Under starter’s orders

My father used to say that buying a house was like the Grand National in terms of how many fences one had to jump to reach the finish line.  It appears that we only have three in our personal Grand National, but they’re all pretty much Becher’s Brook-sized.

Those of you going, ‘Eh?  What?  Buying a house??’ haven’t missed anything – this time last week we weren’t even considering buying a house, but then an opportunity came up that we knew we would absolutely kick ourselves for missing out on if we didn’t try and take it, and so after a telephone call with my mortgage broker this morning to clarify some points on both sides, we are going for it.

More details of the house once it’s sewn up, but our three fences are:

  1. Can we raise £127,000 on a buy-to-let mortgage?
  2. Can we get a market rental valuation of £650 a month?
  3. Can we borrow back the mortgage reserve on our current mortgage?

I spoke to our lenders this morning as well, and the answer to 3 seems to be a cautious yes.  They’re closed to new business, so need to double-check with the higher-ups that it can be released and also the full amount will need to be within the original lending criteria in terms of LTV, although we should be okay on the latter point – we’re currently under 60% LTV.

So watch this space and please cross your fingers!

Going back to my father – he would have been 84 yesterday, so he was on my mind, and with the Grand National being run last Saturday, I was thinking about a letter he wrote me when I was at university and he and Mum had put in an offer on a beautiful Grade II-listed house in Somerset, with the plan of my grandmother going to live with them there as well.  It only took me a few minutes to find it, despite the current state of my office (it still has an entire Howdens kitchen crammed into it!), and I realised from the date that it was the last letter he ever wrote to me before he died – he was in a serious car accident seven days later.  So in a post about my Grand National fences, here are Dad’s, from 23 years ago, together with the fountain pen he used to write them which I still use every day.

Not much to report

Progress has been slow over the last fortnight.  David hasn’t been able to get to us for the past couple of weeks, but hopefully will manage a couple of days next week, as Dougie now has a reel of shotgun cable, ordered for him by Colin Chessor (who’ll be doing the satellite dish installation in due course) and is going to be running it into the living room and bedrooms next week.

Mick has spent a day down there today and we now have an insulated living room and the living room ceiling is plasterboarded.  By the time I went down to feed the sheep (who moved back to the fields around the house yesterday) it was too dark for photos.

On the finance and admin side, I got round to catching up on entering all my invoices and spends into my spreadsheet – we are now £35,000 into the budget *gulp*.  What I’m pleased about is that the majority of that money, all bar a couple of thousand, has been spent with local companies and tradespeople.  I do try to spend within the local economy where I can.  I’ve also ordered the correct Ordnance Survey map extract needed for the decrofting application, which arrived on Friday and is sitting in a tube on my desk ready for me to break out the colour pencils.  Since it cost me £19, I think the first thing to do is ask Mick to make several copies of it for me to practice on!  (My scanner doesn’t do A3).  Given I was sorting sheep out on the area in front of the house yesterday (we managed to pick up a few extras coming down the village!), I’m only going to apply to decroft the bit of ground the house sits on and a tiny bit behind it for a small garden – as long as I draw the map accurately, it should go through with no problems, as I’m not applying to decroft any areas that would restrict access to the rest of the croft.

Every little helps

I really need to sit down and go through the enormous stack of invoices that’s piling up under my desk, because I suspect I’ve gone very off-budget.  However, I’ve managed to bag another bargain this evening – B&Q had an offer on Sandtex masonry paint, 2 for £40 on all the 5 litre cans (usually £29 each), meaning I can have the colour I want for a little less than the colours that come in the bigger 10l tins (£44 each was the cheapest I could find them).

The paint splurge was prompted by Magnus sending me an email with an estimate of £800 for his labour costs, which he reckons will be 5-6 days and includes completely power-washing the house, but I need to buy the paint and he reckoned 100 litres would be a good starting point.  20 cans in the basket, £400 down from £580, free delivery to the Highlands and, as long as it tracks properly, 3% cashback via Quidco*

Where did the weekend go?

It seems it was Friday only about two seconds ago!  This is where the roofing team got to on Friday afternoon:

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You can’t see it very well on the picture (click on it to enlarge), but there are four scalloped diamonds on the roof, spaced in between the windows.  Pete suggested that we do a line of scallops connecting them as well, to echo the one at the ridge line.  I was expecting the diamonds to be three slates wide, as per my original drawing – if you want a laugh…:

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they’ve actually gone for four and we may have overcooked it slightly, but I think it only looks a bit overdone at the moment because the rest of the outside isn’t finished.  Once the house is painted a warm white with a dark green front door, a couple of dark green planters with colourful flowers either side, a new fence and new gate, it might well be just right.

Of course, the fact that the front is nearly finished means that I’m going to have to write another big cheque soon, as the second of the three payments is due on completion of slating.  My credit card bill for the insulation and flooring arrived last week (1% cashback on that card!) and when I logged in to pay it, I was slightly alarmed to see that I had no money transfer or balance transfer offers available – there’s been one on that card every month for at least the last three years.  I still have one available on my other card from the same provider, which I will take up next week, but this card has a £12,000 limit and not being able to access that is going to leave quite a big hole in the budget.

Save

Save

Hey big spender

I had to write the first big cheque last week (well, the first one since the one I wrote for buying the place, which was a whopper!), so I thought it was probably time to put my cards on the table and share my budget.

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There are really two parts to the budget: what’s needed to get it to the point where it could be sold or rented and what’s needed to furnish it to turn it into a holiday let.  Here are our figures.

Item Estimate
Roof & stonework £16,000.00
Electrics £4,655.00
Heating & burner install £7,000.00
Joinery £5,000.00
Kitchen units £3,000.00
Downstairs flooring £1,600.00
Carpets £750.00
Plasterboard & insulation £2,000.00
Skirting boards £200.00
Kitchen appliances £2,000.00
Switches, sockets, light fittings £500.00
Interior paint £500.00
Exterior paint £1,000.00
Shower tray & screen £700.00
Shower £400.00
Woodburner & kit £1,500.00
Windows and door £5,000.00
Door stripping £400.00
Miscellaneous tools £2,500.00
Bathroom tiles £250.00
Garden/fencing £2,000.00
Interest, council tax, electricity £3,500.00

Total: £60,455 *gulp* And we’re actually already £2,720 over the roof budget because of the extra work to the stone. On the plus side, the house and surrounding fields were valued at £77,500 on the home report (the rest of the value being assigned to the other croft) and should be worth in the region of £150-160,000 once we’re done, so we’re still just about in profit.

On the furnishings side..

Beds x 4 £750.00
Mattresses x 4 £1,300.00
Sofas x 2 £1,100.00
Kitchen table & chairs £800.00
Coffee table £200.00
TV unit £200.00
TV £300.00
Wardrobes x 3 £750.00
Drawers x 2 £500.00
Bedside tables x 4 £500.00
Pots, pans & crockery etc £600.00
Cushions, pictures etc. £500.00

Total:  £7,500.  I’ve priced up for mostly new, but am hoping I can save some money by buying good-quality second hand – browsing the local Facebook for sale group, I’ve already seen a really nice oak single bed frame that would be perfect for the small bedroom for £45.  A friend of mine recently furnished an entire rental property from the weekly furniture auctions at Dingwall and has a teenage niece who’s got the long summer holidays coming up who is very, very talented at smartening up bargain buys, so I’m hoping she might be employable for a few days!  The one thing I refuse to buy second-hand are mattresses.

We’ve also agreed a £5,000 contingency, bringing the overall grand total potential spend to an absolutely eye-watering £72,955.  We have enough cash, from savings and 0% offers, to get us to the house being more or less finished, but not the garden – so I need to crack on with the decrofting application for the house site to make sure that as soon as there’s a working kitchen and bathroom in place, I can get on with a mortgage application to release money to pay back the 0% deals as they expire and put the final touches to it so it can start earning its keep.

Stripped

Mick decided to take the day off on Friday, got the bit between his teeth and completely stripped the living room.

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Sadly no enormous fireplace on this end.  We did have a brief discussion about the merits of swapping the kitchen and living room over, but decided that the extra hassle and expense of replumbing probably wasn’t going to be worth it.  It just means we rotate the kitchen layout 90 degrees and drop the idea of having a big dresser against a wall for all the crockery and cutlery.  There is, however, a lovely old hearthstone in that fireplace 🙂

As the plasterboard came off, it was clear that there was a membrane underneath the concrete floor, which is why it’s dry.  Unfortunately it doesn’t go under the walls, so a little damp has got into the old lime plaster.  We’re going to pick it all off, let it dry out and take a look at the stone, then see if it needs tanking before we put the studwork back up for the insulation and new plasterboard.

Dougie the electrician rang on Saturday with his quote.  Bear in mind that this was the list we ended up with when he asked us what electrical things we wanted in each room:

Front room

Main BT socket
Satellite connection
3 x wall lights
2 x standard double sockets
2 x double sockets with USB chargers
CO2 alarm

Hall
Smoke alarm
1 x single socket
1 x ceiling pendant light

Bathroom
Electric shower to be changed out
Electric towel rail
3 x large (about dinner plate size?) recessed ceiling lights
Extractor fan

Kitchen
6 x recessed ceiling lights (standard spotlight size)
Cooker
Heating control system
Hob hood extractor
Small spots for lighting the food preparation surfaces
3 x standard double sockets
2 x double socket with USB chargers

Landing
2 x recessed ceiling lights
1 x single socket
Smoke alarm
Move meter from hall and bring in power here instead of through the front door
Low-level, fairly dim lights up the stairs, wired to a switch in each of the three bedrooms to light people up and down to the bathroom at night, without waking everyone up by switching on the main landing light

The two larger bedrooms
1 x central pendant light
3 x double sockets with USB chargers
Satellite dish connection
Ethernet connection
Smoke alarm

Smaller bedroom
1 x central pendant light
2 x double sockets with USB chargers
Satellite dish connection
Ethernet connection
Smoke alarm

What do you reckon his quote was?  Mick was thinking in the region of £6,500-£7,000.  I was hoping it would be about £5,000.  He’s quoted us £4,655.  I was so surprised that I completely forgot to ask what I needed to buy and what was covered in that list!  When he was talking about the stair lights, he said the ones he intended to use were in pack of six, so lights must be included, but I know that I’ll need to pay for the shower, the extractors, the towel rail and, obviously, the cooker.  What I’m not sure about are the cover plates for the light switches and sockets, so I’ll have to email him and check.

Since he says he’ll want to start upstairs and can begin in about three weeks’ time, we attacked the upstairs again this morning and made good progress in stripping out some of the last bits of panelling – now David the Joiner has confirmed that all the internal wood that isn’t a sarking board or rafter is non-structural and can be removed, we’re being a bit more adventurous with the pry bars!  Only one worrying moment, which was when I was breaking out some of the panelling below the window in bedroom one, put my bar against an enormous rock in the wall to brace it and the rock moved….!!  It’s completely loose, so it’s been pushed back into place and we’ll get Pete to have a look when he’s next here.  A little bit of wet stone under the window in bedroom two as well, but we’ve had an easterly with rain in it all weekend, and I think it’s just been forced in around the window.

I also got to grips with a power tool for the first time – I used Mick’s drill with a Phillips screwdriver head attached to remove the handrail up the stairs.  It took a couple of goes to get the idea that I had to keep it pushed into the screw even though I was using it to take the screws out, as that seemed a bit counter-intuitive, but 24 screws later I was quite comfortable with it.

Budget Day

Not just for Mr Osborne, but I thought I’d add up how much I’ve spent to get here so far, as the solicitor’s bill arrived this afternoon.

The only two expenses I’ve had (not counting the running costs for my sheep – I’m keeping my crofting budget separate) are the interest on the money I’ve borrowed from my family and the legal fees, so the accounts so far look like this:

Difference between money borrowed and purchase price – £70.51
10th Nov – Interest – £96.68
10th Dec – Interest – £276.88
11th Jan – Interest – £276.88
10th Feb – Interest – £276.88
10th Mar – Interest – £276.88
16th Mar – Solicitor’s bill – £766.00
Total:  £2,040.71

So it’s cost me a little over £2,000 just to get the keys.  In fairness, that’s not bad – I had to sit down when I opened the solicitor’s letter, as I was expecting that to be four figures and possibly starting with a 2!  I shall drop in and pay it tomorrow and leave a large Easter egg for Jane, my solicitor 🙂

I had a call back from Dougie the electrician this afternoon – he was up the road in Melvich, could he come and have a look?  Sure.  The good news is that he’s agreed to quote for it, so I need to think about what I want in each room in terms of lighting and sockets (I don’t need to finalise positions just yet), think about where I want the TV and the phone, as he’s going to hide all the cabling currently tacked to the front of the house for those, and decide whether I want the power to the byre to be on a separate meter to the rest of the house.  He’s also going to move the position of and seriously upgrade the heating controls (it’s a cheap clockwork timer and the noise is really annoying) and move the meter and fusebox etc. – he’d seen that the main power cable into the house is chased into the harling down the outside wall and then goes through a wooden panel above the front door, which isn’t ideal, so since we’re getting the door replaced and we’ll have someone patching the non-harled bits that will be revealed when Pete takes the fascia boards off, it’s going to go through the wall at the height of the connection and all be hidden in a little cupboard on the landing.  Mick has suggested that we ask him to also quote for putting in outside lights, particularly one to illuminate the fanks (sheep handling system), and also for wiring in a back-up generator so that if we do have guests in and there’s a power cut, it’ll cut in and take over.  We actually have a generator here, but it’s not wired in, so it can go down the road.

Another two hours stripping out panelling and bedroom one is very nearly ready for work to start.  The priority over the next few days is to get the surfaces with the Veluxes/proposed Veluxes bare so that if Pete wants to start cutting holes in the roof next week it’s all ready to go.  I uncovered a MAHOOSIVE spider which I thought was dead, but turned out not to be.  Mick really Does Not Do spiders, so I had to dispose of it out of the bedroom window.

She’s making a list, she’s checking it twice…

…and she found she’d left the electrician off it!

Yes, we’ve reached the planning stage.  This is a list (not quite in the right order) of all the stuff we think we have to do to Ethel’s House.

  1. Treat woodworm.
  2. Strip all rooms back to walls.
  3. Repair kitchen ceiling.
  4. Re-wire house.
  5. Enlarge fireplace in living room to take woodburner.
  6. Replace windows.
  7. Replace front door.
  8. Replace roof and all rainwater goods.
  9. Repair chimney.
  10. Enlarge two existing roof lights and add two more.
  11. Insulate all rooms and roof.
  12. Install underfloor heating in kitchen and bathroom.
  13. Install new kitchen.
  14. Install new shower.
  15. Lay solid wood flooring throughout ground floor.
  16. Carpet up the stairs and throughout upstairs landing and bedrooms.
  17. Install woodburner in living room.
  18. Decorate throughout.
  19. Furnish.

Just a bit of work to do, then…  We are really dependent on the electrician and the roofer, as a lot of the rest can’t be done until they’ve finished.  By the time we’ve got it furnished, hopefully the decrofting of the house site will have come through and I’ll be able to get it revalued and apply for a small mortgage to pay off all the money I’ll be borrowing to pay for the list above.  At the moment I have a home report that says it’s worth £77,500.  Compared to other 3-bed near-identical houses in the village currently for sale, that’s very, very low – although all those came to market after the home report was done.  Given there’s a 2-bed bungalow with no land 200 yards up the road that’s been valued at £125,000, I think we should do okay when it comes to getting a good low loan-to-value.

3% levy on second homes

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Well, I was feeling slightly smug for a few weeks about Scotland not being affected by the 3% surcharge for buying a second home that was announced in the Autumn Statement, but despite the SNP’s avowed loathing of Westminster, they’ve not hesitated in going, ‘Oh, that’s a good idea,’ and doing exactly the same for LBTT (Land and Building Transactions Tax, our version of stamp duty).

Scottish Budget: New 3% levy for buying second homes

I’m really not sure what the recent flurry of legislation affecting landlords is supposed to do, other than reduce the amount of rental stock, thus pushing rents up.  Anyway, if my purchase looks like it’s going to get anywhere close to not completing by the date this comes in (unlikely, but then I thought I’d be six weeks into renovations by now!), I shall be strongly suggesting that the seller pays it.

Holiday letting – council tax or business rates?

Money

No, sorry, I still haven’t bought the house!  I did email my solicitor last Monday to find out if there was a chance of getting the keys before Christmas, but haven’t had a reply yet, so hopefully that’s still a ‘Maybe’ rather than a ‘No’!

However, what I have been doing is looking into some of the things that are going to affect how much I earn from my holiday cottage and one of the main things I was a bit confused about is whether a holiday letting property is subject to council tax or business rates.

Disclaimer – I am not an expert and the below might be wrong!

From what I can figure out, and please remember that I’m looking specifically at the law for Scotland here, it all boils down to how many days the house is available for and how many it’s actually let for.  The Scottish Government website is actually very helpful on the subject if you do a bit of digging.  So, on this page, it says that if my holiday cottage is available to let for 140 days a year or more (which it will be – that’s only 20 weeks), then it will be rated as a self-catering property and liable to business rates.

The next burning question I wanted answered was how much is it going to cost me?  Given that the council tax for our house is £113 a month (which does include water rates), I was pretty sure it was going to be more.  I dug further and discovered that the local assessor will give me a rateable value for the house upon which I then have to pay the poundage rate, which for 2015/16 is 48p in the pound.  At this point I was getting slightly worried – was that related to the value of the house?  Surely they couldn’t be expecting me to fork out tens of thousands a year?

Fortunately not.  I then found this EXTREMELY useful document on how ratable values for self-catering cottages (or castles!) are worked out.  It’s dated 2004, so I’m not sure if the values are still in use, but it gives me some idea and based on the house sleeping 5, done to an H1 standard, and being in a remote (P) location, that would give us a ratable value of £1,025 – and that roughly tallies with the information I found on the SAA website that a 2-bed holiday cottage on the other side of the bay has a rateable value of £800..  So 48p in the pound means £492 a year in business rates, way lower than council tax.  Result!

Then it got even better.  It turns out that the Highland Council has something called the Small Business Bonus Scheme, which, if I understand it correctly, means that businesses with a total ratable value of up to £10,000 get 100% relief from rates – so I will pay nothing at all!

However, business rates don’t include water or refuse collection and I’ve been struggling to find out what I’ll have to pay for those.  I’ve found an old PDF on the Highland Council website which seems to suggest that for a normal domestic 240l wheelie bin collected from household premises in 2010/11, it was £3.43+VAT per collection for a refuse bin and £1.64+VAT per collection for a recycling bin, but I can only see current prices if I apply for a collection. I am completely flummoxed by what happens about the water, I think I’ll have to ring up Scottish Water and ask!  All in all, it does look like I’m going to be better off on business rates.