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Hi everyone, 

Just hoping to get some advice on a strategy dilemma I am in as I want to make sure I am making the best use of my money. 

I am currently living in a shared ownership flat (where I own 50%). I have savings to buy the remaining 50% this year, but I am not sure whether to proceed and buy the remaining 50% or continue to save my funds to put towards a BTL property next year. 

Subsequently I think I have two options but am struggling to work out which way I would get best value: 

  1. Purchase the remaining 50% of the property this year with my savings. Then continue to save for a BTL, which will take me approx. 2 years to get the required funds. 
  2. Don't purchase the remaining 50%, continue to save and look to purchase a BTL next year with a view to purchasing the remaining 50% at some point in the future. 

Only issues are around property prices increasing, which could make buying either property slightly difficult. 

Look forward to hearing your thoughts, thanks in advance. 

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  • 1 month later...

Do the math. 

For example, if 50% of the shared property is worth £100,000 and you are paying £5,000 extra rent, and you believe you'll miss out on a £5,000 price increase, then your effective 'roi' or saving would be 10% per year on that £100k, meaning investing that £100k will make you 10% better off in a year. 

If you can take that 100k and get a better 'return' or value out of it (however you look at it) then it may be worth investing in a BTL - example, if you could invest £100k and somehow get a larger return than 10%. 

Of course, a BTL has risks such as a non-paying tenant, damages, hidden issues, legal fees, refurb cost. In the same regard, your property has a risk of going down in value, or incurring you additional costs. 

 

BTL income is also subject to tax, whilst you will save your 'rent' and when you sell, any 'profit' from a property price increase will be tax free as it is your main residence. 

 

 

 

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Given that shared ownership is a scheme to help people who cannot afford to buy an entire property get on the housing ladder, I would not be surprised if you were not allowed to purchase another property so check your T&Cs.

Personally, I think it is important to secure you own home before starting on the BTL route. A bad tenant can result in losses and you do not want this to put your own home at risk. If you have enough in 'savings' then why not buy the remaining 50% with a combination of mortgage & savings in order to boost your deposit for a BTL?

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  • 2 weeks later...

Hi All, thanks for your responses - really appreciated. 

I have liaised with a mortgage advisor, in the meantime and we both agreed that it would be better for me to take option 2 as it enables me to get started on my property journey as well as earn an income. There is also the potential added bonus that if the property I am currently living in increases in value, I can use the increase in my 50% share to use as a deposit for the purchase of the remaining share. 

I appreciate the comments relative to the T&C's and have since checked my Contract and lease agreement, both of which do not mention anything about purchasing any further properties. My Contract is with the council and upon buying my original 50% share, they advised me that I will be denoted as the owner of the property and it should be treated as such.

I possibly should've made it clearer in my first post that I don't have the 'savings' to purchase 100% and will be using a mortgage product. But still, the numbers work out better for me if I use option 2. 

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