With Covid-19 causing huge problems this year, I thought I would write a post on how you can potentially use this or any downturn to your advantage (Although we are still yet to see a downturn in the property market). Getting on the property ladder can be difficult when times are good, but what about when times are not so good? Can you make it work for you?
This is my story of when I purchased my first home in 2012 at a time when house prices were still struggling following the recession in 2007. Admittedly things do not feel anywhere near as bad as they did in 2007-2013, there are far less redundancies than there were during that period and unlike then, mortgage lenders still want to actively lend, so there may not be quite the same opportunities as then, but there could still be a chance to benefit from the climate we are in.
My Success story
After the recession hit in 2007, there were mass redundancies and houses prices plummeted very quickly in many areas – unfortunately not in area I wanted to move to. However, about 2 miles down the road house prices were hit. Added to that, I also managed to find a property that had been owned by an elderly man so was quite dated which helped to lower the price and desirability (or competition from other buyers) of the property I ended up buying.
With a little research, I could see the property was worth around £120,000 if it was in a nice condition and to get it to that condition it would probably cost around £10,000-15,000.
I purchased the property in 2012 for £84,000 and spent around £12,000 on the property over the next couple of years (I managed to call in some favours from friends and family) which was spent on a new Kitchen (it was older than me), bathroom (which was an avocado suite), installing Gas Central Heating (as it ran on storage heaters), a rewire, new doors, and a complete redecoration of every room – so all in it cost me around £96,000.
I also lived in the property at the time and as the mortgage was small, it cost me less in repayments than it would have done to rent – around £350 p/m compared to around £650 in rent, this also helped to make it a good investment.
By the time I had renovated the property, it had gone up in value as the economy had picked up and house prices had started to go up also. We ended up selling the property for £155,000. Which meant we had seen an increase in value of £59,000 after the cost of the renovation work.
That one decision gave us almost an additional £60,000 to put down on our family home, which combined with the deposit put down when I purchased the property originally and the amount built up in equity from repaying the mortgage, it enabled us to move into our “forever home” to start a family.
It was a slow burner, done over 4 years, but without it we would never have been able to afford to buy in the area we live in.
Summary
Things may look a little turbulent at the moment, but if you do have a stable job, you can potentially use any downturn to your advantage in order to achieve your longer term goals. Finding a deposit for a cheaper property is easier than a more expensive property.
Paying a smaller mortgage will likely also be cheaper than renting, meaning you can also save up faster and if you can find a property that needs some modernising you may also find you can purchase the property for less than its true value and build in some value by bringing it up to date at the same time as putting your own stamp on the property – which you would likely be doing anyway.
Finding “that” property can take time, I think it took me around 3-4 months of searching daily, but it can set you up for life even if it takes a few years to all come together.
Although we are Mortgage brokers, we are here to offer help and advice on how you can achieve your goals, both short term and longer. Please do get in touch if you would like a chat, we are not just mortgage brokers, we have experience of buying “doer upper” properties having done a couple over the years, so we can also help with pointers on that front also… You can learn from my mistakes.