Brief Summary
In this video, Abigail shares her regrets about buying her first property in the UK, aiming to advise others. Key points include making emotional decisions, buying a new build, leasehold issues, purchasing in her name, opting for a ground floor one-bedroom flat, and restrictions on using the flat for Airbnb. She advises thorough research, understanding contracts, and considering freehold properties and houses over flats.
- Avoid making emotional decisions when buying property.
- Be aware of the depreciation of new build properties.
- Understand the implications of leasehold versus freehold.
- Consider the long-term implications of buying property in your name.
- Thoroughly read and understand property contracts, seeking legal advice when needed.
Introduction
Abigail shares her experience and regrets about buying her first property in the UK in 2017 after working in a bank for 8 years. Having owned the property for over four years, she has learned valuable lessons and aims to advise and encourage others to make informed decisions and avoid similar regrets. She emphasizes the importance of doing things right the first time.
Regret #1
Abigail's first regret was making an emotional decision to buy a property. Tired of sharing space with roommates and dealing with the inconveniences of renting, she rushed into buying a flat without proper research. She didn't take the time to ask enough questions, assuming that having a lawyer and mortgage advisor was sufficient. She advises taking time when buying a first property and not rushing due to rental frustrations, as making the wrong initial choice can lead to long-term issues.
Regret #2
The second regret was buying a new build flat. While new builds appear attractive with their modern features and the appeal of being the first occupant, they often come at a premium and depreciate quickly. Abigail notes that the value of her new build depreciated significantly within a few years, aligning with older properties in the area. When she considered selling after four years, the valuation was 7-8% lower than her purchase price, resulting in a potential loss of tens of thousands of pounds, despite the property being in London where prices are generally higher.
Regret #3
Abigail's third regret was that the property was a leasehold. Most flats in the UK are leaseholds, meaning the land is leased, resulting in ground rent and service charges. While the ground rent was manageable at around £240 per year, the service charge was a significant issue. Despite being told that service charges would increase at the rate of inflation, they increased dramatically each year, nearly adding a thousand pounds annually. As a homeowner, she felt compelled to pay these charges, making it feel like uncontrollable rent. She wishes she had bought a freehold property instead.
Regret #4
The fourth regret was buying the house in her name. She bought a one-bed flat due to the emotional desire for her own space, without considering future plans. Later, she realized she couldn't easily rent it out because she would need to inform the mortgage lender and switch to a buy-to-let mortgage, requiring reassessment. Additionally, she had used the Help to Buy scheme, which stipulated that the flat must be her primary residence and could not be rented out. Even if she switched to a buy-to-let mortgage, she couldn't deduct the mortgage interest from the rental income before being taxed, making it financially unviable due to her higher tax bracket.
Regret #5
Abigail's next regret was buying a one-bedroom flat on the ground floor. Only ground floor apartments were available when she purchased the property, as these are less desirable. When she tried to sell, potential buyers were deterred by the lack of a view and privacy. The ground floor location meant anyone could see into her balcony or flat if the curtains were open. One-bedroom flats were also less favorable to sell compared to two-bedroom flats. When many residents tried to sell after their Help to Buy equity loan's interest-free period ended, two-bedroom flats saw a 10% increase in asking prices, while one-bedroom flats had no increase, highlighting the lower demand.
Regret #6
Abigail was shocked to discover she couldn't use her flat for Airbnb. A clause in the contract, which her lawyer failed to highlight, prohibited short-term lets of less than three months. This meant she couldn't rent out her flat while on holiday to earn extra income. She emphasizes the importance of thoroughly reading the contract and asking the lawyer questions, as they often just pass on documents without detailed explanations. She also regrets using the solicitor recommended by the developer, as they prioritized speed over thorough explanation, potentially overlooking crucial details.
Final Thoughts & Advice
Abigail recommends buying a freehold apartment or house and doing thorough research. She advises being aware that new builds often depreciate initially before appreciating. She suggests considering a house over a flat, as it offers more flexibility, such as renting out a room to help pay the mortgage. She also highlights the complexities of switching a residential mortgage to a buy-to-let mortgage and the tax implications of renting out a property in one's own name.
