Buying an Airey house to rent out with a prvate mortgage.

KTR76

Hi, while looking for info about this I've turned up this site more than any other so now I'm still looking for answers I think it's the place to ask!
Airey houses recieve a lot of bad rep & while it's not unjustified if your response here is a flat "dont buy under any circumstances" etc then please leave this to folk with a more open mind.

My brother lives in a semi-detached Airey house, the other half of which is now up for sale. The price is within my reach & reflects the nature of the property. The seller is aware of what the house is & the difficulty in getting a mortgage, he doesnt actually need the money tied up in the house so is prepared to do a private mortgage in order to help sell it. He also has a dislike of estate agents, hassle, pushy attitudes etc and as such is happy to deal direct.
Everything would still be done through solicitors, just cutting out some of the middle-men.

My current situation is I'm in a relatively new relationship, they have a long tenancy on their property, if things work out I'll move in with them & this house would be to rent out, by the time their tenancy is up this would be long since paid for & there would be somewhere to go/sell/ keep renting to fund something else. If things dont work out in the future then I'd have somewhere to do the same myself.

Whislt Airey houses do have a bad reputation circumstances in this case do balance some of that out, in event of repairs, upgrades and redevelopment as a semi you need to work with your neighbour and this case I'm going to be better off than most folk. The site on which it sits is large, a modern development would see 3 or even 4 properties built.
Propety within my reach in my area is rare, this is a fairly remote rural area, houses are few & far between full stop, let alone ones for sale within my budget and this is where I want to be.
I have a large deposit, around 45-50%
I'm living with my parents, never bought property before & as such this is all new to me!

So questions I'm wondering about are:

What problems should I be looking for with this private morgage? I like the principal, the seller gets more than his money would make in the bank and takes less from me than the bank would and I wouldn't have to jump through hoops to get it approved. He's not the youngest of blokes, how would things work if he doesnt out-live the motgage term?

Given that he wont be asking for all the checks/survey etc that a conventional lender would what should I be getting done to ensure the place is sound enough for my purposes? He's been a bit of DIY man & while cosmetic stuff just means work decorating etc he has built an extension on the site of the old outhouse which he says was all done to building regs etc.

When it comes to renting out what porblems might there be with either it being an Airey house and the private mortgage? Besides that, what do I need to be looking for in regard to renting out on the whole?

What about insurance? My brother has had no problems here but how would the combination of unconventional constuction & renting out work?

What other things should I be considering?

Thanyou for any help you may be able to provide.

irishjohn

If you proceed with this - effectively borrowing money from someone with whom you have no connection at all - but its all covered by a watertight legal agreement, then the house becomes yours and he receives his monthly payment. If he died before the loan was fully repaid the outstanding loan would become part of his estate for inheritance purposes under his wishes in his will.

No doubt you will be able to obtain the same house insurance as your brother living next door. But - suppose something happened - there was a structural failure which the insurance policy either does not cover or refuses to pay out on and puts you into a dispute situation. The damage makes the house uninhabitable without repair. How do you cover the need for accommodation for your tenants who have a rental agreement with you and how do you fund any repairs needed urgently but not being paid for by the insurance company.

The DIY extension should have Building regs certificates to prove what has been done is approved. You would need to get the most comprehensive structural survey there is to be sure nothing is lurking hidden in the fabric of the building and you would need to feel very confident that your solicitor has a good grasp of how to ensure the finance agreement between you and the vendor.

Finally - although there may be a lot I have overlooked - you need to check out the regulations regarding being a money lender - as that is what will happen - the vendor will lend you money to be repaid with interest over an agreed period and we all know there are all sorts of money lenders - some not quite legal.

KTR76

Thanks irishjohn, it's the detail stuff like the insurance cover & finding a solicitor that's well informed on the stuff I need, rules & regs that I'm just not aware of that I'm concerned about. I had as you say assumed the mortgage would pass to whoever as part of the estate in event of him not out-living the mortgage but Im worried about making that secure so repayments dont change & they can't call the loan in.
I've never used a solicitor for anything, had a building survey done etc so I'm not too sure how it all works. There's plenty advice out there on the net but I still feel I'm not understanding how it really works, who you have to talk to when, the little detail stuff that matters & those that are used to it all just kinda assume everybody knows about.

irishjohn

The first thing I would check out is the concept of the loan. i am just not sure an individual can lend money to a stranger and charge interest.

molerat

There is no problem buying an Airey house, the only problems come with selling them. A full structural survey would be a good idea to find out if there are any structural problems other than its construction method, is it in imminent danger of collapsing. There should be no problem insuring it as a BTL apart from finding an insurer that is willing to take on NSC. Seems like a reasonable idea but you need to realise that it will need rebuilding or the site redeveloping in the future so you need to factor in funding for that in your long term plans.

You need to discuss the funding arrangements with a solicitor but I can see no real problems, private loans are legal.

DVardysShadow

irishjohn wrote: »

The first thing I would check out is the concept of the loan. i am just not sure an individual can lend money to a stranger and charge interest.

Whyever not? There may be laws which require licensing for providing consumer credit, but they should not come into play here.

pinklady21

Full survey of property - very important.
I would not even consider buying a property without one.

Re the lender - are you assuming that conventional lenders will not lend on the house under any circumstances? While this may or may not be true, I would find an "independent financial adviser" who can look at "all of the market" for mortgages. It is their job to try and find you a lender - they can also advise on the whys and wherefores of using a 'private' lender too.

The biggest problem I can think of in using a private lender would be that such a lender would probably not be regulated. Could be a problem later on if the private lender decides they want their money back early, or treat you unfairly. Where would you get redress?
Best of luck!

DVardysShadow

pinklady21 wrote: »

.... The biggest problem I can think of in using a private lender would be that such a lender would probably not be regulated. Could be a problem later on if the private lender decides they want their money back early, or treat you unfairly. Where would you get redress?
Best of luck!

No need for redress. If they want their money back early, they have to wait. As for being treated unfairly, if the agreement is drawn up properly, they don't have much scope.

KTR76

Hi, I thought it only fair to give an update after the advice given here.
I got a mortgage broker recommended to me by a mate & went to see him, very straight talking & no-nonsense bloke, he had a look around & even with the big deposit a conventional morgtage wasn't available. He was also getting in touch with a surveyor who could either check it out for me of put me in touch with someone who could.
However before things went any further the seller changed his mind, decided he liked it well enough living there & he's staying put so that's that for now. As & when he does decided to sell he says I'll get first chance.

This is actually good news, I'm not in any desperation to buy anywhere, just that this was something I thought I really had to give serious thought to if it was for sale. Now I get more time to think about it & research things, save for a bigger deposit & have more idea of where my personal situation is going to be.
The biggest risk I can see is that if at some point I did need to sell I'd have problems finding a buyer.

Thanks all for the advice!