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Thread: buying a house

  1. #1
    I'm considering buying a 3 bed house in Bristol, my sister would go halves on the mortgage and i would live in and act as landlord to rent out 2 bedrooms. I've done all the calculations so i'm pretty sure we can cope with interest rate increases or downturns in the rental market in bristol, but the killer in deciding whether its worth it or not, is the possibility of a house price crash

    http://www.housepricecrash.co.uk
    flash movie on the subject

    my general feeling on it is that there must be some limit on how high house prices can go and given that its getting really hard for first time buyers then it must be close to that limit. Also the number of insolvenices each year is rocketing and loads of people are taking all the equity out of their houses to fund their debts (and this keeps the economy buoyant), plus lots of people expect interest rates to creep up over the next several quarters so i'm thinking theres bound to be a recession/house price drop some time soon and houses won't be worth the same for about ten years.

    But then i look at the graphs and for the last house price crash, house prices didn't actually fall much, instead it was just that house prices dropped a little and inflation/interest rates were really high so the real value of the houses crashed but in terms of number of pounds they didn't. Also i would be renting out 2 rooms and i don't think rental rates change as rapidly or as much as house prices so it shouldn't affect me so much.

    Anyone got any advice?

  2. The Drawing Room   -   #2
    Agrajag's Avatar Just Lame
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    The Bank of England will raise the base rate by a quarter percent in the near future. So if you don't get a fixed rate that will be a factor.

    You will have to declare the rental income to the Inland Revenue and pay tax on it.

    Given that you are using the property as a business you may also have to pay tax on the property increasing in value.

  3. The Drawing Room   -   #3
    Colt Seevers's Avatar P()()p!3 $CR/-\P3R$ BT Rep: +3
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    Housing market is a nightmare at the moment, for prospective first time buyers. From personal experience I just hope the bubble bursts soon...not like an 80's style crash (negative equity) just to a level that is afforadable.... I rented for awhile but thats just throwing money away....< sorry bit of a brain fart there.
    Last edited by Colt Seevers; 09-07-2006 at 10:48 PM.

  4. The Drawing Room   -   #4
    Agrajag's Avatar Just Lame
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    Quote Originally Posted by Colt Seevers View Post
    Housing market is a nightmare at the moment, for prospective first time buyers. From personal experience I just hope the bubble bursts soon...not like an 80's style crash (negative equity) just to a level that is afforadable....
    Won't happen.

  5. The Drawing Room   -   #5
    Colt Seevers's Avatar P()()p!3 $CR/-\P3R$ BT Rep: +3
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    Quote Originally Posted by Agrajag View Post
    Won't happen.
    ok.

  6. The Drawing Room   -   #6
    Busyman™'s Avatar Use Logic Or STFU!
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    Weird, your market sounds like ours.

    I don't really KNOW your market but based on the surface I recommend you buy.

    In my area, if you owned a home around Sept of '01 then you made out like a fat rat.

    We were in a recession and then 9/11 happened so the fed cut interest rates spurring people to buy homes.

    This cause demand to rise and so did home prices. During this time though (the last 5 years) it was a great time to buy. You paid a little bit more for you home but got a great interest rate. Those that already had homes refinanced and in many case went to a 15-year mortgage (which gets an even lower rate) as opposed to a 30-year.

    Now what we are seeing happen is a gap between the haves and have-nots. If a person doesn't get a home soon then later (cos real estate only drops but so much) they'll pay for a high costing home and have high interest. The fed just stopped raising rates recently and homes have not dropped significantly. I talk with teens and 20-year olds often about 'buying a home, buying a home, get in a home, get in home and don't wait'.

    Some small tidbits....our real estate market was drummed mainly by investors and short-term owners flipping houses.

    I buy...to sell...to another...that buys....to sell. They use their profits to buy more property...to sell....and thus a faux market boom. Interest-only loans were and are still prevalent with investors and those trying buy homes to live in that they really can't afford.

    The only hesitation I would have is that if the market took a downturn,would it make you have to charge significantly less for rent thus making you and sis eat the difference. Run-On A good lengthy lease agreement could you help with that.

  7. The Drawing Room   -   #7
    peat moss's Avatar Software Farmer BT Rep: +15BT Rep +15BT Rep +15
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    Saw a sign on a house for sale last week thought it was a great idea .

    http://www.tradeahomewithme.com/index2.shtml


    I forgot to add the id # 3060 is one my wife and I were looking at . On the left menu under quick find .
    Last edited by peat moss; 09-09-2006 at 05:51 PM.

  8. The Drawing Room   -   #8
    Tempestv's Avatar Engineer
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    I have heard that on average nationwide in the united states, the housing market is down for the first time in a couple of years. here in Bozeman, or pretty much most of western montana that isn't the case though. there is still a huge housing boom going on- single bedroom condos are going for $150,000 and are considered low income housing. If I can, I hope to be able to buy a bare lot here in the future and build my own house on it. Unfortunatly most of the lots I am seeing would be better suited for a spec home, not somewhere i want to live.
    Plan for the worst, hope for the best

  9. The Drawing Room   -   #9
    ghurka's Avatar Welsh Bhoy BT Rep: +5
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    As with everthing in life its a gamble but property is still the best investment in the present climate.

    If you're renting at present and its a choice between renting or buying then you have to do some research on your area. I know that in some areas in the UK, for a first-time buyer, it is more beneficial to rent despite the rent being "dead money".

    As for the tax consequences (I know what I'm talking about here) as it will be your private residence you will not pay any capital gains tax if you have one lodger but may if you have two....but that is only if you sell the property. Your sister would have to pay capital gains tax on any gain she has made regardless.

    On the income tax side there is an allowance called rent-a-room relief which you can claim against the rents if the lodgers actually share the common parts of the property (kitchen, lounge, bathroom). Have a look at this.

    Just got to make the decision thats best for you.

  10. The Drawing Room   -   #10
    Agrajag's Avatar Just Lame
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    Quote Originally Posted by ghurka View Post
    As with everthing in life its a gamble but property is still the best investment in the present climate.

    If you're renting at present and its a choice between renting or buying then you have to do some research on your area. I know that in some areas in the UK, for a first-time buyer, it is more beneficial to rent despite the rent being "dead money".

    As for the tax consequences (I know what I'm talking about here) as it will be your private residence you will not pay any capital gains tax if you have one lodger but may if you have two....but that is only if you sell the property. Your sister would have to pay capital gains tax on any gain she has made regardless.

    On the income tax side there is an allowance called rent-a-room relief which you can claim against the rents if the lodgers actually share the common parts of the property (kitchen, lounge, bathroom). Have a look at this.

    Just got to make the decision thats best for you.

    Arghh, a taxman and a Welsh one. Do you and manker sometimes have fights.

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