Funds Insider - Opening the door to funds

Welcome to the Citywire Funds Insider Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error
Need Some Advice On My First Property
+ Reply to discussion
Options
ArcticPanda
Posted: 27 November 2013 16:52:37(UTC)
#1

Joined: 27/11/2013(UTC)
Posts: 9
Hey guys. I'm new to the forum, so i'll give a little backstory on me and how I got onto the forum.

So, I'm 19 years old, and currently studying Accounting with Corporate Finance in Edinburgh. I've always had an interest in finance from a young age for some weird reason.

I currently rent a flat with my friend, and it comes to just over £400 per month each.

Recently, I had the idea to possible get my foot in the market some time next year, and get started sooner rather than later. I'm by no means an expert in this field, so that's why i've come here to find more knowledge and seek help.

My plan, so far, is to look for a 2 bedroom flat in a "promising area". IE - One that isn't necessarily already busy and thriving, but one that I could see being there in 5 years or so. Live in it, for 4-6 years (Until i'm financially stable enough to increase my portfolio of property when i'm - fingers crossed - a fully qualified accountant), and then after I "move on" so to speak. Start renting it out, to get around about £800-1000 a month from rent.

In the 4-6 years while i'll be living there, I'll obviously have a spare room, which I'd likely be renting to a friend (Likely the one I live with currently). This would obviously bring down the monthly mortgage payments considerably...quite likely to make it less than I'd be paying to continue renting a flat.

As I said before, I'm definitely no expert, and I've not really got anyone in the family who's an expert I could ask either. It would be great to hear some advice, and criticisms.

Is this a possibility? Or should I just forget about it?
Back to top Quote
SKH
Posted: 27 November 2013 18:21:06(UTC)
#2

Joined: 03/01/2012(UTC)
Posts: 1
I may be missing something ArticPanda, but do you currently have any earnings? These days banks do like to see some money coming in before advancing you a mortgage!

A few words of caution:

- the property "ladder" is not necessarily a one-way journey. Prices can go down, sometimes a great deal, and interest rate rises in the next few years may well be the catalyst.
- Edinburgh property prices are by far the highest in Scotland. Might be worth waiting for the independence debate to play out before investing.
- the best protection against price falls is to buy an attractive property in a good location where demand is already well established, but there are still no guarantees.
- do you want to take on a lot of debt and worry in your early 20s? I would have thought a student loan would be enough of a burden!
- property investment these days, particularly for a landlord, is not an easy way to make money. Rental yields barely cover mortgage costs so you are reliant on price appreciation for returns.

Other than that, it's not a bad plan. But take it from someone 30 years older than you, also educated in Edinburgh - focus on having fun in your 20s when you're in the early stages of your career! And put any spare cash into ISAs and a pension and invest aggressively.
Back to top Quote
TJL
Posted: 27 November 2013 20:49:24(UTC)
#3

Joined: 14/03/2011(UTC)
Posts: 1,630
Dead simple - buy a practical, attractive property in an acceptable area, and rent it maintained to a tasteful standard at a reasonable rate.
Property has made lots of people lots of money over many years (and will probably continue to do so for the astute), but don't make assumptions (read the post by the chap who bought a property in Detroit).
I might end up in your situation when my daughter goes to university in a year or so, when I am considering following my own advice, but otherwise, beware, I don't know what I'm talking about!
Good luck.
TJL
Back to top Quote
 |  Edit by user
ArcticPanda
Posted: 28 November 2013 00:30:23(UTC)
#4

Joined: 27/11/2013(UTC)
Posts: 9
TJL;21844 wrote:
Dead simple - buy a practical, attractive property in an acceptable area, and rent it maintained to a tasteful standard at a reasonable rate.
Property has made lots of people lots of money over many years (and will probably continue to do so for the astute), but don't make assumptions (read the post by the chap who bought a property in Detroit).
I might end up in your situation when my daughter goes to university in a year or so, when I am considering following my own advice, but otherwise, beware, I don't know what I'm talking about!
Good luck.
TJL


Thanks for your input!
Back to top Quote
sandid3
Posted: 28 November 2013 06:58:55(UTC)
#5

Joined: 18/02/2013(UTC)
Posts: 651

Thanks: 450 times
Was thanked: 939 time(s) in 385 post(s)
ArcticPanda;21838 wrote:
So, I'm 19 years old, and currently studying Accounting with Corporate Finance in Edinburgh...

My plan, so far, is to look for a 2 bedroom flat in a "promising area".

As an oldie I weep that this seems to be the height of a young person’s ambition today.

My suggestion is to get qualified, get a job in Australia or any developing part of Asia and (please don’t be offending because I do mean this in the kindest, literal way) get a life.

Very best wishes, Sandid3.
Back to top Quote
1 user thanked sandid3 for this post.
Alan Anderson on 28/11/2013(UTC)
Zippy
Posted: 28 November 2013 07:27:45(UTC)
#6

Joined: 02/10/2012(UTC)
Posts: 13
Great sensible plan but I can't see how you would be able to get a mortgage when you are a student. ( I had no money when I was a student)

Now that I am retired and after seeing a little bit of the world I too would say get qualified and party a little and look at Australia or some vibrant fun place to be and live and bring up a family.
Back to top Quote
antigricer
Posted: 28 November 2013 09:38:11(UTC)
#7

Joined: 23/10/2007(UTC)
Posts: 12
If you do rent out a room, to your friend, in the property that you intend to buy and live in the property yourself the rental income up to £4,250 per annum will be tax free under the Rent a Room scheme.

If you receive in rent from letting the room in excess of £4,250 the excess will be taxable.

Good luck!
Back to top Quote
Alan Selwood
Posted: 28 November 2013 14:25:24(UTC)
#8

Joined: 17/12/2011(UTC)
Posts: 3,379
I, too, was wondering how a 19 year old student would be able to get a mortgage! Especially if you have a student loan borrowing as well to repay when you start earning enough.

Even the most optimistic lenders seem to want some evidence that there will be repayments of the money they lend, and where would they get that reassurance? Unless, of course, you have means that are very untypical of the average student (in which case, why are you renting now?)

The comment about tax-free rental income is a sound point for when you are in a position to 'own' a property and rent out a room.

Given the currently still overpriced nature of UK residential property relative to average incomes, you could do worse than consider some of the other comments about places abroad - though Australian house prices are not cheap, given the mining boom of the last few years and the strengthening of the AUD v. the UK£. Sydney prices are very high - Perth prices were much less so the last time I checked. In NZ, keep away from central Auckland, where demand has forced prices to insane levels - elsewhere, they are much more affordable for UK expats with cash, though NZ salaries are nothing special, so their houses are generally not very affordable for most. On the other hand, Germany did not have a housing boom like those of most 'Western' countries, since there is a high proportion of renting rather than borrowing - you may strike lucky there.

At least your type of qualification will, in due course, allow you to take more of a global view of where to live than many people coming on to the labour markets in the next few years.
Back to top Quote
ArcticPanda
Posted: 28 November 2013 14:46:20(UTC)
#9

Joined: 27/11/2013(UTC)
Posts: 9
I don't have a student loan to begin with. I also live in Scotland, so therefore do not pay tuition fees.

To answer your question of "Why are you renting now?". It is just the norm to do for a student, isn't it? When I was in my first year of university I wasn't thinking of the future and how I could potentially benefit from property investment etc. I was spending my time in pubs and clubs, as your average student quite often does.

I wouldn't say i'm your average student when it comes to finances, I suppose. When I was 15, my grandmother passed and left me a reasonable sum of money, and instead of letting it sit in a bank account, I gave it to my mother to purchase 2 flats with (Obviously a 15 year old can't purchase property). Long story short, my auntie lives in one of them and has recently been diagnosed with cancer, and has very little chance of surviving another year. In addition to this, my other tenant is a bit of a pain. Therefore, dependant on my auntie's situation, I'd likely be selling the flats which are back where my parents live (I moved to Edinburgh for university).

In addition to the funds from the flats, I have also been "self employed" to an extent since the age of 16. Designing and maintaining several high profile websites in my area. From the web design aspect of work, I've spread my knowledge into different, yet similar fields, and currently get my main income from Internet Marketing (I'm the annoying git placing ads on websites! ha!)
Back to top Quote
Roydo
Posted: 28 November 2013 14:58:47(UTC)
#10

Joined: 10/02/2012(UTC)
Posts: 101
ArcticPanda;21853 wrote:
I don't have a student loan to begin with. I also live in Scotland, so therefore do not pay tuition fees.

To answer your question of "Why are you renting now?". It is just the norm to do for a student, isn't it? When I was in my first year of university I wasn't thinking of the future and how I could potentially benefit from property investment etc. I was spending my time in pubs and clubs, as your average student quite often does.

I wouldn't say i'm your average student when it comes to finances, I suppose. When I was 15, my grandmother passed and left me a reasonable sum of money, and instead of letting it sit in a bank account, I gave it to my mother to purchase 2 flats with (Obviously a 15 year old can't purchase property). Long story short, my auntie lives in one of them and has recently been diagnosed with cancer, and has very little chance of surviving another year. In addition to this, my other tenant is a bit of a pain. Therefore, dependant on my auntie's situation, I'd likely be selling the flats which are back where my parents live (I moved to Edinburgh for university).

In addition to the funds from the flats, I have also been "self employed" to an extent since the age of 16. Designing and maintaining several high profile websites in my area. From the web design aspect of work, I've spread my knowledge into different, yet similar fields, and currently get my main income from Internet Marketing (I'm the annoying git placing ads on websites! ha!)


Good for you mate. Sound that is. Wish you every luck, but I have a feeling you wont need it!
Back to top Quote
3 Pages123Next page
+ Reply to discussion

Markets

Other markets