Family Buy to Let

nagennif66

Hi,

Any thoughts on this?

The family want to buy to let. There are 4 of us;
one has the 25% deposit and the other 3 will need a mortgage.
However two can get a mortgage and the other one is the wife of one of the mortgagees. Therefore the mortgage will be in 2 names although 3 people will be paying it.(this may be drawn up with a solicitor at the time)
The problem is that we are divided in opinion....2 people think the cash purchaser should take a quarter of the Income (after letting fees etc) and the other 2 feel that all of the income after letting fees etc should be in the bank to produce a deposit for another property. Surely the cash purchaser would then "miss out" as they put up cash whereas the other three are having thier mortgage paid with the income......What would the cash purchaser be getting out of it? Anyone got a solution???????????

G_M

First, are you all fully aware what will be involved as landlords? See:

New Landlords (general information for new or prospective landlords)

Have you all agreed how the property will be managed? Who will make decisions? etc?

As for the money split, clearly whoever puts in cash (and 25% is a significant amount) should get it back somehow. Either

* it is seen as a loan (to the 'group') which gets paid back gradually over time from the income until the full amount is repaid, plus interest
* the same cash amount is returned when the property is sold (plus an amount for interest) or
* 25% of the capital profit when the property is sold (but then what happens if the price has dropped?)

Whatever is agreed, you need all this in writing, in a formal Deed of some kind.

*Whose name will be on the Title Deeds? It will have to be the same as the mortgagees
- As 'owners' these 2 will have power and legal responsibility. Will the 25% contributer be one of these 2?
* how much rental profit will be retained (eg for contingences, and how much distributed (as profit), and to who?
* Do you jointly have a contingency fund?
* what is the wife's role, if any? No cash input, no mortgage......?
* what happens if one or more wants/needs to sell, the others don't?
a) if it is one of the 'owners' (mortgagees), or b) one of the others?
* what if debts arise (voids, defaulting tenants, expensive repairs)?
* what if there are disagreements about.. choice of tenant? Need for repairs?
* what if there are disagreements about future investment, raising equity on the property..

Far better to anticipate all potential scenarios and agree how they'd be resolved, and write it up, than deal with disagreements when they arise, whether thoseare financial issues, or procedural.

nagennif66

Food for thought! Thank you for your advice.