Has anyone ever let a friend invest in their BTL property?

Has anyone ever let a friend invest in their BTL property?

10:15 AM, 15th April 2020, About 2 years ago 12

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Hi, I am looking for a bit of advice and wondered if anyone could offer any suggestions. I have a friend currently working in Bermuda, (but from UK), who is looking to get on the property ladder.

They can’t get an overseas mortgage, but have around 20K that they would like to invest and have asked for our help.

I have pondered whether they could invest their funds into one of the existing BTL properties that I own jointly with my spouse, but I wasn’t quite sure how to do this, or even if it is a good idea to suggest this to them. The reason for this is that it would have to be a long term investment to them as the market has suffered a bit of a downturn of late.

Not sure how this type of arrangement could be structured to ensure fairness to all parties. E.g. how do we work out the percentage of the value of their investment, and try to estimate the future value of the property. We would continue to be responsible for the mortgage/expenses and to receive the full rental income.

Also, there is the question of what sort of legal document would need to be drawn up in the absence of their name being put on the deeds to the property.

Has anybody ever done anything like this before?

Ann-Marie



Comments

by Simon M

15:32 PM, 15th April 2020, About 2 years ago

Even within the families these arrangements are fraught with difficulty - even with a deed of trust, all parties must expect and act to the strict terms of the agreement. It's an implied assumption the friend will gain, but what if they want their money back when the property is worth no more or less than before? Will you always be able to cover the amount they withdraw?

House price inflation is currently 3% (Halifax) or -1% (Land Registry) so this is worth at most £600pa less the costs to start and end the arrangement. To get on the housing ladder they need to earn/save more - £600pa won't make a big difference. A cleaner arrangement would be to retain the properties and find a way to give them the equivalent.

by David Mensah

10:27 AM, 18th April 2020, About 2 years ago

I've done this with very close friends before and it was great fun, but you need to know and trust one another, and also have very clearly spelled out expectations of what could happen, including unexpected costs, but also who does what in terms of work. My friends and I have complimentary skills which worked well for us. We did up a dilapidated house and it ended up costing £150K more than we initially budgeted, which was tougher to work through, but doable because we had thought such things through in advance. I think that if your friend only has £20K to invest that this is too little. Property fluctuates, costs fluctuate, and you need a bigger buffer than that.


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