How should I approach my landlord to buy?

Gel247

We have a lovely landlady and are happy where we are.

Approaching our fourth year at the property we'd like to make an offer to buy.

I'm probably misinformed or have a poor understanding somewhere in this (hence my posting) but I'd like to give the landlady a large deposit 30-50k and then continue to pay rent for a specified number of years. They have a plan to sell it at some point in the future, possible 5 years or so ahead.

The landlady is overseas if that has any bearing. We would like to technically own the property so we could make changes as we saw fit.

I want to approach her in a way that is profitable to her otherwise she may as well wait another 5 years and sell it outright.

C.C.L.

This used to happen years ago (40 odd years) and was called rental purchase.I've not heard of it for years so don't know how it would be implemented. The best way I could see is to contact your landlady and put it to her, she may dismiss it or give it some thought, but you won't know if you don't ask.
Also if she has a mortgage on it, that could make it difficult.

neas

why dont you just buy it off her and get a mortgage youself?

Gel247

The house is owned outright (no mortgage).

I won't even attempt to apply for a mortgage with my partner unless I have to. She is on a mortgage already with her mum (but doesn't pay anything in as it's rented) and I'm self employed.

Couple that with the austere times we live in and I'd rather keep the agreement between a real person than a bank unless I have to.

Plus, the landlady probably doesn't want to sell it now. Logic being that in 5 years it could be worth more. On that basis approaching her to buy outright may be a pointless exercise.

cpdc1030

Gel247 wrote: »

We have a lovely landlady and are happy where we are.

Approaching our fourth year at the property we'd like to make an offer to buy.

I'm probably misinformed or have a poor understanding somewhere in this (hence my posting) but I'd like to give the landlady a large deposit 30-50k and then continue to pay rent for a specified number of years. They have a plan to sell it at some point in the future, possible 5 years or so ahead.

The landlady is overseas if that has any bearing. We would like to technically own the property so we could make changes as we saw fit.

I want to approach her in a way that is profitable to her otherwise she may as well wait another 5 years and sell it outright.

I was in the same situation. Landlord was very nice and rented a flat for 2 years from him - asked to buy it and was turned down. A few months later I bought a flat in the same block and my mortgage is £200 per month less than the rent I was paying . He didn't mind though as the property was rented out very quickly again as it is a very desireable area.

If it is someone struggling with a crumbling BTL mini-empire you might have a good chance. But otherwise, it just doesn't make any financial sense for the landlord. Why would you rather give the money as a "deposit" to your landlord rather than invest it somewhere else?

mlz1413

Write to your LL saying that you love the house so much you would like first refusal if she ever sells.

You could then add that you have a large deposit but are not currently looking to obtain a mortgage so are happy to rent until she wishes to discuss the matter.

If the LL wants a cash injection she will contact you and you can enter into plans of how the 'rental purchase' will work.

I would really recommend getting advise from a solicitor if you do enter into something like this as its very uncommon. How would this work if the LL died and the house became part of her estate? or the balance due to buy if off her estate became due?

Richard_Webster

So what you want is to pay her £30-£50K now and she is then bound to sell to you in 5 years time - for how much?

The "market value" you might say. So how will that be determined?

There could be an argument then about what the property is worth and such arguments can be expensive.

Suppose your circumstances change and you can't afford the then market value at that time - you will be stuck having entered into an agreement to pay the then market value.

You could try seeing if she would lend you the rest of the money on a private mortgage. You complete the purchase now and pay her £30-£50K and the rest is owed to her and paid over some agreed period.

If she is looking to sell in about 5 years time then that will probably be a tentative idea rather than a fixed one so it is unlikely she would want to be tied to any deal now - otherwise she would be wanting to sell now.

Gel247

No no, I think my way of explaining this is screwy, apologies.

I'm not trying to secure the house for in 5 years time.

I want to buy it off of her, as in become the owner much the same as if I borrowed the money from a bank and paid her.

However, instead of borrowing the money, I wish to pay her a decent deposit and pay her back in the same way I would pay a bank, so she could still take it back if I failed to pay etc.

If I was to borrow the money from a bank and pay her outright there would be nothing to gain on her part, she may as well sell in 5 years.

If I was to pay a large deposit and continue paying rent, a percentage of which goes to pay off the outstanding amount of the houses value, she would be profiting and it would make financial sense to do so. I could be making payments to her for another 20 years giving a continuous stream of income much the same as a mortgage would to a bank.

There's no guarantee her property will actually go up in 5 years time or at least as much as she would make by charging us interest. I'd probably pay her a smaller percentage than I would to a bank.

Clear as mud? :rotfl:

mlz1413

So in a nut shell you want the LL to be your mortgage lender.

You both agree a price today.
You pay % deposit (say 25%)
LL charges you £X which is the repayment of the 'loan' + nominal % rate.

If the LL wants to sell ultimately then she may accept this.

I would think for your benefit she will have to provide you with a yearly statement. But this make mean she has to abide by some lending laws as she will effectively be loaning you the money.

Again you will need to ensure this is run by a solicitor before entering into any agreement.

Gel247

mlz1413 wrote: »

So in a nut shell you want the LL to be your mortgage lender.

You both agree a price today.
You pay % deposit (say 25%)
LL charges you £X which is the repayment of the 'loan' + nominal % rate.

If the LL wants to sell ultimately then she may accept this.

I would think for your benefit she will have to provide you with a yearly statement. But this make mean she has to abide by some lending laws as she will effectively be loaning you the money.

Again you will need to ensure this is run by a solicitor before entering into any agreement.

You just about nailed it right there thank you.

sonastin

Some thoughts that spring to mind:

If I were the LL, I would want a variable interest rate (linked to BoE rate or something) so that the "investment" of loaning you the property remains worth my while if we ended up with interest and inflation up in the teens again. And re-calculating and communicating the new repayment rate is a p-i-t-a - mortgage repayment sums are hard enough at the best of times!

Would a private individual really want the hassle (and risk) of trying to repossess the property if you default? Courts make it hard enough for financial institutions to repossess and this isn't exactly a tried-and-tested model. The courts might not grant her a possession order and she's effectively lost the property for whatever you've paid up to that date (less any cost of bringing the claim to court). Not an appealing position.

If she's happy with the situation at the moment and not looking for a cash injection, I personally think this is a whole lot of hassle for not a lot of gain for the LL. I think that a request for first refusal on purchase when she is ready to sell, combined with maybe a discussion about whether you'd be permitted to make modifications (including what mods you might like, how you'd get consent for any others, who pays, requirements to put right if you don't buy, etc) would be a better idea.