Renting in London and buying elsewhere. Thoughts?

[Scam]

Currently rent in London with my girlfriend. We obviously want to buy somewhere but it's hands-down impossible in the area we live, and we're not prepared to pay some vast over-inflated sum for a pokey 1-2 bedroom flat in Stabby McStabsville. And we actually really love our flat and area, and are really happy there right now.

Doing some very basic sums; with our current deposit we reckon we could buy a house up north, suitable for retirement and pretty well cover the mortgage without even needing to rent it out. Let's say for example we're both saving £500 each per month easily (with the ability to save more if it was for a more-worthy cause than a 1% interest ISA ). If we put in enough deposit and find a house at the right price to give us a mortgage of roughly £1k pcm, what are the downsides? Clearly interest rate spikes would be an issue, and we'd want to make sure we were still putting some money away for a rainy day.

On top of that where we're looking is near to her (retired) parents, so we've even started thinking about more complicated ideas such as roping them into managing it as an AirBnB to help with costs (we would happily use it as a holiday home also), or even persuading them to sell-up and move into the house to "look after" it. Doing that would mean they might put all/some of their money into it -- could possibly end up buying somewhere mortgage free if so. Which is another whole set of calculations to do, long term.

Just thinking out loud really. A final choice is to simply BTL. But we hate landlords with a passion -- and beyond the "if you can't beat them, join them" mentality we just think it's a pretty horrible road to go down...

tldr; Rather than spunking £1500/month into a **** ISA, should we put 90% of our savings into a cheap property up north to get on the ladder?

 

[VincentHanna]

Buying a house, paying a mortgage and not renting it out seems like madness.

Just hire a local firm to look after it all.

 

[Marmot]

I've rented and worked in London for the last five years. In December I got myself a little 2 bed BTL in the South West where I grew up. An agent manages it for me and all I need to do really is my self assessment for tax purposes. I had £50K sitting around so buying a house made sense, but even with 4-5x my salary I still didn't have enough for something in London.

Not many banks out there do a FTB BTL mortgage, I think there was two in fact.

 

[Scam]

Buying a house, paying a mortgage and not renting it out seems like madness.

It's highly unlikely we'd do that, but I guess my question is - why not? We can put away probably £1500 comfortably every month between us. Is that not better to pay off a mortgage than go into a crappy ISA? But yes, this route is probably fairly unlikely to be fair!

Not many banks out there do a FTB BTL mortgage, I think there was two in fact.

Assuming you wouldn't need a BTL mortgage for holiday lettings though?

If you wouldn't mind posting more detail about your finances... I'm guessing you don't cover your mortgage with the rent. So what, you pay out like £100-200/month "towards" the flat and I guess still manage to save something every month for yourself?

 

[Marmot]

I more than cover my mortage with my rental income - Property was approx £150K, got a £100K mortgage and it costs about £500 a month. Property pulls in approx £600 a month after 9% agent fee. Obviously there are many extras you need to consider such as maintenance, landlords insurance, energy certificate, etc. as well as Tax at the end of the year so I don't really make anything.

The plus side is I get to continue to live in my swanky central London appartment rather than some ********, and long before I retire I'll have an extra chunk in my monthly income.

Edit - should add, my mortgage is repayment (eventually own the house) not interest only

 

[Scam]

Sounds like you're doing alright then (part of the reason why BTL is so popular in this country ). I'd love to know how AirBnB hosts get on. Doing a holiday let just "seems" less evil than straight-up BTL and the fact we'd have somewhere in the countryside to have a weekend/time away from London would be lovely. You don't get that with BTL...

 

[Psycho Sonny]

Sounds like you're doing alright then (part of the reason why BTL is so popular in this country ). I'd love to know how AirBnB hosts get on. Doing a holiday let just "seems" less evil than straight-up BTL and the fact we'd have somewhere in the countryside to have a weekend/time away from London would be lovely. You don't get that with BTL...

I think you might be over estimating the demand for your property in terms of a holiday home.

As in it would be easy to rent it out for use as a home and with decent tenants it would be relatively hassle free. Guaranteed income all year round whereas with air bnb it will be seasonal demand. It will be empty a lot of the time and therefore no income. You will also need to pay for cleaners, etc too. If someone rents it for a party or stag doo, etc. You will need decent insurance to cover damages from renting it out too.

Also you do realise there will be running costs? council tax, insurance, electricity, gas, etc. As in if you buy it and leave it empty (not renting it out at all) for 20+ years you do realise all sorts could happen. As in the roof could need replacing after 20 years, damp, leaks, squatters, etc.

I think your idea is terrible personally. Why not just buy in London then sell that in 30 years time to buy somewhere up north? It will increase in value faster meaning you get more for your retirement.

The only good idea I can see is if your parents decide to sell and you combine their equity with your income to buy something in a really nice area and they then live in it until you retire. That could work. However a lot of compromises would need to made I imagine in order to suit everyone's interests.

 

[Russinating]

Assuming you wouldn't need a BTL mortgage for holiday lettings though?

Except you do. Just Google it and you'll find a tonne of resources, such as www.which.co.uk/news/2017/07/could-listing-on-airbnb-put-you-in-trouble-with-your-mortgage-lender.

 

[Scam]

I think you might be over estimating the demand for your property in terms of a holiday home.

Well I'd love to know how often AirBnBers get their places filled. But I'd imagine it's totally dependant on the area etc. For what it's worth the area we're looking at is a touristy area, but not overly so. There would be some demand for holiday lets, there's a number on AirBnB.

You will also need to pay for cleaners, etc too. If someone rents it for a party or stag doo, etc. You will need decent insurance to cover damages from renting it out too.

True, although I think for example AirBnB insure you for that? I've only looked briefly. Seriously though, my girlfriend's parents are retired and would probably jump at the chance to help manage a holiday let (cleaning etc.).

I think your idea is terrible personally. Why not just buy in London then sell that in 30 years time to buy somewhere up north?

Erm, because we can't afford to buy anywhere nice in London. On top of that we are feeling the urge to get out of the city more and more, hence why I'm leaning towards a holiday let, that's available to us when we feel like it at weekends etc. I can't move out of London because of my job, the industry doesn't exist anywhere else. And I couldn't stomach commuting 1hr30+ every day, not yet anyway.

The only good idea I can see is if your parents decide to sell and you combine their equity with your income to buy something in a really nice area and they then live in it until you retire. That could work. However a lot of compromises would need to made I imagine in order to suit everyone's interests.

This is the option I mentioned in the OP. They currently live in a small semi/2-bed up north and to be perfectly honest although it's a lovely house -- it wouldn't be a stretch to find something bigger and better for them (by the nature of moving to a smaller town). The tricky part is persuading her parents to move from the house they've lived in since they got married And I'm struggling to see from my side how good an investment a 3-way purchase would be. Myself, my girlfriend and her parents all chipping in. Then no rent etc. If we're talking purely investment terms I'm not getting a lot back apart from somewhere to live when they pop their clogs.

 

[toshj]

You may as well rent it out. The upsides of "being able to pop back for a long weekend" could invariably diminish depending on how your lifestyle in London changes over the coming years. If you do let it out to tenants for the next 15-20 years, you may have paid of 50%-75% of the mortgage by the time you decide to remove yourself from London and live there permanently. If you supplement that by chucking in your own monthly savings, you could have it paid off a great deal sooner, allowing you to relocate back mortgage-free.

 

[Psycho Sonny]

Well buy somewhere in London which isn't nice then. Beggars can't be choosers. I don't see the point in renting and then buying a house miles away for 30 years time. Buy something in London. Overpay the mortgage and then look to move to somewhere nice within 10-20 years. Then after 30 years sell up and mocm to the country. It's called a property ladder for a reason. But you seem to want what you can't afford and you want it now.

As for no rent in a 3 way split. You also have the upside of their share will become yours when they pass on. They will also maintain and keep the property to a decent standard, etc.

Just because there is already air BnB in the area doesn't mean that there is a huge demand for it. The opposite. Its if you can't find anything to rent and they are all taken then demand is greater than supply. Air BnB get used by prostitutes, etc travelling up and down the country touring. Is that something your parents want to be cleaning up after?

 

[Scam]

Well buy somewhere in London which isn't nice then. Beggars can't be choosers. I don't see the point in renting and then buying a house miles away for 30 years time. Buy something in London. Overpay the mortgage and then look to move to somewhere nice within 10-20 years. Then after 30 years sell up and mocm to the country. It's called a property ladder for a reason. But you seem to want what you can't afford and you want it now.

Because we have a very good deal on our rental place, lovely landlords, amazing area, great commute. There's a lot of upsides. We simply don't want to spend the next 10 years overpaying a mortgage and living in a terrible hole. London life is hard enough as it is.

Say we buy a house up north for £300k and manage to either break even on the rental (holiday let, or longterm) or get the parents to invest and hence go mortgage free. What do we end up with? A £300k property up north. Then imagine we buy a £300k flat in London. What do we end up with? Same outgoings financially, but rather than living in our lovely flat in a lovely area with a short commute, we have to live somewhere we don't know, don't like, etc. So why exactly shouldn't we buy that £300k house up north?

As for wanting what we can't afford, now... Well, isn't us looking to buy outside of London the total opposite of that? What we really want is a 2 bedroom flat in our area for £300k but that ship sailed in 2003 (or something)

As for no rent in a 3 way split. You also have the upside of their share will become yours when they pass on. They will also maintain and keep the property to a decent standard, etc.

That's true.

 

[toshj]

living in a terrible hole.

You do realise that London doesn't just have two different options - it's not just 1) a lovely area or 2) a hell hole. There are in betweens.

I gave up renting in a great area centrally to buy a flat in a less desirable area, but I've enjoyed it more and more as the area has developed around us. There's no benefit in paying rent in your current flat, whilst not renting out a country place for the lengths of time that you're discussing.

 

[mattyprice4004]

I don't get the 'landlord hate' that seems prevalent.
They have an asset, you want to use that asset - what's wrong with that?

Almost seems like pure jealousy just because they own more than one home, and can afford to do so.

 

[Scam]

They have an asset, you want to use that asset - what's wrong with that?

It's been widely discussed on here, and explained pretty well by myself in other threads. Go search. I don't particularly want to derail the thread going into that argument. If you can't see how unaffordable housing is in this country -- and how BTL has been one of the primary causes of that.. well, I dunno, go off and read some articles.

 

[BUDFORCE]

Except you do. Just Google it and you'll find a tonne of resources, such as www.which.co.uk/news/2017/07/could-listing-on-airbnb-put-you-in-trouble-with-your-mortgage-lender.

This is correct, and actually if you want to use it for holiday let/air BnB use you potentially might need some kind of commercial mortgage, it depends on the lender of course, but a lot of them are really twitchy about air BnB use, the mortgage lender I work for will just decline the application if there is even a whiff of it.

Also the fact you live and work in London will be a dead giv away if you try and get a cheeky residential mortgage. Don't ever let some ******** mortgage broker talk you in to lying, they don't care just want their commission. Despite what you might think with automation etc, mortgage applications are checked pretty thoroughly.

 

[Fusion]

What do you do that can’t be done outside of London? You could probably take a pay cut and have a property in a different league to what you have now.

 

[Spook187]

Which part of the north are you thinking about.

 

[200sols]

I don't get the 'landlord hate' that seems prevalent.
They have an asset, you want to use that asset - what's wrong with that?

Almost seems like pure jealousy just because they own more than one home, and can afford to do so.

Because people can’t buy a house of their own, all the houses are bought up and rented out and the rent is higher than the mortgage would be. It’s greed for a few at the expense of the many.

 

[BongoHunter]

My partner and I are currently looking at this exact scenario, we rent in a nice bit of West London and love the place - the location is fantastic for both of us for our commutes and there's loads of great things to do and places to go nearby.

But buying here is completely unaffordable and we want on the ladder and are struggling to find something nice nearby - so we're looking to buy a small place on the south coast and let it out for a few years until we're done with London - looking at doing corporate let type thing to a company local to the property as it seems less hassle than if we have 'proper' tennants - so that kind of arrangement might be worth a look

Ignore the haters - most people have awesome morals when it's not their own money and life