Climbing the housing ladder is engrained in our society and it’s always billed as a sound financial decision. Here I tell my home buying story, and how it has worked out well for me. I want to acknowledge both my privilege and the choices I made that resulted in these positive financial outcomes.
I’ve been reluctant to share this story, as I’m a classic case of that old-fashioned narrative – doing well financially by buying a home. And this narrative isn’t the same for everyone, namely those who either didn’t have my privileges and experiences or were not willing to make the same compromises. However, I’d like to share my housing ladder success stories, or how I managed to shimmy my way up that elusive housing ladder.
Buying at 19
As I’ve mentioned before, my parents were of the property-owning is normal, middle-class persuasion. And most importantly, we lived where buying property was generally affordable. I’ll state that again, we lived where buying property was not out of reach for most people, and moving up the housing ladder was normal.
Hence I didn’t see it as particularly abnormal that at 19, while a student, I bought my first flat. A little one bedroom flat, all for me. I saw this as my first step for freedom, moving out of the parental home and into a place where I could set the rules. And where I wanted to live – out of the small village, into the city. Where I could go out at night, and come home whenever I wanted. The 19-year-old’s dream.
The flat itself was in grim shape, reeked of smoke and looked unloved. Luckily as it was my first place, I got free parental labour to help decorate. Over a weekend, we transformed it with a lick of paint to a work of art, a palatial home, in my opinion. Being able to decorate everything the way I wanted was refreshing and made me feel like a million dollars in my own little palace.
How did I afford it?
Well, the main thing here was the price – the flat was only £27k, of which I put just over 10% down – £3k – and got a mortgage for the rest. My Dad kindly agreed to sign the mortgage as a guarantor, as I was a student. As I mentioned in my previous post, I have always been a saver and saved a lot of money even as a child. Birthday gifts etc were put in the bank, which I enjoyed watching grow. And then when I finally was allowed to get a job at 17, I got a low paid job over the summers and saved a lot of that money. Hence, I had around £5k in the bank and could afford to buy a place myself.
Nonetheless, you don’t get a property for £27k without some tough compromises. And it’s fair to say this flat was not in a cool place. And nowhere near desirable. This was a rough neighbourhood, albeit not far from the city centre. The first compromise I made to be able to move was the location. I chose to move into an uncool place, which had a bit of an unfortunate reputation. I have quite a determined character and can handle myself in most situations, so I was not at all worried about this. My parents were a bit more worried, but not enough to stop me. Looking back now, it was a perfectly safe place to live, all the violent incidents associated with the area were overexaggerated and people who kept out of the trouble were not at risk.
The second compromise was the location. I bought a flat on the main road. There was a bus stop outside my window, and many buses an hour ploughed past. As did a lot of heavy traffic and sirens. In fact, my Dad joked that he heard more sirens in 2 days in my flat than had since moving to the mainland 25 years prior. So the flat was on the main road and loud, but interestingly this compromise also made the first compromise more bearable. The main road aspect of the flat meant the location felt much safer than a side road. And I got a great door number, over five hundred, which although common in the US is rare in the UK.
And the third compromise? I bought a flat in a rough area, on the main road, on the ground floor. Ground floor flats are cheaper, as they are less desirable. You have to live with noise from your upstairs neighbours, and people can see in your windows. But there were a few mitigating factors; it was an elevated ground floor flat, with bushes in front of the windows. By making all of these compromises, I was able to buy a home at 19.
My time as an accidental landlord
As I mentioned above, I was a student when I bought the flat. And when I finished my course and had a shiny degree in my hand, I wanted to get a job further away, that would let me explore more of the world. I was craving wider experiences and felt I had explored the city as much as I could. So then I ended up as an accidental landlord. And you know what? This cheap flat made a great rental. The rental yield was over 20%, so I rented it out when I went off to work and experience the world.
Making a profit
Finally, I sold this flat, and I did very well out of the sale – I made £13k, which is a 48% return in 4 years. I think this will be one of the best returns I’ll ever see on a property. Although it may seem that this was a lucky profit, there was a bit of educated risk in it as well. The area was showing signs of regeneration, and right next door flats were being built, with asking prices much in excess of the £27k I paid. I correctly predicted that once the newness of those flats paid off, the values of the flats would equalise. And they did, leaving me with a handsome profit, to use a deposit on my next place.
Then again at 23
We then pick up my home buying journey when I was settled in a new location and I wanted a cat. So the urge to buy came up again, and I followed a similar path to above. I did not stretch myself but instead found a place in a less desirable neighbourhood that I could afford. This place has very similar characteristics to the above, a cheap area, near to the main road and not far from the city centre.
However, I did make one splurge, this was the crucial upgrade to a house with a garden, so I could have a cat. This house was £68k, and as I mentioned before, I am a natural saver, so and I had a lot of cash to put down here, and only ended up with a £38k mortgage. And I loved this house, despite people seeming to pity me living in an uncool place – it was perfect for my needs at the time. Again this house was not pretty – there had clearly been an interesting story with the previous occupants, and it had a smashed window, some interesting painting and grim carpets everywhere. But I knew I could easily sort that out with some graft and paint.
I lived in this house through the house prices bubble of 2007/2008 – and watched the price rise to £125k – an identical neighbour sold for that – then swiftly fall back down as the UK property market crashed. So, when I eventually sold this property for £80k, it was bittersweet. I felt sort of aggrieved that I had lost out on the peak price, but glad I didn’t actually lose any money on the house. That old loss avoidance mindset is hard to avoid, although I know it is irrational.
And finally at 30
Then my big move to London happened, you can read about my love letter to London here. I love London, but as you may know, housing is expensive here. Despite my sizeable deposit in hand, lots of London was unaffordable to me. Hence I concentrated on where I could afford and narrowed my search to those areas. Compromise featured heavily in my house choice, and I really wanted a cat-friendly 3-bed semi with a large garden. And by going a little further from the station than I desired, and considering outer London, this was possible.
I maximised the things I wanted and compromised on things I was less fussed about. Again the house was not pretty or perfect. The boiler was older than me, and both my father and I did not recognise it as a boiler. The bathroom was positively vile, featuring no bath but a shower cubicle coated in limescale. And a downstairs toilet with a plastic cistern and no sink. Like how grim, if you used the toilet downstairs you’d either not wash or use the kitchen sink?
I bought my house for the frankly frightening (at the time) number of £250k. I got a £185k mortgage on a ~£44k salary, and it did feel tight. But as my income grew, the mortgage became more and more reasonable. Some may say I overstretched myself, but I was happy taking this risk, for a property in outer London.
Nowadays the house has benefitted from the rampant London house inflation and would sell at around £400k. But I’m not planning on selling at the moment, as I’m planning to FIRE and go travelling in just under 3 years, as detailed in the 1000 days left to go post.
Random thoughts Buy-to-Let
As an aside on home buying – I have to say I swing left wing on this. I believe buying property is for living in, not for profiting from. Hence I don’t believe in buy-to-let. Whilst I am happy with people buying houses to live in and appreciate in value as a residential home, adding in a profit margin from other people’s homes feels wrong. This may not be a popular position, especially as I’ve just detailed how kind the property market has been to me. And that I’ve been an accidental landlord. But I do believe we need to sort out the housing problem and make sure the market is sustainable for the long term, so other people can follow my path.
Can everyone do what I have done?
Can everyone successfully climb the housing ladder? Is it a skill? Or is it a matter of privilege? Next week I want to tell you another tale – my brother’s housing story. He is someone with the same if not more privilege than me and yet the housing market hasn’t been as kind to him.
But I want to leave this story on a positive, that buying rather than renting has worked out well for me personally. Even if my reasons for buying were for freedom from parents, then freedom to have a cat. As let’s face it, cats are the answer to most problems, after you have exhausted 42.
Over to you
- Have you bought a property?
- If so, what age did you buy your first?
- Do you believe it was a good / bad decision to buy?
- what is your experience of the property ladder?
Looking forward to your thoughts and ideas – all are welcome.