Good Landlord trying to find a win win – any ideas please?

by Readers Question

15:23 PM, 20th March 2014
About 7 years ago

Good Landlord trying to find a win win – any ideas please?

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Good Landlord trying to find a win win – any ideas please?

Hi all

Every so often a deal comes up that I feel I ought to look at for the purpose of helping someone out, rather than for a big return, though it needs to be a decent investment. I’d be keen to see if any of you have creative win/win solutions for this one.

One of my tenants who has been with me for two years and was my mothers MacMillan nurse before she died has moved her boyfriend in, which is fine by me. He had a leasehold flat to sell and got a purchaser in September.

The flat is in an old Victorian conversion, one of about 10 separate apartment flats, all leasehold. The lease however has only 60 years to go and the buyer agreed to go ahead only if the owner would pay and apply to extend it. He agreed but 6 months later she is still asking questions via her solicitors (I haven’t asked any more about that yet) and no exchange has happened and they are getting very worried and at this moment in time can’t afford the rent to me plus the mortgage on the empty flat.

They came to me to see if I might be interested in buying it.

The flat was purchased in 2004 for £95,000. It was previously sold for £73,000 in 2002. Other flats in the building have sold for between £82,000 and £109,000 up to 2007. He has a mortgage of £800 per month and I suspect had a deposit of say 10% at the time he purchased so owes about £85,000. It went up for sale at £115,000 and they got £110,000. It would rent out at £550

I’m wondering if it is worth me considering a BTL at 85% – ROI would be about 7% after all management fees, ground rent etc and I’m trying to work out if there is a decent offer worth making bearing in mind this is now becoming a distressed sale but with a history that means if I go ahead I want all parties to feel they have been treated fairly

Ideas most welcome

SueHelping hand


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Comments

Neil Patterson

15:33 PM, 20th March 2014
About 7 years ago

Hi Sue,

I am torn on this one.

On the one hand it is Fantastic trying to help out and I totally understand why. What goes around comes around. It is just a nice thing to do 🙂

On the other as a business and a property purchase in a free open and mature market you should purchase the property for the lowest figure you can. This does not compute with the above statement.

I think we need to know what you personally would feel comfortable and good about paying first for the property.

550 rent is reasonable and you should get lender to fit easily at 75% or even 80%, but at 85% you are looking at a very restricted option of 2 lenders and 3 products so we would need to go into a lot of detail not appropriate in an open forum to see if they would fit.

Do you have a larger deposit if required?

Have you checked out the Landlords Calculator >> http://www.property118.com/calculating-rental-yields-and-returns/

and or the BTL quote mortgage sourcing engine >> http://www.property118.com/buy-to-let-mortgage-calculator-2/

I do not see any huge holes in your desire to help out on a win win basis, but maybe other readers will also be able to comment as well.

Mark Alexander

16:27 PM, 20th March 2014
About 7 years ago

Hi Sue

The first rule of investing is to separate emotion from investment decisions. The deal you have outlined isn't investable in my opinion, certainly not with anything more than around 60% borrowing anyway.

Neil's advice is good.

If you are feeling benevolent towards this couple why not offer them half rent for six months or until there property sells, whichever is sooner. They would probably like some assurances of tenure too so why not offer them a Deed of assurance for 5 years? See >>> http://www.property118.com/deed-of-assurance-1/32440/

If you want to buy another investment property why not take a look at our Property section - see >>> http://www.property118.com/category/property-for-sale/

If you are worried about buying a property which offers a high yield then you may need to look further from home. If that's the case you will need a good property manager - see >>> http://www.property118.com/full-property-management-from-just-14-99-a-month/34413/
.

17:59 PM, 20th March 2014
About 7 years ago

Hi Sue,

While it is very laudable that you want to help out here, I think that you will struggle to get any form of lending on a property with less than 70 years left on the lease.

These kind of problem properties tend to get sold to cash buyers and property traders.

If you do not have the cash, a colleague of mine, Richard Hill, specialises in buying properties with short leases and I am sure he would make an offer on this flat so that everyone can move on. Richard can complete in as little as 4 days if necessary, thanks to his cash reserves and experienced team, and he pays the legals.

Have a look at http://www.dreamhousebuyer.co.uk and/or get your tenant to give him a call on 0800 1577497.

Hope that may help solve the problem as six months is a very long time for a sale to drag on and what your tenant needs now is certainty. I suspect that only a cash sale can provide that.

Jeremy Smith

11:26 AM, 21st March 2014
About 7 years ago

Hi Sue,

I assume that the lease is now extended, that is what is implied in your question.
Your concern, as you say, is them paying the rent to you.

Perhaps there is a case for him to convert his mortgage to a BTL interest only, you could point him in the right direction of a good broker....
...You could then manage the property for him for a fee and he wouldn't need to sell it, you would get another property to look after and he gets more cash coming in to pay your rent with !
Obviously your profit margin would not be there, just a monthly fee, but you've helped them out of their predicament, and yourself in the process.


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