Author Topic: Case study: Early stage house purchase planning (?)  (Read 2664 times)

aoedae

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Case study: Early stage house purchase planning (?)
« on: April 17, 2018, 10:38:14 PM »
Apologies for this late night rant, but I anxiously run the numbers on home ownership when I'm stressed and thought this time i'd write it up for forum input. Below is my fairly uncensored musing.

I'm in the UK, living near Cambridge - and am trying to plan ahead in the housing market.

I'm 25, but will be taking a year off to study from September. I expect to be on an income of 25k starting at age 27 and rising to 35k by the time I'm 30. I currently save 50% of take-home income (on 25k) and expect that proportion to stay the same if not increase. My starting stash is around 30k and I expect this to grow at a rate of 10k+ per year (saving into a LISA for that sweet govt. bonus as well.)
 
I have a lovely partner who is fixed in the area (hence my constraints in living near the city), but for various reasons (mostly existing kids) it is not possible for us to live or buy together, and we'll not be financially merging at any point.

How on God's earth am I meant to be able to buy a house or property on my own that can access a) Waterbeach [where partner lives] and b) jobs in or south of Cambridge (think Sawston-way for the Sanger/Babraham OR central or North Cambridge)?

There's nothing in the 1 bedroom range anywhere useful as the market is so compressed at the lower end, so I'd be looking at 2 beds. For work I'd need to be within biking distance of either a train station or my workplace - my main criteria is that I don't want to be anywhere I have to run a car or drive, or commute over 45 minutes to either work or my partner's place. I would of course have a lodger in the second room to help pay the mortgage if I could get one (and as an extreme back-up I have parents who'd step in and buy me out partially if I looked like going underwater).

So assuming that at age 30, I have a 60k deposit and 4 x 35k mortgage, that's 200k. All the properties that look even vaguely plausible to purchase on Rightmove are 250k or above.

How do I get across that gap?
Do I wait until I'm 36 or so to get the extra money in cash (i.e. 130k-ish deposit)? But then don't I need to worry about house price inflation getting away from me?
Is there any way I can supercharge my savings rate to reduce the time? (my parents live too far away from useful jobs for me to live with them.)
Should I look to buy a property half/half with a friend for, say, 135k each - but then how do I mitigate the risk of them needing to bail/sell out, and needing to buy them out if I want to have my own place?
How do I evaluate if owning a house (with maintenance and bills costs etc.) is even financially sensible, if I can rent a room for 500pm?
Should I even be aiming to buy a house or just be a permanent lodger in other people's homes with stock market investments?

I find contemplating house purchases really hard to think clearly about - it's just such a big amount of money, and is tied up so much with what kind of life I'd like to have and where I'd like to live.
« Last Edit: April 17, 2018, 10:50:50 PM by aoedae »

SpreadsheetMan

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Re: Case study: Early stage house purchase planning (?)
« Reply #1 on: April 18, 2018, 12:50:19 AM »
I can't see how you can manage to get close to Cambridge property prices at your projected salary level as a single person (effectively).

I live in Cambridge and all the younger people where I work that earn similar amounts to you and have houses live 25+ miles away and have substantial road commutes. They all have 2 income households too to make even that work financially.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #2 on: April 18, 2018, 02:25:28 AM »
Another local, quite a few friends who work at the Sanger. The short answer is that Cambridge has overtaken Oxford (March 2018 data) as the least affordable place to buy in the country. The small number of young people I know who can afford to buy live in newly built estates in Haverhill or St. Neots (you can get a house for < 200k) and have long road commutes, or they live in Littleport or Downham Market and take the train. The latter is obviously handier for Waterbeach, not so much for Hinxton. Housing association/shared ownership might also be possible? In the timeframe you're talking about, one would hope that serious numbers of new houses get built and the various transport infrastructure improvements being talked about actually happen. Another 1000+ houses got planning permission in St. Neots yesterday, for example.

2Cent

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Re: Case study: Early stage house purchase planning (?)
« Reply #3 on: April 18, 2018, 03:19:48 AM »
Not sure about how the mortgage works in the UK but for affordability you could rent out your second room. That would probably cover a major part of the costs. If you find a place with a front and back entrance you might even be able to each have your own door. This is how I solved the problem of having too much house.

SpreadsheetMan

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Re: Case study: Early stage house purchase planning (?)
« Reply #4 on: April 18, 2018, 03:35:19 AM »
Another local, quite a few friends who work at the Sanger. The short answer is that Cambridge has overtaken Oxford (March 2018 data) as the least affordable place to buy in the country. The small number of young people I know who can afford to buy live in newly built estates in Haverhill or St. Neots (you can get a house for < 200k) and have long road commutes, or they live in Littleport or Downham Market and take the train. The latter is obviously handier for Waterbeach, not so much for Hinxton. Housing association/shared ownership might also be possible? In the timeframe you're talking about, one would hope that serious numbers of new houses get built and the various transport infrastructure improvements being talked about actually happen. Another 1000+ houses got planning permission in St. Neots yesterday, for example.

One of my colleagues lives in Red Lodge - there is massive development there as a Cambridge dormitory town too. (my office is located off the A11 south of Cambridge, so that works well)

The A14 development should also help the St Ives / Huntingdon area where there is a lot of new housing development & that has the guided busway into Cambridge too.

It's sobering how salaries haven't kept up with house prices here - when I moved to Cambridge in 1990 with my electronics job I was earning 25k and the house I bought in '92 was under 65k. I still live in that house and it is >410k now.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #5 on: April 18, 2018, 03:50:11 AM »
It's sobering how salaries haven't kept up with house prices here - when I moved to Cambridge in 1990 with my electronics job I was earning 25k and the house I bought in '92 was under 65k. I still live in that house and it is >410k now.

Indeed. I moved here for an electronics job in 1997, earning 25k, bought a 4-bed house for 75k - didn't need my wife's salary to cover the mortgage and she became a SAHM. Twenty years later, 3x my very much higher salary, in a very much more senior position, would not buy that same house.

It's pretty obvious why, though. There have been several tens of thousands of new, well-paid jobs created in Cambridge, but nothing like as much new housing. Hence people commuting from Kings Lynn, Northampton and other ridiculously far away places.

sea_saw

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Re: Case study: Early stage house purchase planning (?)
« Reply #6 on: April 18, 2018, 05:09:25 AM »
I'm no good for very local advice as I live in the other place. However I was recently in similar shoes in a similar place, at 30 years old and buying alone. I managed it only with parental help a mix of gifts and loans (to be paid back through taking on lodgers) which allowed me to increase my budget as though I earned about double what I actually do, or was going in with a partner earning about the same as me. I'm very happy to talk deets if this is something you would consider, it was a surprisingly painless process.

However I think since you're several years away from wanting to buy and not actually in your expected job yet it might not be that helpful to get too detailed in your plans and projections. A lot can change and your salary, job location, partner situation, local house prices etc etc are not that easy to predict, so the situation you end up seeing at 30 may not be the one you imagine now. You do know the broad outlines of it, which are helpful to reassess against as time goes on. 

In terms of actions, I think at this stage you're 100% doing the right thing by living inexpensively and saving as much as you can. Whether those savings become a deposit, a FIRE fund, or anything else, you'll be glad to have them. You might want to consider investing at least some of it in index funds if you don't already, it will hopefully help your money grow faster than your current predictions (which if I'm reading it correctly only factor in your contributions + LISA top up). However exactly how much to invest and in what is a more complicated topic!

If in the future you decide home ownership is your main priority in more of a 1-2 year horizon then you can start to get more detailed, and hopefully things will fall into place one way or the other. Maybe your job/relationship situation will be such that you'll be able to afford the sort of places that currently seem out of reach, or maybe your preferences and priorities will have changed so the cheaper places are more appealing. Or maybe you'll crunch the numbers and say nah, I don't want to move to any of the places I could currently afford to buy, but I am happy with my life as it is and where it is and I'm saving plenty, so I'll keep on keeping on.

From personal experience, when I was seriously looking into buying for my immediate-future self instead of my hypothetical-years-away-self, it became very clear to me what things I would compromise on and what I would not, until I basically had a hierarchy of options that were within the realm of the possible. Basically something like 1) buy a place that meets requirements ABC within budget X, 2) buy at a huge, scary stretch up to budget Y, 3) keep renting a single room, turbo charging savings, and househunting like it's a second job until succeeding at one of the above, which I thought I could cope with for maybe up to 2 years, 4) give up on turbo-savings mode, return to normal-savings mode while renting somewhere that feels more homey, concentrate on career or other pursuits instead. I'm in no way saying you'll find anything similar just that you'll probably find *something*.

What I wouldn't do is try to second-guess 'well maybe in 5 years I'll wish I HAD (done some incredibly specific thing)'. You just can't know! You're already doing a great job of setting yourself up for success, even if you don't know exactly what it will look like.

To @2Cent: mortgages here are usually capped at 4.5ish times your gross salary. There is also an affordability check for the monthly payments (checking for your normal expenses, any credit card debt, etc) but that's not going to be an issue for OP. Unfortunately lenders also explicitly don't factor in predicted income from lodgers or airbnb as they don't see it as 'guaranteed' income. However, it certainly is real money coming in, and very helpful just not in securing a higher mortgage directly.

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #7 on: April 18, 2018, 07:49:50 AM »
Urgh, I feel for you.

Some thoughts:

It will be difficult to buy as a financially-single person if you are tied to a really expensive city by a partner. How established is the relationship and do you have a long-term plan that you are both happy with and does this plan involve living together ever?

What are the options for your career if you weren't tied to Cambridge? Is your work industry concentrated in a few geographic areas or could you do the same thing for similar money away from Cambridge? What does your career progression look like after age 30?

How do you feel about renting? Some people love it, some people hate it, others tolerate it but have a yearning to own a home. Try to separate out the feelings of friends and parents who often have their own concerns based on what everyone did decades ago.

You are in a great position now. Saving hard and being thoughtful about where you live now and how you spend your money will put you miles ahead of your peers when it is time to think about buying.

If you can handle the Busway as a commute it will open up a lot more affordable homes for you. Huntingdon and Peterborough both have 2 bedroom places within your forecasted 30-year-old-you budget.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #8 on: April 18, 2018, 08:28:09 AM »
If you can handle the Busway as a commute it will open up a lot more affordable homes for you. Huntingdon and Peterborough both have 2 bedroom places within your forecasted 30-year-old-you budget.

Commuting from Huntingdon or Peterborough is road-only at the moment (and fairly hellish with the A14 widening over the next few years.) The guided busway starts from St.Ives and seems reasonably popular now the initial teething problems have been overcome - it's planned to expand to other places in the next few years.

aoedae

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Re: Case study: Early stage house purchase planning (?)
« Reply #9 on: April 18, 2018, 08:14:12 PM »
A quick note to say thank you to everyone for your input so far.

I started replying to @Playing with Fire UK's very helpful questions, and it got personal enough that I've moved writing to my diary until I get a more forum-condensed version of my ideas.

Thanks everyone for highlighting the busway - I'm totally fine with cycling down it and have done many happy trips from central Cambridge out to St Ives, but from my memory of the times involved I assume it'll be quite lengthy to get down to Hinxton area from there on a bike?

One follow-up question - just in case I've missed options outside the traditional, does anyone have any 'alternative' living ideas in the Cambridge area?

I mean, I'm minimalist and not too fussy about having lots of space: my main priority is to have my own place so I can stop feeling like I'm trespassing in other people's space all the time, and so I can be independent, on my own, and have somewhere to put down my own roots and community. I love tiny houses a lot. I really don't *need* anything other than a kitchen/bed/bath, but no-one seems to build small live-able spaces for single people (?) aside from enormous unaffordable flat complexes in the center of town, or tiny remote one-beds that cost my entire budget and put a ridiculous price on one room relative to rent.
« Last Edit: April 18, 2018, 08:19:28 PM by aoedae »

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #10 on: April 18, 2018, 10:24:34 PM »
One follow-up question - just in case I've missed options outside the traditional, does anyone have any 'alternative' living ideas in the Cambridge area?
Sounds like shared ownership might be your best bet - you own a percentage of the flat and pay rent to the housing association for the part you don't own.

Don't think either of these really tick the boxes, probably more cheap places to live than secure long-term place to settle down, but have you considered - Houseboats? There are a small number of people living on houseboats in Cambridge - and rather more living in them in marinas in places like Isleham & Buckden. Language schools? There's a huge number of places for teenagers learning English - mainly Spanish & Italian schoolgirls, as you may have noticed. They sometimes need live-in "wardens" for the houses they own; effectively free accommodation in return for keeping an eye on kids in the evening.

There's a lot of consultation on housing & transport infrastructure happening at the moment - decent new cycle paths in quite a few places and busway extensions, light rail proposals etc. and a commitment to build thousands of homes per year. The commuting situation may look different (and better) by the time you are ready to buy.

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #11 on: April 19, 2018, 12:24:25 AM »
Other second jobs that come with housing: au pairs, some hotels, on-site caretaker.

Slightly controversial: living in a camper/transit van. I don't know whether it would feel enough like home for you. It could work as a way to supercharge savings. It would work if you wanted to be location independent.

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #12 on: April 19, 2018, 12:31:15 AM »
If you can handle the Busway as a commute it will open up a lot more affordable homes for you. Huntingdon and Peterborough both have 2 bedroom places within your forecasted 30-year-old-you budget.

Commuting from Huntingdon or Peterborough is road-only at the moment (and fairly hellish with the A14 widening over the next few years.) The guided busway starts from St.Ives and seems reasonably popular now the initial teething problems have been overcome - it's planned to expand to other places in the next few years.

The guided busway goes to St Ives but the buses go to Huntingdon and Peterborough and avoid the A14.

start_at_the_beginning

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Re: Case study: Early stage house purchase planning (?)
« Reply #13 on: April 19, 2018, 01:02:38 AM »
A quick note to say thank you to everyone for your input so far.

I started replying to @Playing with Fire UK's very helpful questions, and it got personal enough that I've moved writing to my diary until I get a more forum-condensed version of my ideas.

Thanks everyone for highlighting the busway - I'm totally fine with cycling down it and have done many happy trips from central Cambridge out to St Ives, but from my memory of the times involved I assume it'll be quite lengthy to get down to Hinxton area from there on a bike?

One follow-up question - just in case I've missed options outside the traditional, does anyone have any 'alternative' living ideas in the Cambridge area?

I mean, I'm minimalist and not too fussy about having lots of space: my main priority is to have my own place so I can stop feeling like I'm trespassing in other people's space all the time, and so I can be independent, on my own, and have somewhere to put down my own roots and community. I love tiny houses a lot. I really don't *need* anything other than a kitchen/bed/bath, but no-one seems to build small live-able spaces for single people (?) aside from enormous unaffordable flat complexes in the center of town, or tiny remote one-beds that cost my entire budget and put a ridiculous price on one room relative to rent.

No idea how feasible this is, but I was also thinking of houseboats. I've seen a for sale sign on one of about 40,000. However, I think you're unlikely to get morning in the town centre https://www.cambridge.gov.uk/residential-boat-mooring-licence

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #14 on: April 20, 2018, 05:56:26 AM »
The guided busway goes to St Ives but the buses go to Huntingdon and Peterborough and avoid the A14.

The bus from Peterborough takes more than 2 hours to get to Cambridge though - and would involve 1 or 2 changes of train to get to Waterbeach. Even from Huntingdon, it's 69 minutes on the bus. The train from any of Littleport, Downham Market or even Kings Lynn is faster - and property there is cheaper than Huntingdon (due to its fast line to London, of course.)

It will be interesting to see what happens in Wisbech, if the proposed re-opening of the line there comes about. It will potentially turn the town into Cambridge commuter territory - prices are currently around a third of what they would be in Cambridge itself.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #15 on: April 20, 2018, 06:18:35 AM »
As an aside, I often go to the botanical garden in Cambridge for lunch. The weather this week means it's rather busier than normal. While I was walking round, I overhead 5 different conversations - 3 were about the difficulty/unaffordability of getting somewhere to live locally and the other 2 were Tinder related :-)

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #16 on: April 21, 2018, 12:15:03 AM »
As an aside, I often go to the botanical garden in Cambridge for lunch. The weather this week means it's rather busier than normal. While I was walking round, I overhead 5 different conversations - 3 were about the difficulty/unaffordability of getting somewhere to live locally and the other 2 were Tinder related :-)

The times we live in!

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #17 on: April 21, 2018, 12:34:26 AM »
It will be interesting to see what happens in Wisbech, if the proposed re-opening of the line there comes about. It will potentially turn the town into Cambridge commuter territory - prices are currently around a third of what they would be in Cambridge itself.

You make an excellent point. Wisbech is far more affordable but doesn't work without a car at the moment. The rail line would be game changing.

shelivesthedream

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Re: Case study: Early stage house purchase planning (?)
« Reply #18 on: April 22, 2018, 06:46:28 AM »
As others have said, at this stage I don't think it's as much of a financial question as it is an emotional one. I'm 27 and would LOVE to own a house. Currently living in London where owning a garage is pretty aspirational (planning to move in mid-2020 but Oxford or Cambridge are both favoured options so hardly to somewhere enormously more affordable).

I honestly have ALL TEH FEELZ about owning a house. I like DIY, I like gardening, I like decorating...and I would like it to be MINE. But I also embrace the downsides. I'm not especially interested in travelling. I'd like to find somewhere pleasant to live and tether myself there for years and years. A house isn't just a building to me: it's somewhere that will actually enable me to do a lot of the things I want to do with my life in a way that it would be difficult to do if renting. It's a lifestyle dream, not a numbers game.

Buying a house is a huge deal for our generation, and our country. Everyone will tell you to do it. They'll tell you you're throwing money away on rent, that house prices will always go up... but it's just not true that everyone should buy a house. But it's not a wholly financial decision and I think you need to wrap your head round that bit first.

BrakeForTurtles

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Re: Case study: Early stage house purchase planning (?)
« Reply #19 on: April 25, 2018, 12:05:24 PM »
The New York Times has an excellent interactive calculator for answering the financial part of the rent or buy question. Just imagine the dollar sign is a pound symbol. Sometimes renting isn't just throwing away money, if for instance rent is cheaper than the interest, insurance, maintenance, taxes...etc etc that are part of the cost of home ownership.

Renting has allowed me enormous flexibility and the chance to afford to live in incredibly expensive cities. I wouldn't trade the last 12 years of nomad-ish lifestyle for homeownership, but when DH and I do eventually settle somewhere (probably in 3-4 years) our plan is definitely to buy a house. Mostly for the fact that we'll get to hang things on the wall, and paint as we please and start a garden, as SLTD pointed out. It will be an emotional decision for us, and we're well aware of that.

I think in your case, if you can reduce your housing costs now and save intensively for a deposit, you'll be in a much better spot in a few years time. Trying out a trailer, tiny home or co-op could be a really good step. For most people homeownership makes up the bulk of their investments/savings, but I think in this community it's more common for people to have invested in the stock market and the family home makes up a smaller proportion of their net worth. As long as you're saving as much as you can it doesn't really matter where the money ends up. 

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #20 on: April 25, 2018, 02:44:02 PM »
Trying out a trailer, tiny home or co-op could be a really good step.

All of those are pretty unusual here. England (and the south eastern corner of England in particular) is very densely populated and the planning regulations place pretty strict limitations on which pieces of land can be built on. Well over half of the cost of a house around here would be the value of the land its built on, so it just isn't economically worthwhile building "tiny" homes, even if you got permission to build one. "Park homes" (our equivalent to trailers) would be found in an urban setting mainly on land which was specifically set aside by local councils for traveller/gypsy communities.

There are very small numbers of housing co-ops - but the last time I saw a newspaper story in Cambridge about them, it was stated that there were around 80 people in 15 houses in this kind of housing in the the city.

Kwill

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Re: Case study: Early stage house purchase planning (?)
« Reply #21 on: April 25, 2018, 02:46:47 PM »
In your situation, I would rent with flatmates / housemates for a few more years. Through your early 30s, it should be relatively easy to find people to share with near your age, especially somewhere like Cambridge where there are postdocs and grad students, people commuting into London, etc. There are various websites to help find people to share with. There may also be co-ops, etc.

Long term, it's hard to say what the housing market will do, but it's worth saving toward a bigger deposit. There are so many unknowns in your situation that really that is the main thing you can do. Even if you were financially prepared to buy right now, it sounds like there are some unknowns related to your future work that would make it better to wait until you are more stable.

I'm in the process of buying a one-bedroom flat via shared ownership scheme, and it's been quite a learning experience. One thing that surprised me is that it didn't stretch my budget as much as I thought it might. The mortgage provider decreased the amount of mortgage payment I could afford based on the amount of rent and ground rent and service charges I would need to pay. It's making it possible for me to stay in an area convenient to work, but it's not magically making everything simple and cheap.

Moonwaves

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Re: Case study: Early stage house purchase planning (?)
« Reply #22 on: April 26, 2018, 07:15:50 AM »
Should I look to buy a property half/half with a friend for, say, 135k each - but then how do I mitigate the risk of them needing to bail/sell out, and needing to buy them out if I want to have my own place?
This is definitely doable, if you have a friend you are willing to share with. Ideally you will have already shared a house or at least been on holidays together several times and know that living together and having joint financial responsibilities are feasible things to do. There's possibly no point in buying a house with you most anti-mustachian friend. :)

Buying with friends became a very popular thing to do in Celtic Ireland. So much so that there's even an entire section devoted to it on askaboutmoney.com, including a sticky post with a draft agreement (admittedly a bit dated now but I think the principles remain the same). You could check some of the UK-based sites for similar stuff, too but I'm afraid I am drawing a blank on what the big one is - is it moneysavingsexperts or something like that?. At any rate, it's bascially important to cover every potential situation you can think of (illness, death, damage to the house, buying each other out and in what circumstances, moving partners or other people in, etc., etc.). You could also find out if the various UK mortgage providers have any restrictions on joint but not related/in a couple ownership. They may also have sample agreements on offer or details of what they expect to be in such an agreement.

You'll notice there are also lots of threads on AAM about when things go wrong. A lot of those situations were tied to the recession but not all and it might be a help to read through some of  it to help you decide whether or not this is something you might really want to consider.

shelivesthedream

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Re: Case study: Early stage house purchase planning (?)
« Reply #23 on: April 26, 2018, 08:40:31 AM »
Buying a house with a friend sounds like a terrible idea to me. Perhaps it's just ALL TEH FEELZ talking, but what's the point of buying if you're not in it for the long haul and how on earth can you commit to a friend (both financially and living-with-them-ly) for a decade or more? I'm sure there are people out there who have done it successfully but it gives me the heebie jeebies and smacks of "Must buy house at all costs in order to tick life box".

It would, I think, be more sensible to buy a house with a spare room with the idea of a friend being a long-term renter if you wanted to go down a similar route.

sea_saw

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Re: Case study: Early stage house purchase planning (?)
« Reply #24 on: April 26, 2018, 10:11:31 AM »
Trying out a trailer, tiny home or co-op could be a really good step.

I live in an equivalent city, and down my road, a 170 square foot / 16 square metre flat is on the market for 180,000. Tiny enough for you, North Americans? ;)

I know someone who lives in a co-op. I think it's amazing, and it certainly is cheap rent and bills, but setting it up took two years of hard work and repeated obstacles from the council, mortgage lenders, and HMRC. Just the fact that it made it to the papers tells you something.

It would, I think, be more sensible to buy a house with a spare room with the idea of a friend being a long-term renter if you wanted to go down a similar route.

Unfortunately, this is the solution to a different type of problem than OP is anticipating having. E.g. just as order of magnitude estimates, imagine OP has a salary of 30k, and properties they're interested in are 300k. Maximum mortgage they can qualify for is somewhere around 140k, so they need a deposit of even more than that, which is not feasible. Nor does 160k buy them even the tiniest of tiny homes designed for someone commuting into the city three days a week.

However if they team up with a friend who also earns 30k, together they can qualify for a mortgage of approximately 250k, and thus only need a 50k deposit between them, which is completely doable.

But of course as you say it comes with risks and downsides. I think you pretty much have to accept going in that you may be forced to sell up and move out in order to part ways (because you don't get on, because one of you gets a job somewhere else, or wants to move in with a partner), just as people often end up doing after a divorce. Of course you can hope that your salary situation will be such that you'd be able to qualify for a large enough mortgage to pay them off - but if you thought that was likely, you'd probably wait to buy alone to begin with :/

For myself, I'd definitely pick a shared ownership scheme like @Kwill did rather than buying with a human person. It has all the advantages without any of those risks (although, with a bit more of a bite into your monthly cashflow).

Not an easy problem, but, people find a way to a life that suits them. And OP, it sounds like you're in a good position to set yourself up to have as many option as possible, so sleep easy :)

shelivesthedream

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Re: Case study: Early stage house purchase planning (?)
« Reply #25 on: April 26, 2018, 10:16:36 AM »
It would, I think, be more sensible to buy a house with a spare room with the idea of a friend being a long-term renter if you wanted to go down a similar route.

Unfortunately, this is the solution to a different type of problem than OP is anticipating having. E.g. just as order of magnitude estimates, imagine OP has a salary of 30k, and properties they're interested in are 300k. Maximum mortgage they can qualify for is somewhere around 140k, so they need a deposit of even more than that, which is not feasible. Nor does 160k buy them even the tiniest of tiny homes designed for someone commuting into the city three days a week.

However if they team up with a friend who also earns 30k, together they can qualify for a mortgage of approximately 250k, and thus only need a 50k deposit between them, which is completely doable.

...

Ah yes, of course, I had slightly forgotten the original problem! Still, I stand by my heebie jeebies about buying with someone who isn't a committed long-term partner.

Kwill

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Re: Case study: Early stage house purchase planning (?)
« Reply #26 on: April 26, 2018, 12:01:40 PM »
The New York Times has an excellent interactive calculator for answering the financial part of the rent or buy question. Just imagine the dollar sign is a pound symbol. Sometimes renting isn't just throwing away money, if for instance rent is cheaper than the interest, insurance, maintenance, taxes...etc etc that are part of the cost of home ownership.

It's more different than you'd think, actually. I moved to the UK from the US and had a lot to learn. For example, instead of annual property taxes, the UK has 'council tax' that is paid by both renters and property owners. And then there are different sorts of costs that come up with buying and selling. Plus, mortgages work differently, and 30-year fixed rate mortgages don't seem to exist in the UK. That said, a rent vs. buy calculator is a good idea. There are some for the UK: one from the Telegraph in 2013 and one from allAgents.

BrakeForTurtles

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Re: Case study: Early stage house purchase planning (?)
« Reply #27 on: April 26, 2018, 01:35:07 PM »
The New York Times has an excellent interactive calculator for answering the financial part of the rent or buy question. Just imagine the dollar sign is a pound symbol. Sometimes renting isn't just throwing away money, if for instance rent is cheaper than the interest, insurance, maintenance, taxes...etc etc that are part of the cost of home ownership.

It's more different than you'd think, actually. I moved to the UK from the US and had a lot to learn. For example, instead of annual property taxes, the UK has 'council tax' that is paid by both renters and property owners. And then there are different sorts of costs that come up with buying and selling. Plus, mortgages work differently, and 30-year fixed rate mortgages don't seem to exist in the UK. That said, a rent vs. buy calculator is a good idea. There are some for the UK: one from the Telegraph in 2013 and one from allAgents.

Oh, definitely! Even in Canada (and Australia) 30 year fixed rate mortgages don't exist. That might be a US-only situation. To get around that I just assumed an average interest that is higher than today's rates that would hopefully take into account future fluctuations. I found that calculator really useful, because so often people err towards buying as being the most sensible option, financially. In most places I would want to live, renting comes out ahead, so then I know I'm making the decision to buy based on something other than finances. Funnily enough, in our current town buying would have been a way better decision financially, but we didn't want to have to deal with maintenance and other adult aspects of homeownership on a place we would own for three years tops.

I live in an equivalent city, and down my road, a 170 square foot / 16 square metre flat is on the market for 180,000. Tiny enough for you, North Americans? ;)

Ok, ouch. That is teeny tiny. Roughly how much would a place that size cost to rent?

All of those are pretty unusual here. England (and the south eastern corner of England in particular) is very densely populated and the planning regulations place pretty strict limitations on which pieces of land can be built on. Well over half of the cost of a house around here would be the value of the land its built on, so it just isn't economically worthwhile building "tiny" homes, even if you got permission to build one. "Park homes" (our equivalent to trailers) would be found in an urban setting mainly on land which was specifically set aside by local councils for traveller/gypsy communities.

There are very small numbers of housing co-ops - but the last time I saw a newspaper story in Cambridge about them, it was stated that there were around 80 people in 15 houses in this kind of housing in the the city.

Tiny homes and trailers are by no means common here, but I do know someone who lives in a trailer in Toronto at a friend's place. Obviously that requires a generous friend with enough space for a trailer, so not exactly an easy situation to come by. I guess a share house/flat with people of a similar age and life stage would be the best for trying to lower living expenses. 

sea_saw

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Re: Case study: Early stage house purchase planning (?)
« Reply #28 on: April 26, 2018, 03:28:56 PM »
I live in an equivalent city, and down my road, a 170 square foot / 16 square metre flat is on the market for 180,000. Tiny enough for you, North Americans? ;)

Ok, ouch. That is teeny tiny. Roughly how much would a place that size cost to rent?

I'd expect rent to be somewhere in the region of 800pcm. To rent a still tiny flat but one that has at least a separate living room and/or kitchen, add another 100, and add a further 100 to take it out of tiny territory and into normal/spacious (by local standards - say 450 square feet and up, the kind of thing you could comfortably share with a partner say).

A good sized room (with a 'full'/'double' bed and a desk), in a decent shared house (still contains proper living room and kitchen, reasonably well maintained, not sharing with many people) is about 550 in rent, so there's basically a huge step up in costs for living alone. If you're prepared to sleep in a single bunk bed, in a bedroom that's been carved out of what used to be the house's living room/a larger bedroom, or just share with lots of housemates, you can go as low as 400. But it's not always worth it...

Incidentally, trailers/mobile homes aren't really a thing, but Oxford and Cambridge do both have canal boats! :) Not as cheap as people would like and good moorings are also dear, but I know multiple people who've gone that route. I haven't looked into the finances in detail myself because I know the labour/maintenance/lifestyle of it wouldn't really suit me. See e.g. https://anarrowescape.wordpress.com/

shelivesthedream

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Re: Case study: Early stage house purchase planning (?)
« Reply #29 on: April 26, 2018, 11:27:35 PM »
I know someone who lived on a narrowboat in London for a few years and also in both Oxford and distantly in Cambridge. I reckon I would absolutely love to do it for a few years at least but Mr SLTD is extremely unimpressed with the idea. As you say, it's a significant lifestyle choice, and moorings can be almost as expensive as rent. I am trying to persuade him to take a narrowboat holiday at some point but he claims he is too tall :)

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #30 on: April 28, 2018, 03:21:26 AM »
The people I know who live in canal boats are the ones who love all the maintenance, repairs, and having to make their own furniture. I think of myself as pretty handy but when they describe a typical week it sounds exhausting to me. If you don't love the idea (and have a partner that loves the idea) it isn't recommended just to save money.

It is (legally, but some people think unethically) possible to get around mooring costs by getting a touring licence and moving location every fortnight(?). But more work and you need to figure out clean water, black water, fuel, etc in new places.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #31 on: April 28, 2018, 04:54:27 AM »
It is (legally, but some people think unethically) possible to get around mooring costs by getting a touring licence and moving location every fortnight(?).

The Canal & River trust has pretty much declared war on people trying to do this (i.e. not actually touring, but living on a boat with no home mooring and shuttling back and forth between locations.) Causing a lot of strife in recent years. You have to be genuinely "continuously cruising" as in making progress from A to B and not just making short trips or shuttling back and forth between locations and they have been rigorously enforcing this - fines, removal of licences etc. etc. 

Playing with Fire UK

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Re: Case study: Early stage house purchase planning (?)
« Reply #32 on: April 29, 2018, 02:59:37 AM »
It is (legally, but some people think unethically) possible to get around mooring costs by getting a touring licence and moving location every fortnight(?).

The Canal & River trust has pretty much declared war on people trying to do this (i.e. not actually touring, but living on a boat with no home mooring and shuttling back and forth between locations.) Causing a lot of strife in recent years. You have to be genuinely "continuously cruising" as in making progress from A to B and not just making short trips or shuttling back and forth between locations and they have been rigorously enforcing this - fines, removal of licences etc. etc.

Thanks @cerat0n1a ! I knew they were angry, but didn't realise that they were doing anything about it.

sea_saw

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Re: Case study: Early stage house purchase planning (?)
« Reply #33 on: April 30, 2018, 04:43:38 AM »
Incidentally I didn't mean to imply that that 170 square foot shoebox flat was normal accommodation around here it is certainly remarkably small, it made local news, took a long while to sell, etc. I can't imagine anyone I know wanting to purchase it as their primary residence, no matter how desperate to buy. Just trying to explain that simply going smaller is often not a plausible solution, as even the tiniest place imaginable already costs more than can be afforded on an average (single) salary.

That said, this thread prompted me to look up the size of a standard 'trailer', which I had always imagined to be about the size of the sort of caravan I remember from childhood camping holidays. It turns out the SMALLEST standard size is about 1000 square feet! And the more common sizes are larger. This has completely changed my mental picture of 'mobile homes'... and yeah, you have basically zero chance of knowing anyone with enough land for you to park something like that on around here.

A canal boat seems to be about half that size in external dimensions, not sure how to translate that to livable space but it will certainly be less. I know I absolutely could not do it and SLTD I'm impressed you'd contemplate it. I'm extremely grateful that in my flat some basic things (water, heating, electricity, waste disposal, weather proofing...) just work, without needing constant attention and labour! For the right people it can work, it's surprising how many people I can name living in boats. But for me I'm 100% certain a boat would basically destroy my life, lol.

Buying with friends is an interesting proposition. I don't personally know anyone who's done it, although I do know two people who bought with a sibling. I did consider it myself, but mentally walking through my network, there wasn't anyone I even wanted to open a conversation with. I could think of maybe three people (one sibling, two friends) who I could imagine being compatible with in terms of finances, personalities, cohabitation preferences etc, but all were in London. In my city, no one quite fit the bill of someone I'd like to put down roots with and 'commit' to in this slightly odd, sideways way - partly because many of my friends here are a bit older and already own, and/or are couples starting families. It's not something I'd dismiss out of hand, it's one that depends on your personal relationships. But I do think it would be a pretty rare occurrence for it to work out as your best option.

cerat0n1a

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Re: Case study: Early stage house purchase planning (?)
« Reply #34 on: April 30, 2018, 07:17:01 AM »
You have basically zero chance of knowing anyone with enough land for you to park something like that on around here.

That could be my FIRE passive income solution :-)  I live a few miles from one of the places aoedae mentioned possibly working and could easily fit a couple of dozen caravans in the back garden and still have space for my chickens and veggies. I reckon the council would take a dim view of people permanently living in caravans in someone's garden. (Although - seems to be OK when it's East European workers in a mobile home on farms  - I suppose there's no neighbours to object.)

Quote
A canal boat seems to be about half that size in external dimensions, not sure how to translate that to livable space but it will certainly be less. I know I absolutely could not do it and SLTD I'm impressed you'd contemplate it.

My mother and father-in-law lived on a canal boat with a small baby, they moved to dry land just before number 2 arrived. I wonder whether SLTD is still up for it?

Manchester

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Re: Case study: Early stage house purchase planning (?)
« Reply #35 on: May 02, 2018, 06:32:34 AM »
It's brilliant that you're planning ahead, but with something like this it's really difficult to decide what you'll want in three or more years time.  Surely if you're still with your S/O by that time you'd be considering co-habiting? 

Perhaps you could look at another location to buy a house.  I'm taking somewhere within 60/90 minute drive that's well within your budget.  You could buy this cheaper house with the intention of renting it out.  I'd look somewhere like Peterborough, Colchester, Norwich, Kings Lynn, Ipswitch etc that have decent enough rental markets.   You rent that property out to cover the mortgage and continue renting around Cambridge yourself.  This leaves you flexible to move around and really decide which part of Cambridge suits you best.

You'd technically 'own' a home.  Your equity will continue to grow in the property which you could use as leverage to finance a second and begin building an empire.  Sure you'll continue to pay rent, but you'll be building your assets at the same time with a passive role.