Next door wants be to buy help

cargo

My next door neighbour is wanting to move into sheltered accomodation.
She as allready got the keys to her place and had it re decorated and is ready to move in.
She droped this bombshell on us last week after we got back from hols,her house is in need of doing up, there are a few rented properties on our street and some tenants are not the best.
So as you can imagine we are keen not to have anymore next door.
She said she had allready sold to a buider and he had promised he would do up and sell.
Anyways he as dragged his feet and she rang me up asking for a chat the out come as been that if We were to give £5k cash to allow her to furnish her new flat/home and move in we could buy the house for £65k thats £70k in total.
The houses allthough not selling at the moment are going for lowest £115 upwards.

We are thinking this is to good an offer to miss as if we buy and sell or rent out (all be it to none dss)
This would be a good investment/pension plan as I have just gone self employed and am not paying into a pension at the mo.

We have done some figures and we are thinking along the lines of:
Paying the £5k cash
Using £31k as payment out of our savings
borrowing £34k

Allso using another £10k to £12k of our savings for renovation.

My questions are many but here we go:
Are we right to be using our own monies for this type of thing or should we be borrowing more the above will leave us with roughly £10k cash we can get at and £26k in trust/peps/shares.
The lady owns the house and as the deeds so if we go ahead do we just get a soliciter involved to sort the sale out?
Also for £34k do we get a loan?
or a morgage or a buy to let morgage or is there a better way to raise this amount?
We also own our own house (just finished paying off a few months ago)
Also do we get a survey done as you would normally even though house is next door?
If yes which type of survey is best.

Sorry for all the questions and the bad grammer.
But I would be really pleased to hear some of your thoughts on this matter.

Ps:
Also how should I aproach giving the lady £5k in cash would it be wise or good enough to type a document up to say she as recieved this cash and have her sign it,this is a funny situation as she is a good friend but cash is cash and I assume you need to cover yourself.

thx fro looking.

michaels

Sounds like a good deal. If you plan to rent out there tax advantages to getting as big a mortgage as possible.

Are you sure you wouldn't feel bad about taking 45k off someone who is vulnerable and also your friend?

Dora_the_Explorer_5

if We were to give £5k cash to allow her to furnish her new flat/home and move in we could buy the house for £65k thats £70k in total.
The houses allthough not selling at the moment are going for lowest £115 upwards.

Why not tell her what similar properties to hers are on the market for? That would be the neighbourly thing to do, she may not realise the current market value of properties.

cargo

Thx for your comments so far.
The lady in question is fully aware of prices in the area and it is herself who as quoted the asking price she was going to sell to a builder at first for £75k but would rather sell to us.
She is 55 years of age and by no means lacking in knowledge, allthough she wants to go into sheltered accomadation it is due to the fact that her property requires a lot of work doing it up which she cannot handle nor afford and she requires a social life.
The place she is going to is for people who want just these things and are over 55 years of age.
Her husband died around 2 years ago.
Anyone bought run down properties before as a bussiness or otherwise and can give advice on the money side of things/surveys and the like.
plz

inmypocketnottheirs

Well some basics for you.

With regards getting a mortgage,you should be able to get 85% of the purchase price, or valuation - whichever is the lowest. This is on a buy to let basis.

The rental income should be 130% of the mortgage payments to qualify.

As advised above, the interest portion of your mortgage is tax deductable. This means that each year, you will be able to deduct the amount of interest that you have paid from the amount of tax you will have to pay.

This is why it is best to get the highest mortgage possible, some landlords prefer to have interest only mortgages other wise you will pay tax on the amount of the mortgage that is the repayment element.

Either way, you will have to have a survey for the mortgage. This can be just a simple valuation, normally about £150, or a more comprehensive Homebuyers Report, which I think is about £400, or a full structural survey, I think from about £600.

HTH

itsakidsworld

If somebody is offering you a property well below market value and you are satisfied they are doing this with full knowledge of the situation, then you are not being un-ethical.

Regarding the money, by all means give her £5000 up front as a deposit but do it through a solicitor. Draw up a contract which can be done in a matter of days, agreeing the price and the deposit and then let it takes it course to complete.

Find a good local Independant Financial Adviser who will be able to source you a good buy-to-let mortgage and borrow enough to pay of the balance and some for doing the property up.

Then find a good local rental agent and get it let out.

Everything legal and straight forward.

IAKW

clutton_2

some lenders are not keen on lending on the house next door to your currentn property - goodness only knows why.....

linlin_3

cargo wrote:

Also how should I aproach giving the lady £5k in cash would it be wise or good enough to type a document up to say she as recieved this cash and have her sign it,this is a funny situation as she is a good friend but cash is cash and I assume you need to cover yourself.

thx fro looking.

Don't give her the cash, even with a receipt. Any contract for property must be by deed. She doesn't get the cash until she completes on the deal.