Property With Basement Flat & Tenant

chambta

Quick one folks.

I've seen a property that's just come up for sale locally that seems perfect for me. It's a little outside my financial clout but oddly for my area it has a tenanted basement flat. Now my assumption (from the info on Rightmove) is that it forms part of the sale and is therefore on the same title as the house.

Assuming the tenant is paying rent, even at a low level of say £250pm, that money would suddenly make what's a little out of my bracket affordability wise become very affordable.

Would a lender touch this sort of arrangement? There is a tenancy agreement in place but it confuses matters on a residential mortgage and I can't see a high street bank embracing the scenario completely.

I will put a call in with my present mortgage provider who I'm tied to for another 4 years to see how they would see it but would be interested in any thoughts beforehand.

Thanks

Jowo_2

Don't get misty eyed over the financial benefits associated with an existing tenant. If they have a protected tenancy, it is extremely risky and many buyers will never consider buying the property because of the expense and issues associated with them. What 'tenancy agreement' is in place - the older the agreement, the less economic it is.

Tenancies brought into existence before 15 January 1989 are governed by the Rent Act 1977. These are uneconomic for landlords to operate - avoid them if you can. Exercise extreme caution when purchasing properties with existing tenants.

Tenancies commencing after 15 January 1989 but before 28 February 1997 may be either Assured Tenancies or Assured Shorthold Tenancies. The default tenancy here is the Assured one which offers more security to the tenant, unless the landlord can show that the correct Shorthold (Section 20) Notice was served. Again, caution is needed when purchasing with existing tenants.


http://www.landlordzone.co.uk/residential_tenancies.htm

chambta

I know that different tenancy agreements offer varying dangers. I have no real desire to become a landlord, particularly to someone beneath my front room, but want to look a little deeper into it.

The price of the property doesn't seem particularly depressed because of the unusual (for my area) additional property but I dare say it won't encourage interest.

G_M

So long as you are careful this could be a great way to finance a property otherwise out of your reach. I did it 12 years ago with a 'granny annexe' that I used for lodgers.

Check out carefully what kind of contract the tenant (lodger?) has : licence, AST or protected tenancy?; what rights/protection they have, how long they have? whether they are reliable/good payers? (you could ask permission to credit check them).
Check if your bank/BS will view this as a BTL or residential mortgage, what additional restrictions,charges, interest rates they might impose (shop around or see an independant mortgage broker)
Read up on the costs/obligations associated with being a LL (insurance, safety, repairs etc etc) - the library will have books on this or google a Landlords association or www. landlordzone

Good luck.

chambta

G_M wrote: »

So long as you are careful this could be a great way to finance a property otherwise out of your reach. I did it 12 years ago with a 'granny annexe' that I used for lodgers.

Check out carefully what kind of contract the tenant (lodger?) has : licence, AST or protected tenancy?; what rights/protection they have, how long they have? whether they are reliable/good payers? (you could ask permission to credit check them).
Check if your bank/BS will view this as a BTL or residential mortgage, what additional restrictions,charges, interest rates they might impose (shop around or see an independant mortgage broker)
Read up on the costs/obligations associated with being a LL (insurance, safety, repairs etc etc) - the library will have books on this or google a Landlords association or www. landlordzone

Good luck.

Good to hear someone else has had success with something similar. I won't be shopping round mortgage-wise to be honest as no property will call me enough to pay my ERCs!

chambta

I've found out that the tenant has been given notice to leave so it's being sold as fully vacant. The flat being let at £375pcm month though. Not a bad return on a basement of a property that will likely sell for £155k-£160k.

princeofpounds

Be careful, the council might want to charge 2 lots of council tax if they don't already. But otherwise if the property is supplied vacant I can see it working on the operational side. The trick is mortgages, I think you'll just have to explain the situation to a broker and see which banks are flexible enough.

chambta

I've asked the estate agent if council tax and utilities are billed separately. If not it causes problems in more ways than one.

I guess if bought one option would be too split the titles to produce a separate property assuming the mortgage lender agreed their security wasn't being compromised.

guppy

chambta wrote: »

I guess if bought one option would be too split the titles to produce a separate property assuming the mortgage lender agreed their security wasn't being compromised.

This is a terrible idea! Then you will end up with two leaseholds, which may well have the opposite affect from the lender's point of view.

Its probably worth checking whether the basement flat has planning/building regs as these may also prevent you getting a mortgage.

chambta

guppy wrote: »

This is a terrible idea! Then you will end up with two leaseholds, which may well have the opposite affect from the lender's point of view.

Its probably worth checking whether the basement flat has planning/building regs as these may also prevent you getting a mortgage.

TBH gone right off the idea. Will keep an eye on it but I expect it to be difficult to sell.

clutton_2

""TBH gone right off the idea.""

after only 10 posts ????

faint heart never won fair lady

if the tenant is moving out - what are the issues ??