Buy to let

Tomkat

Hello
Can anyone help?

I have an Uncle (78 years old) that has decided that he would like to spend some money before it is to late!
He plans to sell his 60k flat and has been offerded arond on the basis that he will remain as a tennant paying around £500 per month.

I have two qusetions:

1. Does the above deal sound ok for him?
2. Is it possible I could but the flat and offer him the same deal. Bearing in mind I have no deposit and have a large mortgage (200k on a 275k house)

Any help would be welcome

Thank you

firstaspect

1. It depends on the rental value of properties of that type around that area as to if £500 a month is reasonable. He'd also have to consider that the new landlord could decide to give him notice to leave at any point (depending on what contracts are drawn up).
2. Very unlikely without a deposit.

poppysarah

If he lives there for more than 10 years he's paid as much in rent as he'll have got...

CloudCuckooLand

£60k will only cover 10 years of rent.

If he spends a chunk, he will have even less to cover rent. Is he sure this adds up?

He cannot spend £50k, then go claiming housing benefit...council care, pension credits, are affected...

If the buyer decides to increase the rent, or sell up and the new owner doesn't want a tenant, what will he do?

Perhaps a read of this would be helpful?
http://www.ageuk.org.uk/Documents/EN-GB/AgeUKIG08%20Housing%20options%20Guide.pdf?dtrk=true

His long-term security of tenure needs to be assured.

You buying it could be an answer. If you can find a 25% deposit, and a Lender who does BTL for family.

Unless you died suddenly, and your will passed the house to someone who didn't have the same intentions...

Its a complex area. Research, research. Get some professional advice.

vectistim

Where do the figures come from? £60,000 sales price and £500 a month rent provides a gross yield of 10%.
IME about 6% gross yield is more like it, which would either be a £300 per month rent at £60,000 sales price or £100,000 sales price and £500 per month rent.
Presumably he realises that under this sort of scenario he won't be leaving much in his estate, as such it might be worth looking at Safe Home Income Plans (ship) http://www.ship-ltd.org/
If you are short on deposit funds it _might_ be possible to buy on a gifted deposit, if your uncle would take a lower amount:
eg: If £60,000 is what its worth you could buy it for that but only pay £45,000 (75%) and say that he was gifting you the other 25%, that way he could also pay you less rent - just the bare minimum that would make the lender's calculations work.
For either a SHIP scheme or the possible BTL with gifted deposit you really need to talk to an independent broker, and one look for one who deals with lifetime mortgages.

MadnessOfHPI

You need at least a 25% deposit for a buy to let mortgage.

G_M

Who has made this offer? You need to be very cautious with equity release schemes.

As a tenant he will have security to live there for a limited time only. Then the rent could go up or he could be evicted. And almost certainly he'll be selling the property at well below its market value.

Beware! As said above, get advice and do research. And start here.

Tomkat

Thank you for the quick responses
The potential buyer and subsequant lanlord is a private individual and my uncle has been communicating through his lawey so i suppose the legal bits and pieces are ok!!!!

I will take a look at the provided links etc

Thank you

CloudCuckooLand

Tomkat wrote: »

my uncle has been communicating through his lawyer so i suppose the legal bits and pieces are ok!!!!

Just because something is done legally, does not mean it will be the best option for your Uncle.

Or that there will not be implications, as yet not understood, to impact him later in life.

DO NOT take things at face value from this other party.

Get your Uncle's solicitor to ask about security of tenure.

G_M

Tomkat wrote: »

Thank you for the quick responses
The potential buyer and subsequant lanlord is a private individual and my uncle has been communicating through his lawey so i suppose the legal bits and pieces are ok!!!!

I will take a look at the provided links etc

Thank you

By 'his' lawyer do you refer to your uncle's lawyer or to the buyer's lawyer???

I'm not sure I would not be even more wary of a 'private individual' for this arrangement. His circumstances could change any time leading him to want to sell the property on.... and evict your uncle in order to do so.