Read Lafina’s Top tips for Doctors in the first-time-buyer (FTB) housing market!
Disclaimer: Please note that this blog has been prepared for informational purposes only and the views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of Eurekadoc or Medic Footprints. They do not constitute investment advice and independent advice should be sought where appropriate.
Autumn always seems to be a busy time of year in the UK!
It’s back to school for the med students, rotation changes for the junior doctors and a return to school-runs for the parents amongst us! In the property market, it’s no different as there is always a lull period over the summer holidays with people springing back into action by mid-September.
Despite the uncertainty around Brexit this year, there is plenty of business being done within my property network albeit cautiously and using more conservative criteria than a few years ago. I’ve been inundated with messages and inquiries from doctors over the last few weeks who are thinking of buying their first property with questions ranging from “should I buy during Brexit?” to “how can I get a mortgage?” so I thought I’d put together my answers to the top 5 most common questions I receive from doctors who are first time buyers (FTBs)!
What should I buy?
Most doctor first time buyers are looking at buying their first home (a residential purchase) and particularly if they know they are going to be working in the same place for a few years (or at least within a region convenient for work or hospital rotations).
There have been a lot of initiatives in the last few years designed to help first-time-buyers onto the property ladder such as the Help-to-Buy Scheme (where buyers require as little as a 5% deposit to purchase the property with the rest of the deposit topped up using an equity loan from the government), the stamp duty land tax (SDLT) relief for FTB’s (no SDLT payable on purchases up to £300,000) and various Shared Ownership Schemes (if you can’t afford the mortgage on 100% of the home, you can buy a share in the home typically 25-75% and pay rent on the rest with the option to buy further shares when you can afford it).
However, if buying residential property to live in doesn’t work for you right now and would prefer to get your money working harder in an investment property, the good news is that an increasing number of lenders are now offering FTB buy-to-let (BTL) mortgages! Just make sure you swot up on core investment concepts, how to select and assess an investment property as well as the different strategies that you can use which can mitigate the risks involved.
Where shall I buy?
This is a tough question to answer as it depends on what you are buying and why as well as the dynamics of your local property market. If you are buying for yourself then common sense prevails and you need to buy somewhere geographically convenient that will suit your personal and professional needs.
Even if your purchase is to live in, always try to assess a property using investment criteria such as rental yield, ROI and whether value can be added to it. You want to make sure you make a great purchase and have options if your life plans change.
For an investment purchase, if you will be self-managing or running a project then close to where you live is an obvious choice (as long-as it makes sense investment-wise according to your criteria). If you are not self-managing then it will depend on your budget, strategy and naturally your target market e.g. holiday cottages in the centre of a city probably won’t cut it for holiday makers and most university students will not want to live in the countryside!
Research your strategy well and the criteria of the property and area you require, ensure you have a plan for who will manage the property if it is far away and contingency for emergencies. You can find great property projects and investments all over the UK so do not get hung up on the area, it’s more important to understand what makes a good investment, and the criteria required for your property investment to work.
How can I get a mortgage?
Doctors are very appealing professionals for most lenders due to relative job stability and career progression. You should always use a mortgage broker to find you the best deals on the market as some of them also have good relationships with lenders who will lend to doctors with less stable employment such as locums, or those starting a new business.
Bear in mind that residential mortgage lending is based on your annual income whereas BTL mortgage lending is based on the rental income the property can generate in addition to your salary.
What about Brexit, should I still buy?
The impact that Brexit will have on the property market is a big concern for many people largely because of the uncertainty around the scale of the impact it will have. The tabloids reporting doom and gloom will certainly have a huge impact on buyer and investor behaviour due to fear.
No-one can predict with absolute certainty exactly what will happen but I think it’s fair to say that we can definitely expect a decrease in house prices (and demand) for a short period of time perhaps followed by a further housing market recession.
However, it’s important to bear in mind the bigger picture, in that:
- All housing markets (and other business markets for that matter) are cyclical and move through distinct phases over a 15 – 18-year period.
- We still have a huge housing shortage in the UK and we are currently not building enough new homes to meet demand.
- There are property strategies that work very well in a recession.
If you are buying your own home and are not planning on selling for 5-10 years then a temporary drop in house prices should not affect you.
You do need to be very cautious if you need to sell in the near future e.g. 1-2 years and risk being forced to sell at a loss (or break even). Of course, this depends on the area that you are buying in and may not apply to the area you are buying in which may be extremely desirable.
If you are looking for an investment property then ensure you use a strategy that works in this part of the cycle, evaluate different ways you could use the property to generate income and ensure stress test the deal at increasing rates of interest (if using a mortgage) to understand the point at which it stops working.
When should I buy?
Many people ask me when the best time to buy is. In my opinion there is no ‘best time’ to buy and I do think that the sooner you can get started and onto the ladder, the more you will benefit from long-term capital gains in the value of your property.
You just need to take a look at land registry house prices over the last 50-100 years to see that the overall trend on house prices is upwards. Waiting for ‘the bottom’ of the market is usually a disappointment as no one can predict when exactly the market will hit bottom.
In fact, by the time most people feel confident enough to buy (after a recession) prices are usually on their way back up! The current rate of inflation is 2.5% so any funds you have in the bank that are not earning at least 2.5% in interest are actually being eroded by inflation.
My view is to consider whether they might be better invested elsewhere, get educated in the core principles of property and if you think it’s a good option for you, just get started.
Lafina Diamandis is a GP-trainee, property investor, and co-founder of Eurekadoc, the only provider of property training for doctors in the UK. Lafina has over a decade of experience in the residential property sector and has educated over 1000 doctors to date. She is an advocate of portfolio careers in medicine and the author of two books.
The next Eurekadoc Property Course for Doctors is a LIVE virtual course on Saturday 10th November, and 10 lucky Medic Footprints members will get a 10% discount on the standard ticket price of £150, using code: MF10 at checkout. Offer ends before 31st October.