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To buy or not to buy. That is the question

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  • To buy or not to buy. That is the question

    Hi all,

    A property has come to my attention that has a very good amount of equity. However, there are other reasons I might not buy. It is a repossession.

    Here is the info.

    - Current asking price : 169,000
    - I will probably offer : 160,000
    - Sold price in 2006 : 239,500
    - Potential rental income : 650 per month

    The problem.
    - Requires 25% deposit, therefore even at my asking price, 40,000
    - Financial institutions requiring that you keep the property for 6 months before remortgage or sell (thereby locking up my 40K deposit)
    - Low rental yeild, in fact, so low as to not allow a re-mortgage.

    I really want to get into property investment and I think it is a fantastic time to do it at the moment. However, it seems to me that as the banks are not making any money, they don't want anyone else to make money either. (Banks have always been selfish, but this is taking the biscuit, especially as my tax money has been unselfishly given to them.)

    I know that the money is made on the purchase price AND by keeping hold of the property. However, in order to realise the potential massive profit for further investment, and the issue of low yield, I think this one is for buy and re-sell.

    What would you do to be able to make the above purchase work?

    Thanks.
    Community spirited? http://www.AshfieldFOCUS.com

  • #2
    Hi,

    Sorry to sound negative, but buying at £160k @ only £650/m rent?? Thats peanuts...

    When you say there is a very good amount of equity, what was that assumption based on? Forget what it was sold for in 2006 - that has no relevance as to whether it is a good deal NOW. What matters is the open market value of the property NOW, what you're going to offer, and what your property strategy is.

    I personally think the yield is too low to even warrant getting out of bed. As for buy and sell, when were you thinking of selling? It's a falling market, and if you're really thinking of selling, you will need to hang on for a long time. I personally would go for a longer term mortgage deal (say 3-5 years) to avoid getting caught out on the LTV ratio if you have to remortgage.

    There are plenty of properties for sale at the moment, so there's no need to rush. Just make sure you carry out your due diligence, and RESEARCH RESEARCH RESEARCH!!

    Hope this helps.
    www.propertyinvestmentleads.co.uk

    "Exclusive deals for the serious investor"

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    • #3
      Hi,

      Yes, I know the rent is very low on this, but the potential profit is still very good for a quick turnaround on sale.

      The equity based on 2006 price is just over 33%. Now, all the agents, news, property experts etc. are saying that prices have only fell about 20% in the past year (prior to that, they were still rising), which still leaves a good amount of equity in the property.

      Even if I don't realise the full £80,000 equity on resale, it would be extremely unlikely to still not make a good profit. The property may have to be used for rental at a slight loss to realise the overall profit.

      So, with that info, at the moment, I still think it is a good buy, even though I may have to part cover a mortgage for a while.

      I know I could say buy 3 smaller properties and make as much and get a better rental yield, but at this early stage, in order to get enough money to be able to re-invest, this one property could go a long way to doing that.

      However, the question still remains. Even if I don't go for this property, whatever happens, my deposit(s) will be tied up and I want to give up my current career (computer programming). How can I achieve a fast turnaround in order to realise my deposit back and re-invest?
      Community spirited? http://www.AshfieldFOCUS.com

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