Renting back house from (investment) buyer

QTPie

For anyone following my story... we have now exchanged contracts to sell to an investment buyer. We are renting for 6+ months.

The landlord has previously expressed an interest in renting back to us: the house is a 5 year old, immaculate house and we have obviously kept it that way. So we would be good tenants (would be in from completion AND would look after the place)

Buyer has had three quoted from letting agents: £1350pcm, £1500ish pcm and £1800pcm. I know these quotes are legit, because I showed the agents around the house and got them directly from the horses mouths... I also know that the "ceiling price" for a rental in the is development (at the height of the market) was £1600/£1650 pcm (on an identical house). There is another house in this development available at £1400pcm (but starting in May - we complete mid-April).

Husband has been in contact directly with the buyer. The buyer says that their agent has a tenant "lined up and willing to pay £1800pcm". Husband said that was way too much (not technically true, we can afford it, but refuse to pay it - we could probably negotiate £2000 on a better house than this). This house is not worth £1800pcm and we don't want to be over a barrell in a buyers/renters market :rolleyes: (had enough of that being a seller!).

The seller has said he will accept £1550pcm (probably more than it is worth, but acceptable - especially with the reduced hassle of staying put), but that would be direct with him and not through an agent.

So, if we DO rent direct through him, what do we need and what should we look out for? In addition to:
- Having a 6 month AST and getting it THOROUGHLY checked over by our solicitor.
- Ensuring that any deposit is placed into a "Protected Deposit Scheme".
- Ensuring that an inventory is taken and signed: so the buyer doesn't suddenly take possession for anything that he haven't infact included in the sale (like pot plants, a safe in one of the bedrooms - that were not included in the "Fixtures and Fittings" and we will take with us when we eventually move).
- This bloke appears to be a bit of a "not easily to contact person" (husband only has his office number - no mobile or email). That may change, but is currently a concern if something does go wrong (i.e. the boiler blows up and he is in the Bahamas for 3 weeks).

Anything I am missing? Any advice?

Renting direct from this bloke DOES make me nervous... it is still the best overall solution, but we would need things sewn-up tightly to proceed.

QT

pawpurrs

My inital thought is that the man is trying it on, if he has tennants willing to pay £1800 per month, I doubt very much that he would let you have it for so much less (remember this is a man who quibbled over a second hand microwave!)
I think you have thought of everything, and only you can decide if you want to rent from him, rarther than move, to another property.
I should think he should think himself luckey to have tennants allready in the property, so no void period, no agents finding fee, no hassle of finding anyone, and with the bonus that he knows how you look after the place.
I would try and negotiate with him, a bit more.

QTPie

pawpurrs wrote: »

My inital thought is that the man is trying it on, if he has tennants willing to pay £1800 per month, I doubt very much that he would let you have it for so much less (remember this is a man who quibbled over a second hand microwave!)
I think you have thought of everything, and only you can decide if you want to rent from him, rarther than move, to another property.
I should think he should think himself luckey to have tennants allready in the property, so no void period, no agents finding fee, no hassle of finding anyone, and with the bonus that he knows how you look after the place.
I would try and negotiate with him, a bit more.

I think he is too - as you can see from my other threads on the sale, he is obviously a born "businessman" (I am putting that oooooh, so politely! ).

I don't think that he has ANYONE lined up for £1800 a month. Even if he did, he would be paying about 15% a month to the agent AND he would have NO IDEA how well the tenants would treat the house...

We are going to try to negotiate £1500pcm IF he wants to move the completion date forward to 1st April (from 15th April). His choice.

I have a nasty feeling that we will make a pretty hideous LL (although with renting you ALWAYS risk that). We are willing to put up with it for about 6 months IF the price is right. If the price isn't right (or he insists on 12 months), then our first inclination is to rent elsewhere: despite possibly even more cost (i.e. higher rent) plus the cost and hassle of moving.

If we are going to rent from him, then we need the tenancy agreement checked (by the solicitor) and signed quickly because we have to be out of here in 3 weeks and 6 days (so if we don't rent from him, we need to know quickly and get somewhere else signed and removals booked).

Husband phoned him back at 5:08pm and the buyer had already left the office for the weekend :rolleyes: . So negotiations will recommence on Monday - bit of an *rse...

QT

silvercar

If he is based overseas, by law he has to provide a UK name and address.

Get your solicitor to check the AST, it is the landlord's job to protect the deposit and to arrange the signed inventory and gas certificate. Don't start doing his work for him or you will find yourself arranging repairs.

I would always feel nervous renting the house I just sold. If anything went wrong I would be nervous the landlord would say that I should have pointed out that it was a problem!

Minor point, I would expect a safe to be included in a sale. Isn't the whole point of a safe that it is part of the fabric of the house, otherwise a burglar could steal it and obtain access to its contents off site?

QTPie

No he isn't overseas, but he definitely seems "out and about" and not easily contactable... (he may well have a property overseas - or elsewhere in the country - that he spends long weekends at).

Will definitely get our solicitor to check the AST - this guy sounds very slippery...

Wouldn't arrange repairs ourselves - because I doubt that we would want to pay for anything that he didn't specifically arrange. House shouldn't need repairs, BUT you never know when the (5 year old) boiler is going to play up or when the (5 year old) washing machine will pass over to a better place...

I am a little nervous, but I assume that it is up to him to find any faults on completion and anything after that date is considered "since the tenancy started and the LL's responsibility" (assuming it is a breakdown and not us that has broken something). I perhaps should confirm that with out solicitor.

Safe is not specifically included in the "fixtures and fittings" plus it is not embedded in a floor or wall). It is attached to the floor (although I don't know how - I am assuming with some form of bolt). I do not want to leave it: especially with the buyer being a bit of an !!!!. Assuming that the cost of having it detached and refitted in out eventual new home isn't too much AND that the safe can be removed without doing too much damage. If it costs too much to move or will do too much damage, then we will leave it (cost about £250 to buy and have fitted), but I will get a quote first.

It would have to be a bl**dy strong burglar... (it took two big men to install it)

QT

GDB2222

(cost about £250 to buy and have fitted)

I suspect £50-£100 of that was for the safe, and it might cost that to remove it. OTOH the new owner does not need the safe at all for letting purposes.

QTPie

GDB2222 wrote: »

I suspect £50-£100 of that was for the safe, and it might cost that to remove it. OTOH the new owner does not need the safe at all for letting purposes.

IF it is more cost to remove and refit (quite possibly, as you say), then we will leave it.

QT

GDB2222

It does seem that the buyer has more money than sense. Prices are still dropping very rapidly, and I (and I know it's only my own view) cannot see any end in sight.

Besides that, at the rent you are talking about, his income yield is only around 4% before costs. Is there development potential or something like that?

QTPie

GDB2222 wrote: »

It does seem that the buyer has more money than sense. Prices are still dropping very rapidly, and I (and I know it's only my own view) cannot see any end in sight.

Besides that, at the rent you are talking about, his income yield is only around 4% before costs. Is there development potential or something like that?

He does have rather a lot of money (£420k cash buyer), but he has sense too: he is a shrewd businessman.

There is no development opportunity: it is a 3 storey townhouse, with no front garden to speak of and the back garden is 16ft (width of the house) by 27 foot. Typical new development in a city - "development opportunity" already maxed out.

It is in a good area: good school catchment area, 5 minutes walk from the hospital, close to local shops and amenities and in a VERY popular city. It is quite possible that out area doesn't have much in the way of price falls to come AND will be relatively quick to recover. He will not struggle to rent it out and longer term there will be a capital gain.

To be honest, I (and this is now coming from someone who has sold and will start looking to buy) don't think that the market has a lot more to fall. Assuming those houses on the market ARE reasonably priced (many properties are still priced overly optimistic). I don't think it will shoot up quickly either. But it is all speculation - who knows! We will be looking to buy now, but it has to be the right property at the right price.

QT

QTPie

Update

The buyer has changed his mind and is now happy to rent through a letting agent. The price remains (£1550pcm) - he isn't interested in negotiating - but at least the set-up and management will be a lot more professional (although I know that the quality of LAs can vary quite a lot...).

We are happier with this. The price could be less, but as a trade-off for saving the cost and hassle of moving, then it is ok. It will be a relief not to have to deal with the buyer directly on matters with the house (i.e. if anything goes wrong).

I am currently waiting for a caopy of the AST and fees/deposits, but hopefully we should have it all wrapped up by the middle of next week.

QT

pawpurrs

Just check that it will be fully managed by letting agent, in that case. He could just be using them to do all the reference checks, inventory etc...