buying house from our landlord

Incisor

pinkshoes wrote: »

How much do you love the property?

You could tell the owner that for £100k, you'd move out of the property (and thus use the £100k as a deposit to buy elsewhere...) so that they can sell it on the open market at the higher valuation.

You are quite undervaluing the tenancy here

Vt = Vom - [ [R - M] / Y ]

Vt = Value of Tenancy
Vom = Open Market Value of property
R = Annual Rent
M = Annual Maintenance
Y = Yield expected by highest bidding potential Landlord for property with sitting tenant

Vt = 315,000 - [ [7200 - 2000] / 0.05]
= 211,000 assuming a Landlord who expects 5% will buy.

absyandtigger

Sorry Incisor, could you make that a little bit clearer for Numptys like me, it's just I think that might be the explaination that we need to give our landlord but i can't quite keep up!!

absyandtigger

Oh it's okay, I think I've just got it!! Sorry i am very slow when it comes to anything that looks like Algebra.
So we need to be offering about £104 to be in line with a landlord expecting a 5% return, which is quite low for a landlord anyway, is that right?

Incisor

absyandtigger wrote: »

Sorry Incisor, could you make that a little bit clearer for Numptys like me, it's just I think that might be the explaination that we need to give our landlord but i can't quite keep up!!

Sure.

Go back to post #44. This gives the value of the property to a Landlord who wants a property with you in it, paying a rent. I think you were OK with that. You might want to substitute into that your own assumptions for the rent, maintenance and the yield the new Landlord might take and recalculate.

All I did was subtracted the value calculated in post #44 from the value your surveyor gave you, to work out the value of your tenancy.

The interesting thing is, taking beingdjc's estimates of yield from post #46, the value of your tenancy is highest assuming a professional landlord would buy, because they would pay least to get the highest yield. So, you can take the estimate in your favour, by saying that no one would be foolish enough to buy with a yield of below some value:

Vt = 315,000 - [ [7200 - 2000] / 0.08]
= 250,000 assuming a Landlord who expects 8% will buy.

Hope that helps.

absyandtigger

Thank you, thank you, thank you thats just the sort of statistic we need.

Incisor

absyandtigger wrote: »

Oh it's okay, I think I've just got it!! Sorry i am very slow when it comes to anything that looks like Algebra.

But when it comes to sums of money like this being in your favour, you just have to think that algebra is one of the best things at school :j.

So we need to be offering about £104 to be in line with a landlord expecting a 5% return, which is quite low for a landlord anyway, is that right?

yes.

Now what you have to imagine is an auction to Landlords. Assume that they all will spend the same on maintenance. They will all bid up to the level where the yield reduces to the minimum they will accept. So your current Landlord will get the best deal from the least demanding future Landlord. You have to outbid this least demanding future Landlord. Bear in mind the amateurs have probably been scared away from the market.

absyandtigger

Thanks again, we'll up our offer to maybe £110, pointing out the yeild calculation to them. It's difficult we don't want to hold out for the cheapest price in case they do sell it to anyone else, but equally with the market as it is we don't want to pay over the odds.
All these calculations are based on the open market value which as we all know are falling everyday.

poppysarah

I'd offer less. Every day the BTL mortgage market shrinks a little bit more.

600 a month rent sholdn't mean more than 72k for 10% yield which is what a good BTL investment would want,

mlz1413

OP I know this is easy to say because I'm not living the day to day pressure you are but as I read it you have a life time tenancy which over-rides the ownership of the house and means you cannot be homeless or have substainally increased rent.

That said I would say Snazzy's comments on post 22 is well worth considering. Live in your home paying your rent for as long as you want to. Get yourself on the property ladder next year by buying the house you want to retire to and rent it out until you are ready.

But if you are going to buy your current home than only pay what you can afford the value is irrelevant to you.

absyandtigger

Thank you for that, we are beginning to come to that conclusion.
With the housing market/economic situation, it is feeling more secure to rent, with security of tenure/fair rent. We will only go for it if we can secure it really cheaply. ie around about the £104k mark. Will let you all know how it goes.