Buying our second home - Part one
It was June 2018, my wife was pregnant with our first child, and we were falling out of love with our flat. There were many reasons for our sudden change in feelings which culminated from the smell of herbal remedies (I am sure you know what I mean) from our neighbors, lack of space and wanting our own garden space being the top reasons. At the time we had savings and some equity in our flat. We had only been in our flat for two years.
The equity in your property is the difference between your outstanding mortgage amount and the market value of the property at a particular moment in time. Please see the below example:
Property Value £300,000
Mortgaged amount £230,000
Equity (1-2 =3) £70,000
We considered selling our flat as this would have meant that we could cash out and find a bigger home without the need of paying any additional stamp duty. We also contemplated the idea of holding on to our flat and buying a second home. A quick look at the HMRC stamp duty calculator in June 2018, using our maximum budget showed that £19,200 would be required if we wanted to retain our flat and buy a second home. The higher stamp duty was due to the additional 3% surcharge on second homes.
I was shocked at the stamp duty balance of £19,200 as this was effectively the same amount of deposit that we needed to purchase our first flat.
Based on our budget for a second home, we made an assessment that we would need a total of £55,700.00. This large amount of money was not something that we had seen or touched in our lives. When I took stock on what lied ahead, I smiled while nervously scratching my head.
Decision-making process or at least the initial one
As mentioned in my previous post, my tendency in times of crisis is to analyse, so I opened an excel spreadsheet and ran a series of scenarios to see what we could and could not do. My initial analysis concluded that we needed to wait for another two years before we could move or at least this is what I thought at the time.
A chance encounter
I was daydreaming about the prospect of moving home just in time for the arrival of our newborn baby
It was a lovely summer afternoon in mid-June 2018, and I was on my way back home from a work meeting. I was daydreaming about the prospect of moving home just in time for the arrival of our newborn baby. I exited the train station in anticipation of dashing for the bus. As I was pulling up my trousers and clenching my work bag to run for the next bus, an uncle of mine yelled, "Adewole, come in the car"! At first, I looked and wondered who it was, before realising, it was my prized advisor, Uncle C.
"they will give you a company car, and you won't need to sit behind a desk all day"
Uncle C has been instrumental in providing me with sound advice and guidance throughout my life as a young man. He was also a significant influence as to why I currently work in property development. When I was 15 years old, he advised me to go into the property industry by taking a BTEC in Constriction and then a degree in Building Surveying. His selling tactic to me at the time was, "they will give you a company car, and you won't need to sit behind a desk all day". After hearing this, I was completely sold. Property was to be my profession, and from that day on my dream to join the industry was birthed. He is one of the few people I know personally that embodies the mentality of 'feel the fear and do it anyway'.
My Uncle does not usually drive through the route he took that day and explained that he was simply trying to cut through the traffic and was only on this route by "chance". It was a chance encounter for both us as what were the odds that two busy property professionals will cross each other's path at 3:00 pm.
"Wole, you can do it now"
As we made our way to my home, I explained my predicament to him on wanting to buy another house in time for our new arrival. I told of my perceived shortfall in funds and the perfect scenario that would need to be enacted for a new purchase to happen. His response was "Wole; you can do it now" in his iconic voice. Uncle C's response resonated with me. There I was, doubting myself, and I did not believe a perfect scenario could ever present itself. However, it dawned on me that if my Uncle believed I could purchase a second home, then I will lean on his faith in me until I start believing in it myself.
Throughout my life, there have been instances where I had no hope, but my wife, family and friends believed in me. I now live by this statement, "when faced with a difficult decision and I do not believe in myself, I lean on my support system who have faith in me until I am in a position to believe in myself".
Some may not get this statement, but in short, we should all be open-minded to gather motivation from everywhere we can.
After my short and impactful talk with Uncle C, I found myself back in the zone to go for it. I was able to convince my wife that buying a second home was indeed possible, and we set our sights on the target.
To sell or not to sell
Owning more than one property has always been a dream of ours, but we thought it was near enough impossible to pull it off so early in our married life. When considering whether to move or not, we factored in the below points:
My wife was heavily pregnant.
Selling would take 4-6 months, and we didn't have that time as we wanted our baby to live in a house.
We loathed the idea of having a newborn live in an environment where the smell of herbal remedies was the norm.
We needed more space and craved having a garden as I love to BBQ.
It felt like we were enacting our sequel of Mission Impossible, and I suppose we wanted to star in the impossible task of getting a bigger home to prove to ourselves that we could achieve the impossible.
We didn't want to take on too much
After careful consideration, coupled with the imminent arrival of our newborn-child, we decided to do all that we could to hold on to our flat while also buying a new home.
The story continues... part two to be released next week