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By Emma-Louise Boynton
hen make-up artist and influencer Lou Teasdale, 37, and her twin sister, co-founder of Bleach hair salon, Sam, were both 25 years old, they pooled together their savings to put down a deposit on their first flat.
Jointly, they had around £30,000 –- just enough to secure a mortgage on a £150,000 one-bed flat in Holloway, north London. It was a “doer-upper” and both sisters moved into it immediately – Lou in the living room, her sister in the bedroom – while they renovated the place from top to bottom.
Fast-forward to 2021, and that initial investment has propelled both sisters up the property ladder following over a decade of so-called “house flipping” (a type of real estate investment strategy where someone purchases a property intending to sell it on rather than live it themselves).
If it weren’t for that first Holloway flat, which they were able to remortgage to free up money for a new deposit and eventually sell at almost five times the buying price, neither Lou nor Sam would, they both agree, own anywhere close to the properties they now own.
Joined by their mortgage adviser, Chris Dawe, founder and CEO of London Mortgage Partners Group, Lou and Sam Teasdale share their top tips for getting on the property ladder with The Stack founder, Sharmadean Reid.
Tip 1 – Buy with someone
Chris: “The big benefit of two people buying together – if they have identical salaries – is that they can essentially borrow twice as much as what one person can borrow on their own. For example, if you are on a £30,000 a year salary, then you can borrow £125,000 to £150,000 on your own. If you can find someone else who is also on a £30,000 a year salary, then all of a sudden you’re able to borrow up to £250,000.
“Buying your first property with someone else is often a very good stepping stone for you to then be able to do something on your own in the future, using that initial investment, which is ultimately what Sam and Lou ended up doing.
“The most important thing to do with the person you’re buying with is to have an open and honest conversation about what you both want from the situation right from the start.”
What is more, mortgage repayments are typically much cheaper than paying rent. When Lou and Sam moved into their one-bed Holloway flat, they went from paying £1,500 a month in rent on a shared flat in Camden to £300 a month in paying off their mortgage.
‘The most important thing to do with the person you’re buying with is to have an open and honest conversation about what you both want right from the start.’
Tip 2 – Be realistic about your first house
Chris: “People come to us with delusions of grandeur saying: ‘I definitely want to freehold; I don't want to leasehold; and I don't want to live there, I want to live here…’.“
“Our advice is that you can either buy something you can afford, which might be a one-bed flat in Zone 4-6 or maybe something outside of London, or you can continue paying sky-high rent because you want to live somewhere like Clapham.
“Ultimately, you will be better off dropping your standards and going to live where you can afford to buy and benefiting from the uplift in that property, which will eventually catapult you closer to where you want to be.”
Tip 3 – Your house will increase in value faster than your salary
Chris: “It is more likely you will get closer to buying the property you want through buying something that appreciates in value than it is likely your income will go up sufficiently fast enough for you to be able to buy that dream place.
“I’ve worked in property for 20 years and every time somebody asks me: ‘When is the best time to buy?’ The answer is always, ‘yesterday’. House prices, no matter where you are in the South East, particularly in London, go up. Regardless of World Wars, stock market crashes, the pandemic… house prices have doubled every seven to 10 years in London.
Lou: “On the (Holloway) flat that we paid £150,000 for, I got £500,000 10 years later. And then that allowed me to buy the house I’m selling now. It was really the equity in that first flat that we bought that allowed me to buy my (current) house. If I was just earning what I earn and hadn’t made that initial investment, then I wouldn’t have been able to get anywhere near a house like the one I now own.”
As your property value increases, this also gives you the opportunity to remortgage. One year into living in the flat in Holloway, Lou and Sam had the property revalued at £250,000 – an increase of £100,000 on the buying price. This meant they could remortgage the property and use that money to put down a deposit somewhere else.
Chris: “At any given time, the difference between the mortgage amount and the value of the house – that’s your money. By remortgaging the property, all we are doing is accessing that money for you to do something else with. A good time to evaluate your mortgage is at the end of two years.”
Sam: “So you can see how once you've got one [property], it grows, as then you earn another deposit and you can buy another one. That is what the ladder is.”
Tip 4 – Aim to renovate your first house yourself
Lou: “You can’t increase the value of a flat if you overpay for it. So you have to underpay. Find something that is really good value which you can make money on if you do it up yourself, fitting an IKEA kitchen and Topps tiles, for example. They have everything you need to make it look like a Pinterest board – it's not that difficult. And always think about the resell. That’s what we did with the Holloway flat because we knew that was what it was for.
“The key is you just can’t overspend; otherwise you won't make any money.”
Lou recently sold another doer-upper property she bought during Hackey’s 2015 property boom for £825,000. After spending £250,000 on renovations and turning it into an Insta-ready dream house, she sold the property for £1,395,000.
Tip 5 - Look for an up-and-coming area
Sam: “If someone is telling you somewhere is an up and coming area, and you get down there and you just can't quite believe it… Yeah, all of the gentrified areas were like that at one point. If all the signs are there, it's going to become one.
“My first job in London was at Foxtons and we used to have to pay people to go to do viewings in Dalston because no one would want to go to them.”
Property prices in Dalston have increased from £149,227 in 2000 to £600,482 in 2020, according to Foxtons.
Tip 6 – New-builds are a good option (especially off-plan)
Sam: “After remortgaging that first Holloway flat, I bought a new-build off-plan in Dalston, which is when the developer is selling the properties before they’ve been built. When you buy off-plan, you often get to choose things like finishes, floors and bathroom, which you will then pay a bit extra for. Generally, you have to wait about six months to a year for it to be finished, sometimes longer.
“So I put a deposit down on that flat, which I bought for about £235,000. And the finished ones in Dalston Square nearby, which were exactly the same size, were on the market for around £280,000 to £290,000 already, so I knew it was really good value.
“That’s a really good tip – to watch the market constantly and do your research. Even when you're not looking to buy, think about what your next move will be and really learn what they’re selling for, what comes on and what doesn’t come on very often. Then when it comes round to you buying, you’re getting all the information you need already. If you start looking when you're ready to move, that’s too late.”
Chris: “Sometimes people turn their noses up at new-builds, but how many do you see sitting there empty? They all get bought. So if you’re not buying them, someone else is, and invariably they will go up in value. So again, sometimes you've got to do what you need to do to get your foot on the ladder.
Sam went on to sell her Dalston property for £300,000, allowing her to buy her next property, which she still owns.
‘You can’t increase the value of a flat if you overpay for it. So you have to underpay. Find something that is really good value which you can make money on if you do it up yourself.’
Tip 7 – Mortgage offers last six months
Chris: “Typically, a mortgage offer will last for six months. So if you buy a new-build off-plan and it's not going to be completed for two years, then you need to have a conversation about what your salary and income will be in two years’ time because we can’t arrange the mortgage for that property until six months before it is due to be completed.
“However, there is something called an assignment of contracts. Let’s say I’m purchasing a property and I’ve put down an initial deposit of say 10%, and I exchange contracts. Now I own the right to purchase that property.
“Then one year down the line, it's still not built and I decide I don’t want to live there anymore but someone else wants to purchase the property, under certain circumstances, you can assign that contract on to somebody else and make a profit (aka, on the appreciation in value on the property that has occurred since you first bought it).
“You don’t start paying your mortgage until you've completed the purchase and you are in the property.”
Tip 8 - Shop around for lenders
Sam: “Lenders all have different criteria they lend against, so make sure you’re speaking to a mortgage broker who will then speak to hundreds of different lenders [and look at the whole market for you]. While you might see an advert offering a mortgage, it may just be one lender and you might get a rejection from them, but then get an acceptance from somebody else.”
Lou: “A high street lender wouldn’t lend to me (I've got a lower credit score and I’m self-employed), but Chris found me a lender that looked at my whole picture and then figured it out.”
Tip 9 – Plan around your goals
Chris: “We can’t wave a magic wand and make it perfect. But what we can do is tell you what you can do and what you need to know so that you can set yourself a plan for working towards your goal, whatever that may be.
“On your credit score, the best advice I can give is to get on the electoral roll. If you are on the electoral roll of where you live, then that will have the biggest impact on boosting your credit score, since a lender will be able to check that [and confirm you are who you say you are and the details you’ve provided are correct].
Join Chris Dawe, Founder and CEO of London Mortgage Partners Group at 6pm today live on The Stack World Instagram as we discuss how to get on the property ladder!
An investment in property will always appreciate in value at a faster rate than your salary will grow, so if you can afford to get on the property ladder – do it.
By Emma-Louise Boynton