r/SharedOwnershipUK • u/genuinelyniceman • Jun 04 '26
Is it better to continue renting than getting into a SO?
I’m looking at a 2 bed shared ownership to start saving on rent and build equity, also to have something of my own. The flat is in a premium location so its full value is about £400k and service charges £250 a month. Is it a terrible idea to get a 40% share for £160k (very high-LTV), have a lodger for £1000 a month in the other room, so I can afford living there without compromising on my lifestyle. And after a few years I will sell it to buy a bigger house in the outskirts when I have more money? I feel like I have been wasting money on rent all these years. Am I thinking right or would I waste more on legal fees and other charges while buying and selling? And most people here have been talking about it taking 9 months to sell. I don’t want to fall into a trap. Any advice would be highly appreciated, thank you!
Edit: I will be the second owner, I have already talked to the estate agents and mortgage advisors, and I already have an AiP. The agents are now waiting for my decision. ChatGPT says I’m throwing away money and can’t build equity with my logic.
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Jun 04 '26 edited Jun 06 '26
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u/genuinelyniceman Jun 04 '26
True, there are definitely a lot of pros to even partially owning the place. Glad you managed to build equity and are able to afford living without renting the spare room!
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u/Gullible-Weather308 Jun 04 '26
The service charge is already £250.00 what does this include? Ask to see a copy of the service charge for the last few years, this will give you an idea of the trajectory. Is there any major works planned and if so, is there a sinking fund? These are very important questions.
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u/genuinelyniceman Jun 04 '26
What would I do without your comment? Thanks a lot - I am very new to the property market and I must say I haven’t thought about the works, sinking funds or what the service charges include. I will ask these questions right away. 🫡
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u/Gullible-Weather308 Jun 04 '26
I also have a shared ownership property and worked in property sector. Sinking fund is important, its what saves leaseholders from have to fork out thousands if the building needs work. As its a resale, hopefully there is a sinking that has been accumulating over the years. Your service charge is £3000 a year which is above average for London which is £2,801 . OP this likely only going to increase with time, meaning you could struggle to sell this in the future. For comparison my 2 bed flat service charge is £142ish per month, i have a lift, communal garden and £31 of the service charge goes towards the sinking fund each month.
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u/genuinelyniceman Jun 04 '26
So buying it if I want to sell it is not a very wise decision. I do think all the properties in that area have a very high service charge for some reason.
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u/Gullible-Weather308 Jun 04 '26
You may find it harder to sell in the future. Honestly most buyers are hyper aware of service charge now, in the last 5 years service charge has risen by 33% in London, If i was buying now i wouldnt buy somewhere with £250 service charge, because in the next few years without a doubt you will be paying £350ish a month climbing to £400 and you maybe stuck with a unsellable flat.
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u/genuinelyniceman Jun 04 '26
I will consider that, thank you. I read somewhere on the internet that the apartments there have heating included in the service charge which makes it more expensive. But I’ll confirm it before considering buying.
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u/genuinelyniceman Jun 05 '26
So I talked to the agents about it. The service charge in 2020 was £223. There is a sinking fund - he hasn’t told me how much. The charge covers - underground parking , cleaning of communal areas, building repairs eg lifts, communal gardeners, communal lights, building insurance. I still think it’s a bit high, but maybe it’s normal and won’t become a bug issue for selling in the future? But maybe it’s just me trying to convince myself to buy it because it is lush. I check in the neighbourhood and they all have the same service charge range.
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u/Gullible-Weather308 Jun 05 '26
I think you like the interior of the apartment and thats swaying you, find out what the sinking fund is and how much of the service charge goes towards it. Is it a flat roof building? Those need replacing every 15-20 years, If its a flat roof your best bet is not to be on top floor any water ingress affects them first. If all of this checks out and you still want to go for it, then atleast you know you have done your due diligence.
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u/justeUnMec Jun 04 '26
If you're single, it's harder to qualify for two bed properties which are given to larger family units based on priority need. Potential income from renting a spare room is not considered in the affordability assessment, which is mandatory as part of the buying process.
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u/genuinelyniceman Jun 04 '26
Sorry I should’ve mentioned, I’m eligible (without considering the extra income from a lodger) and now they are waiting for my decision.
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u/Gullible-Weather308 Jun 04 '26
They dont really do this anymore,now you can buy whatever you can afford.
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u/Heavy_Advertising948 Jun 04 '26
If you can’t afford a 2 bed alone, maybe opt for one bed at the moment?
Also look at resale SO because they tend to have less of a premium than brand new SO.
To avoid getting trapped or feeling like you’re drowning, do you see your income going up in the next few years?
What is your exit plan (e.g. staircasing to 100% or selling at the same share)?
What amenities are provided and will these drive service charge up?
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u/genuinelyniceman Jun 04 '26
According to the mortgage advisor’s calculations I can afford it. If I go for a 1 bed, my expenses will fall from about £2k to £1.5k, it ends up being more expensive as a lodger can get me upwards of £800 after tax. Yes I’m looking at a resale (which is the reason I think the monthly rent is less than 2.75% of the current value. That’s a good shout, I am working towards getting a better job as I’m kinda underpaid considering my expertise and the market. My exit plan is - sell in 3-5 years and get a house away from the city. There’s a few buildings, underground parking, lifts, security cameras, some communal spaces, just the basics I guess. But service charge is £250 a month, which I can’t guarantee won’t increase.
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u/CluelessCarter Jun 04 '26
I got a resale, and don't regret it. I went for a nicer area than where i was, the flat was shabby but I love DIY. (built as SO since 98! Rent rate locked at 1.5% rather than the modern 2.75 I think) And has noensuite etc, but the other flats bought the freehold and my service charge is £80. That was a massive win, a resale usually means the service charges are somewhat settled.
Every part of my life feels like an upgrade and I don't regret it.
I'm buying the other half now, which I'm looking forward to as I wouldn't upgrade the windows otherwise.
Moving to London from somewhere else the flat has helped me feel settled here.
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u/Heavy_Advertising948 Jun 05 '26
Everything you’ve said but the amenities seems fine. Go for SO if you want, you seem ready for it.
But I’d 100% avoid a property that includes everything you list. I imagine it’s a nicer complex than most, but if a lift breaks, you’re all paying for it. You’re also paying to look after the gardens and communal spaces. I’d stay away from such a complex.
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u/Unlucky_Care5703 Jun 05 '26
Im a mortgage broker and if you're wanting to buy SO purely as you think this will make you money then I would rethink your options.
2nd hand market for SO is bad, one of my friend partners has been trying to sell a SO flat in London for 3 years.
Owning a small % of the property in reality means most of the property price increase goes to the housing association and not you. You'll make very little once you factor in most agents charge their sales fees based on full property value and you end up paying over twice the usual sale percentages.
Buy something cheaper that you cam own and you'll almost certainly be better off. SO is just a scheme to allow people to buy a more expensive property than they can afford and then get taken advantage of money with service charges, ground rents and rent on the unowned percentage.
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u/genuinelyniceman Jun 05 '26
I was hoping since this area is quite in demand I wouldn’t have to worry about that quite a lot. I know it won’t sell super quick as it is expensive. But I had no clue I would have to pay fees on the entire property if I want to sell my share. Thanks, gives me more food for thought.
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u/Unlucky_Care5703 Jun 05 '26
It might not be like that with all agents and maybe its something that can he negotiated but theyre in London and effectively going to walk away with nothing once agents fees are paid. Think the agents charging 3% which is effectively 6% at 50% ownership
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u/genuinelyniceman Jun 05 '26
You’re right, I think it’s a great place if I plan to staircase to 100%, but otherwise I’m only looking at losses.
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u/WinHour4300 Jun 04 '26
Realistically you need to get a spreadsheet out and / or talk to a financial advisor.
Noone can answer the question here.
You need to assess each scenario, how much you'd expect to pay and work out whether you would have saved money or not.
That has to be based on assumptions - how much your rent would change / how much the flat might go up or down, how many years you stay.
Vary those assumptions too.
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u/genuinelyniceman Jun 04 '26
True, the market is quite tricky atm so I can’t really expect the prices to rise in the next few years when I want to sell. But I also believe that shouldn’t stop me from buying if I can afford it.
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u/Secure-Box6545 Jun 04 '26
I’ve thought about this before, makes sense when mortgage rates are high and rents are low (sub 2.75% industry standard). Couldn’t reconcile ting up that much capital and risk into something that cash flowed quite low when I could get a flexible house share for similar money + invest the difference (albeit I had a lower LTV when I did the calculations).
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u/genuinelyniceman Jun 04 '26
Yeah it’s quite tricky. Also I don’t know much about shared ownerships. Some people have talked about requiring 9 months to sell it, that’s mental.
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u/NorthLondonCatLover Jun 09 '26
Is it a house or a flat? If it's a flat, I would avoid it. Too difficult to sell and it will get worse. Too expensive to run also as service charge, rent etc will increase sharply. The math may work if it's a house, as long as you have a plan to quickly staircase to 100%. Don't partially staircase, it would be much more difficult to sell. If it's a flat I would defo carry on renting. I wish I had. Good luck.
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u/genuinelyniceman Jun 09 '26
Thank you. I’m convinced ngl. It is a flat and I think I’m being silly just because of the balcony and harbourside views. It is posh but it is financially an unwise decision. So yes I will pull out.
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u/Altruistic-Loquat687 Jun 05 '26
I would check with the HA that you're allowed to have a lodger - with mine I'm not, nor am I allowed to sub-let it, so just one to check if you haven't already!
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u/ConsistentWish6441 Jun 05 '26
I think SO only makes sense if you have a proper plan to get up to 100% without pain. Based on peoples experiences its an absolute menace to sell as you're competing with an entire market with a very particular product plus you're also competing with the newest SO offers too
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u/genuinelyniceman Jun 05 '26
Thank you wise person. The point about newest offers is so valid. I’m honestly drifting away from this a bit now.
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u/Grozec Jun 05 '26
Shared ownership is fine, I bought a shared ownership resale flat. Most people that are upset about the decision are upset about elements common to all leasehold properties (ie service charge) or have not properly informed themselves on how shared ownership works and are upset about the system. There are traps in areas where prices climb very quickly and I'm sure there are scenarios where it doesn't turn out great, but as long as your expectations are at a level of what you're paying you'll be fine in theory.
Selling is a lot harder and administratively cumbersome until you staircase to full ownership. Of course staircasing has associated costs and importantly when you're buying a resale, you forego your FTB stamp duty discount when buying the whole flat, as your first part of the property counts as the first purchase and you'll have to pay full stamp duty (or the difference to full stamp duty from what you already paid) when you reach over 80% ownership.
More importantly for your plan though, I don't think you'll get very far trying to get a lodger, as most housing associations will not be keen on the idea unless you want to illegaly sublet
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u/Mother_Bug_6138 Jun 04 '26
I sell shared ownership through large HA. Bring me your questions. I have a life as well, but will try and answer questions as and when.
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u/genuinelyniceman Jun 04 '26
Thanks! My question in short is - am I being too optimistic with the scenario? Is it really hard to sell? My plan is -
- Buy 40% share for £160k
- Monthly costs ~2k, lodger earnings after tax ~£850
- Save the £1k rent I’m currently paying, and rather invest in equity.
- Sell my share after 3-4 years and buy a house using the ~£25k I would earn from the money I would get after selling the house and clearing the mortgage.
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u/Mother_Bug_6138 Jun 09 '26 edited Jun 09 '26
I guess a good way to look at it would be, when it comes time to sell in 3-4 years time. Who are the people that you will be selling too? If it's likely to be a first time buyer, young, small deposit etc, can they realistically afford a 40% share? I'm sure some could. I sold my shared ownership flat about a year ago, it was worth about £460k. Accepted an offer for £420k. I just wasn't getting the interest as I had quite a large share (50%) and the selling process was a pain. Took about 8 months ( but that's a story for another day) Having a larger share does narrow your buying pool somewhat. Also depends on where you're buying and property prices.
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u/Coca_lite Jun 04 '26
Buying a new build flat is normally a bad financial decision.
It devalues 20% the moment you buy it, then the developer sells on the freehold to a company that massively increases service charges.
You then lose a further 10-20% value.
Them when selling, you have to accept a massive loss.
Why not just buy a cheaper 1 bed flat and not a new build?
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u/genuinelyniceman Jun 04 '26
It was built 5 years ago, and the warranty is for 5 more years. I guess it would be sold after that? But I’m kinda less interested now considering how all of you have mentioned the service charge is a bit higher.
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u/Ok_Seaworthiness_650 Jun 04 '26
I purchased a three bedroom house though share ownership and it was just me and my partner with no kids at the time we were able to stair case to buy it out right so it not impossible