BTL with a friend for 1.5 years only... Advice please!

[Deleted User]

Hi,

I was hoping to get advice on an idea a friend has posed to me... He's found a flat for sale with a tenant signed up for 6 months and moving in in 2 weeks.

The rent is £350pm and the flat is on sale for 59k. To ensure the rent covers the mortgage + admin fees it'd need to be bought for 54k or less.

The proposition he's made is I become a partner on the mortgage paying £2.7k deposit (5%) then take a £24,300 mortgage (45%).

Where it becomes slightly more complicated is that I'm saving for a deposit myself. Realistically I see this coming together in early 2015. At this time he'd buy my half of the flat, paying everything I owe on the mortgage, and give me an extra £1.5k on top of the original £2.7k.

My questions are:

1. Would any of this affect future mortgage applications I make?
2. Can anyone see any pitfalls or things I've missed?

I'm personally thinking it's actually a decent proposition given the returns compared to savings interest rates. He's also a very good friend so I'm not concerned with this aspect.

Thanks

I_have_spoken

Can anyone see any pitfalls

Yep, friends and business deals never go together. Expect to be an ex-friend sooner rather than later.

he'd buy my half of the flat, paying everything I owe on the mortgage, and give me an extra £1.5k on top of the original £2.7k.

A commitment secured against what asset?

[Deleted User]

I_have_spoken wrote: »

Yep, friends and business deals never go together. Expect to be an ex-friend sooner rather than later.

I appreciate this is a consideration

I_have_spoken wrote: »

A commitment secured against what asset?

A fair point I'll consider, thank you.

ognum

I assume you have a job, have you considered the tax implications, only the mortgage interest is non taxable.

How does your friend plan to have the money in 18 months if he hasn't got it now.

How will you agree on maintainace issue, if the boiler breaks and needs replacing your whole profit has gone!

Letting is a buisness it is not a way to easy money, you need to be in this for a decent term.

MarkBargain

That sounds far too complicated for such a short term arrangement! Just save up for your own deposit, that's my advice. Snap up the best savings rates you can, I get 6% and 5% with two of my Nationwide accounts.

[Deleted User]

ognum wrote: »

I assume you have a job, have you considered the tax implications, only the mortgage interest is non taxable.

I haven't and to be honest I'm not sure I understand what you mean by 'the mortgage interest is non taxable.' - sorry!

ognum wrote: »

How does your friend plan to have the money in 18 months if he hasn't got it now.

How will you agree on maintainace issue, if the boiler breaks and needs replacing your whole profit has gone!

To good questions, thanks

[Deleted User]

MarkBargain wrote: »

That sounds far too complicated for such a short term arrangement! Just save up for your own deposit, that's my advice. Snap up the best savings rates you can, I get 6% and 5% with two of my Nationwide accounts.

Thowing it in an ISA would gain me roughly £100 compared to the £1.5k my mate is offering.

MarkBargain

Deleted_User wrote: »

I'm not sure I understand what you mean by 'the mortgage interest is non taxable.' - sorry!

You have to pay income tax on the rental income. You can deduct mortgage interest from this, but not capital repayments.

MarkBargain

Deleted_User wrote: »

Thowing it in an ISA would gain me roughly £100 compared to the £1.5k my mate is offering.

I wouldn't go through the hassle for £1.4K, especially taking risks into account.

I presume you've taken account of the mortgage application fees, these are usually about £1K.

G_M

Mad!

Becoming a landlord for 1.5 years is pointless. All the agro, all the risk, no timetospread it over.

What if the tenant turns into the tenant-from-hell?
Have you factored in all the costs? Tax? Repairs/maintenance? Insurance?

Read: New Landlords (information for new or prospective landlords)

You'd need a legally binding Deed between yourselves to cover ALL eventualities (eg partner can't afford to buy you out when the time comes etc)

[Deleted User]

I was thinking I'd be more the silent partner and my friend taking on the landlord's responsibility.

I've posed all the questions so far so thank you.