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First Home & My Future Strategy Plans, Am I Thinking Right?


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Hi everybody!

 

So I'm in kind of a unique position, I'm looking at buying my first home alone and have a few ideas for how things might go going forward. I was hoping that if I listed some of my plan, whether you guys would mind reading over it and with your much better judgements, knowledges and experiences than me, offer me any advice/suggestions that might come to mind?

 

So,

 

  • I'm coming 22, still living at home but in no rush or immediate need to leave
  • I have approximately £50k in savings
  • Earn approximately 45k per year before tax (but am self-employed so this isn't exactly set in stone - I do also have 2 mortgage agreements in principle already so don't need to worry about the effects of my self-employed status on this)

 

I'm looking at buying my first home, probably a semi-detached 3 bed house in the region of 140k in my own name, with the potential to spend up to around £15-20k on improving it/adding value if possible. I'd look to make the kitchen/dinning rooms into one, decorating throughout, possibly extending into the loft since I'm a plasterer by trade so could do a lot of that work myself, and adding a driveway to the front.

 

I'd be looking at a 25year repayment mortgage with a 15% deposit of around £20k, leaving me with £30k to develop the property, pay fees, buy furniture and have a decent emergency fund left over since I'm on my own and self-employed.

 

I'd also be thinking of having it on a 2 year fixed rate, so until I was 24 before re-evaluating.

 

In the future, if I ever met a partner, I'd plan if locally for them to move in and then potentially buy in to the mortgage, or otherwise to buy a new house in joint ownership in our names while transferring my own property into a ltd company and renting it out as the start of a portfolio in my mid 20's with ambition to grow this portfolio into my 30's and beyond. This would also give me some security of a home to return to if ever needed.

 

I'm looking at buying now over continuing to remain at home, as I'm getting to the point where I have the funds saved and feel I need to beginning doing something with them (you can only hold so many current accounts and monthly savers!!) as apposed to just hoarding more and more. I also want a project to work on on the side and I feel I could learn a lot from that, and I think I'd gain personally by taking the leap and being fully independent as well.

 

How does this plan sound? Does it sound good or bad? Is there anything you'd suggest, agree with or advise against? Any tricks you think I might be missing?

Any other questions, obviously please just ask!

 

Thank you for reading!
Joe

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Hi Joe

 

Welcome to the Hub and congrats on having a pot of savings and thinking about your strategy at such a young age. I wish I had started earlier!

 

Strategy sounds solid as it's all about creating or adding value to the property whilst trying to find consistent and happy tenants.

 

Just a couple of points to remember when considering your strategy:

 

Borrowings: you mention having a a repayment mortgage and 15% deposit. Generally, buy-to-let mortgages have a 25% deposit, with some lenders offering 20% but usually at higher rates. Also, consider interest only to help cashflow and snowball your portfolio growth. 

 

If your current decisions in principle are for your own residence, then you'll most likely need to get a BTL mortgage instead if you won't be living in the house. Another option might be to live in the house and rent out the other 2 rooms. That way, you can keep your residential mortgage and get up to £7.5k tax free in the rent a room scheme.

 

Consult a mortgage broker to discuss your BTL borrowing options 

 

Tax: if you're currently self employed, do you have an existing limited company that you're a director of? If so, you can potentially set up a new limited company for the property investments and loan between the companies the deposit. There's additional costs involved, extracting funds from the company are most costly tax wise, andrtgage rates tend to be slightly higher so you need to weigh up the costs/benefits. Flip side is corporation tax is 19% and S24 doesn't apply to limited companies (for now).

 

If you buy the Property in your own name now and transfer it to a limited company later, you'll need to consider stamp duty and any capital gains as it's another transactional cost. So better to plan ahead now.

 

• Future thoughts: with the uncertainty of Brexit this year and the 18-year property cycle forecasting a dip in prices in 2024/25, ensure you have sufficient cash in the bank. This will help keep the properties going in any slowdown and assist with meeting any shortfalls if you're trying to remortgage and don't meet the PRA tests. 

 

All the best, keep working at it and most importantly take some action when you're ready! You're off to a solid start.

 

 

 

Personal Blog: https://abcdad.co.uk
Property Spreadsheet and Deal Analyser: https://abcdad.co.uk/property-spreadsheet
Looking to read some Property books? https://abcdad.co.uk/books/property-books
Follow on Instagram: @abc.dad

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Hi Joe,

 

Great to see you are ready to buy your first home!!

 

It sounds like you have a solid plan ahead of you, and have taken into factors that most people don't.

 

Definitely agree with Derek and consider the points he's made but otherwise it looks like you're ready to start.

 

Good Luck, and keep us posted about how you property journey goes!

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  • 2 weeks later...

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