Buying a buy to let property with a friend

jayniep_2

Hi,

A friend and I are looking to purchase a buy to let property. I am funding my half with cash (from an inheritance). My friend is funding her share with a buy-to-let mortgage. She has been informed that my name also has to go on the mortgage.

My concern is that, if she is unable to meet the mortgage payment for any reason I am liable for the full payment of the mortgage. So I could end up paying for the whole of the property but only owning half.

What can I do to protect myself & my investment?

Any advice would be gratefully received.

G_M

The names on the Title deeds must match the names on the mortgage. Otherwise in the event of default/repossession the lender could not evict an owner who was not on the mortgage and gain possession....

You could draw up a Deed (use a solicitor) to say what would happen in this, or any other, future scenario. eg In the event the A) takes over 100% of the mortgage liability he also gains share of the property.

It would also be wise to anticipate what would hapen if one person wanted to sell/take out their equity, but the other did not.

sirmosh

You can draw up a declaration of trust to recover your share in the event of a sale but as far as the mortgage goes you will be liable just as much as she is, that means the possibility of damaging your credit rating, having the house repossessed and having the lender come after you for money.

It's a very risky situation and not one I would put myself in to be honest, especially since there's not a whole lot of money to be made out of renting out a property if you need to mortgage it once all the costs of maintenance and tax has come of any profit.

Beckyy

I would rather take out a BTL mortgage myself with a 50% deposit from the inheritance.

If you would definitely like to buy with your friend then make sure you talk to a solicitor about it and get something drawn up to specify how the property is divided up, who owns what and what is to happen if you one you wants to sell or dies. You need to get something properly draw up for this IMO.

Acc72

From your post, it does not sound as though either you or your friend are experienced BTL investors ?

I am sure that there will be many on this site who can advise on the merits of BTL investments.

I would just say that (and sorry in advance for being negative) this kind of thing has a potential million disadvantages - just look on this site for "I lent my friend £50" type of threads.

My advice would be to see an Independant Financial Advisor with regards to your inheritance (eg. do you also have a mortgage / savings / investments etc. ?).

Before you do anything like BTL (with or without a friend) just do lots and lots of research.

Good luck.

jayniep_2

Acc72 wrote: »

From your post, it does not sound as though either you or your friend are experienced BTL investors ?

Hi,

Thanks for the advice. I have previously owned a buy to let property, so have a bit of experience.

My main concern is regarding the mortgage and my liability given that I will already have invested half of the value of the property.

I really need to know that I have protected myself; as several people have pointed out we don't know what is around the corner in life.

I have children so hopefully this will provide them with something in the future.

kingstreet

TBH if you're going to put in all the money and you're going to be responsible for all the mortgage, why don't you just do it yourself?

You appear to be taking all the risk, for less than all the reward...

sonastin

If you are going into business with a friend, it is a good idea to put together a business plan which deals with everything about how you are going to run your business not just the mortgage element.
If you have let property before then I am sure you are aware it isn't just a matter of buy property, receive rent, pay mortgage. You should work out the whole picture up front so that you don't fall out later when things change...

who is responsible for vetting tenants/selecting agent/negotiating rents/arranging or authorising repairs/etc? Is it a joint decision, does one partner have a veto, will you leave it to one or the other of you to arrange with the other trusting the decision?
what if one partner isn't doing their share (either paying the mortgage or doing the other tasks that fall to the landlord)? do you have remedies to make the other pull their weight?
how will you go about dissolving the partnership if one of you wants out? is one entitled to force the sale? how will you arrange an independent valuation if one is going to buy the other out so that it is at a fair price?

Notmyrealname

Going into business with friends usually ends up in tears. One either ends up ponying up all the money or doing all the graft or both.

getmore4less

You need to look at all exit senarioes not just the business partner can't pay heir share.

What sort of gross yield are you loooking at if it is leaving a risk of non payment then it is probably not enough.

david29dpo

Believe me, something like this will 99% of the time end in tears. In my case it was not the friend but there friends sticking there noses in!