievable by many young people. (I have friends whose cars costs more than my deposit)

Remember you don't need to fully know how you're going to achieve something in order for it to happen.

Work hard & Stay Positive

Help To Buy Schemes Really Helping ?

Disclaimer: THIS BLOG IS NOT ABOUT THE GOVERNMENTS HELP TO BUY SCHEMES. IT IS ABOUT THE LENDING CRITERIA THAT THEY CONVENIENTLY DON’T EXPLAIN

However, for those that are interested, this is a helpful link that explains help to buy schemes. http://www.helptobuy.org.uk

The current help to buy schemes put in place by the government are probably the best opportunity us  (18-25 year olds) will have to get on to the property ladder.

The reintroduction of 95% mortgages is good news for the majority of the population as a 5% deposit is relatively easy to raise. 

e.g a £200,000 house would require a deposit of only £10,000.

However, the difficult part is the outstanding £190,000 left to pay.

LENDING CRITERIA 

The government have window dressed their Help to Buy schemes to the extent  that people do not realise that the criteria for lending is as strict as it has ever been.

Bank & building Societies generally lend anything up to 4.5 times your salary.

The average UK salary is approximately £26,000.

£26,000 x 4.5 = £117,000

Therefore, the best you could wish for is a mortgage of £117,000 (bare in mind this is the best case scenario.) 

A quick search on Rightmove will show you that all you can get for that

type of money is a one bed on top of a chicken and chip shop.

What about the new government initiatives that are supposed to help more first time buyers ?! Won’t that make things easier ??

Well ……

EXAMPLE 1 with “Help To Buy Equity Loans”on a £200,000 property

Salary: £26,000 

5% Deposit: £10,000

20% Government Equity Loan: £40,000

Mortgage required: £167,000

Realistic Mortgage offer: £117,000

EXAMPLE 2 with “Help To Buy : Mortgage Guarantee” on a £200,000 property

Salary: £26,000

5% Deposit: £10,000

Mortgage required: £190,000

Realistic Mortgage offer £117,000

Looking at the example above : In the case of Help To Buy Equity Loans, a further £50,000 will be required to acquire a property. Likewise, in case of Help To Buy: Mortgage Guarantee, a further £73,000 will still be needed to acquire a property. 

Hopefully you can see from this that the main factor when purchasing a property is your salary. If you’re not earning above the average salary then you can more or less wave goodbye to taking a step to owning your own property,

However, if you’re struggling to meet lenders salary criteria you do have three options;

1. Considering acquiring your mortgage with a friend, relative or spouse (Two salaries put together are better than one)

2. Go to the bank of Mum & Dad and ask for a substantial deposit

3. Lower your expectations and live on top of a chicken and chip shop

Key Terms

Equity - A stock or any other security representing an ownership interest.

Mortgage - A legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor's property