Paying a fair asking price

Q: I’m currently renting and want to get onto the London property ladder but I can’t afford to buy where I’d like to live. Do you have any suggestions?

A: This is quite a common dilemma as most people can usually afford to rent a nicer or more central property than they could afford to buy. So, when renters decide they’re ready to get onto the property ladder, it can be quite a disappointing realisation.

One option, which we’ve helped many of our clients pursue, is to buy a property as an investment so that they have their foot on the property ladder, but can continue renting where they’re perfectly happy. This avenue does come with extra responsibilities, though, as you would need to be a responsible landlord. It’s also quite tax inefficient as you would be earning money from your rental income – and paying tax on it – but you wouldn’t be able to offset it against the rent you’re paying out on the property you actually live in.

However, on the positive side, it means you have a foothold in the property market but you haven’t been forced to move further out of London than you wanted to, or compromise on the space or quality of property you’re used to. It gives you a lot of flexibility, too, as it’s very expensive to move home regularly if you are a homeowner and are selling and buying each time, as charges such as stamp duty and estate agent’s fees can be costly. Therefore, this option allows you to move from one rented property to another, until you’re ready and can afford to put down longer term roots, at which point you can sell your rental investment and buy a property which you are genuinely excited about.

If you do decide to go down this route, think about how long you might own your rental investment and choose your area accordingly. For example, if you think it will be a long term purchase, you could choose to invest in a more ‘up and coming’ area which has growth potential over the long term. The great thing about buying as a rental investment is it takes the pressure off finding ‘your dream home’ so the search can be much quicker and less emotional.

If you have a question you’d like Jo to answer please email or tweet her @joeccles.