To Mortgage or not to Mortgage!!!

[eamonheggarty 14]

Hi All, 

Would appreciate some advice on a BLT im currently about to proceed with. I know there will be differing views on this however im just looking to see what you all think of the below: (Note as its situated above a pub ,lending has been incredibly hard to get and Covid has de risked all banks by the looks of it) 

Glasgow, 2 bed flat, City center. 

Value = £150k

Purchaser Price = £128k @ 75% LTV

Renovation costs £9k 

End value = £175k

Mortgage = 3 Year fix @ 4.64% = £360ish/ month mortgage 

STA Rent £850/month,  Air B&B £1600>£2600 conservative 

 Question: Would you walk away from this deal due to the mortgage rate being terrible. Plan is to refinance in 1/2 years when the banks are back to normal (hoepfully).

Thanks,

Eamon

[julia urquhart 173]

I would be concerned about buying above a pub full stop. Who will want to rent it and what happens if the pub closes?

[eamonheggarty 14]

@julia urquhart

The pub has actually be vacant for the past 6 months. If this was to change to offices / cafe / barbers then the value of the property again would increase. 

Going down the Air B&B route im sure location and quality of accommodation would take precedence too? 

[julia urquhart 173]

Would you rent a property above an empty pub? I would be concerned that either it would become a pub again and be noisy or that it would undergo conversion and undergo building work!

Just be sure you are considering all aspects not just the ones that appeal to you!

Can't comment on Air BnB other than to say it is becoming more regulated so do your research.

[eamonheggarty 14]

@julia urquhart

If the sound insulation is adequate i wouldnt see why not. And for the numbers detailed above would you believe a £22k Below value purchased would be something to push forward with?

Yep thanks for challenging as its always good to hear and consider other points. 

Whats your thoughts on the Mortgage %? 

[julia urquhart 173]

Sound insulation will not prevent rowdy pub leavers disturbing you at night or builders starting work at 7am! But that is your decision.

Why are they prepared to accept £22k below value? Who set the value? Was it too high initially? if it is such good value why has no-one else bought it? 

The mortgage rate is high - but if its the best you can get you have no choice. Will it affect your future mortgage options or those of a prospective purchaser?

All things to consider!

Good Luck

 

[eamonheggarty 14]

@julia urquhart

Would triple glazing and sounds insulation work  haha? 

RICS set the value at £150k (In Scotland a home report has to carried out in order to sell a property, fairly rare you can purchase under Home report). £128k as the seller is motivated to sell and now has moved to the USA. 

Can you elaborate on "future mortgage options" would me accepting a bad rate now put other lenders off in the future? Or do you mean the property in general for future motgage options? 

Thanks again 

[julia urquhart 173]

I meant the property - in 3 year time will you be able to remortgage at a sensible rate or will you go onto an even higher variable rate? Will other buyers find it difficult to mortgage in the future?

In the end you are best placed to decide if it is a good buy - I am just pointing out possible pitfalls.

Good luck  

[jamese 0]

We had a  broadly similar situation with a mixed use property (bought for cash as the deal was too good to miss!).  We now have an possible offer for a mortgage at a similar rate.  Way I see it is that the ROI is still excellent with the mortgage (14.9%) so we are happy to go with it almost irrespective of the mortgage cost.  Just my own perspective......:-)