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Good idea or not?

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  • Good idea or not?

    Hello a bit of advice needed.

    In 2011 I bought a cottage which we stay in, in the Scottish Highlands. We bought it for £60,000 renovated it and it was valued recently at £105,000.

    I have now been offered a house by a family member. The house is a 4 bedroom detached house in a rural setting. It has been valued at £170,000 but he will sell it to me at £80,000.

    If we did buy the house we would rent it as we dont have any kids yet.

    Do you think it would work in my favour to buy this? I hope to buy other properties in the future to do up as a hobby business. Will the capital from this deal work in my favour?

    Also if I were to buy this house as I have £45,000 in capital now tied up in my house since it rocketed in value would I need a deposit or would banks likely lend using my capital as a deposit?

    Thanks
    G

  • #2
    Re: Good idea or not?

    Hey Benbecula,

    Although the offer of a £170,000 house for £80,000 sounds like a dream (I wish people would offer me this sort of stuff) you need to get your figures right to understand if this is a good deal.

    1. Is the house actually worth £170,000? You need to feel reasonably comfortable with this.
    2. A mortgage at £80,000, would the rent cover this? Is there rental demand in the area? If the house is at the top of a mountain, I'd put demand for this house as low.
    3. Is the house in good condition or crap? Have you seen the inside and identify any repairs- and how much these will cost?

    Do the figures and then you'll see if it's a good deal.

    Will the Capital from this deals work in your favour? Well, you'll probably have to release the equity from your current house to invest in the new one. This means a higher mortgage for you.

    With regard to you deposit - yes the banks should accept your release of equity as a deposit.

    Good luck with your project - I envy you.

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