I often hear this phrase used quite glibly, not just by the media but also by potential clients. It makes it sounds so easy to buy your first house and “get a foot on the property ladder”. However, in practical terms, for some first time buyer situations it might not be so simple.
Property is a highly sought after investment for many. A poll by the Observer showed that one in three people are relying on property to help them provide funds for their retirement. Other research by Direct Line shows over 280,000 parents hope to purchase a property for their teenager to live in through University. For some this will be through downsizing from a large family home to something smaller, for others this will be through investing in rental properties. This second option might be a practical choice for some second-time buyers, but what if due to circumstances you’re looking to buy your first mortgage and you’re not planning to live there?
Perhaps you live and/or work overseas but want a base in the UK to return to; perhaps you live with a partner or friends in their own home, but want to have your own security; or maybe you’ve moved out to the country for the family, but spend your weekdays in town. Here are my top 6 questions to ask yourself before investing your time in trying to find a property, no matter what your circumstances may be:
1. What are you buying it for?
There should be a clear distinction between buying a property for your own use, and buying a property that will be rented to tenants.
2. Why have you selected property as your preferred investment?
More than once I’ve sat in a meeting with a potential client who wants to commit their savings/future to property investment ‘because you can’t go wrong with bricks and mortar’ or ‘there’s no real risk with houses’ … For the record, you absolutely can, and there are some very real risks!
3. Can you afford it?
Imagine that there’s a period of time when the rental property has no tenant, can you afford to pay and sustain the costs of two or more houses as well as the usual expenses?
4. Have you got sufficient deposit?
If you’re looking to buy a property that will be rented, you should expect to provide a deposit of around 25%. A house that you do intend to live in will require a lesser deposit, and you’ll have a far larger selection of lenders available – attempting to purchase with the wrong type of mortgage is known as ‘scheme abuse’, and it’s a recognised type of fraud – Don’t even consider it!
5. Who will use the place is it’s not going to be you?
If it’s a house / flat for the future, is it viable to rent for now? Your preferences may be very different to those of your prospective tenants. Think about location, transport links, schools, room sizes, and layout of the house.
6. When are you planning to use it, if at all?
I regularly speak to people who are considering ‘investing in a property for holiday lets’. Quite often, what they’re actually hoping for is a ‘home away from home’ for their use – to get a decent return from your holiday let, you’ll need to rent it in the peak periods, you’ll want it to be booked out weeks / months in advance, and should expect (and not get upset if) things get broken!
After contemplating the above, if you think that a property purchase could be the right choice for you, please don’t hesitate to get in touch. I look forward to helping you understand your options.
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