Shared equity BTL question

TrickyDicky70

Hi guys,

After a brief and fruitless search of the net I thought I'd sign up and ask the forum for their advice on my situation:

A very close friend has owned her apartment for around 6 years in an area desireable for young professionals. She is considering moving out of the area and buying a house.

I own a house, but after having overpayed the maximum (without penalty), am fortunate enough to still be accruing savings. I have been thinking about gettting a BTL apartment in the area in which my friend above lives, believing this to be a wise investment.

After a few beers in the pub last week, we struck upon the potential idea of keeping her flat, sharing equity, and then renting it out. This way my injecion of cash provides her with the money she needs to buy a house, whilst we both get a joint investment opportunity in maintaining the apartment.

However after some thought and a little research it seems that getting a BTL mortgage on a jointly owned property is unlikely.

I just wondered if anyone here knew any better? Would the fact the apartment is already owned mean other mortgages would be available?

Any advice greatly appreciated

Let_Us_See

No reason at all why a BTL provider would not accept a joint application. Apart from a re-mortgage to joint ownership, unless the propeerty is unencumbered, you may also have the option of being added to the current mortgage.

somethingcorporate

I'd strong advise against going into business and especially house owning (a quite illiquid asset) with a friend if you have other options available.

What if you want/need to sell? what if they do? what if the housing market continues to tumble and you end up in negative equity? what if one of you lose your job? what if the tenant trashes the property? what if you have long voids? These issues all become twice as complex when you have to discuss and sometimes disagree with a friend who is also your business partner.

Let_Us_See

Blimey, you forgot to add "what if the sky falls down?"

Careful consideration and a written agreement on T & Cs will solve many potential problems.

StuC75

Is the shared equity referring to your business arrangement, or how the friend bought the property?

Looks like basically looking to remortgage into joint names as a Buy To Let..

What kind of equity do your friend have in the property, How much of a lump sum do you have to buy into this? as assume you would have to pay something to the friend..

Theres quite a lot of 'what ifs' to consider..

somethingcorporate

Let_Us_See wrote: »

Blimey, you forgot to add "what if the sky falls down?"

Careful consideration and a written agreement on T & Cs will solve many potential problems.

Which is exactly the kind of thing that most people going into such a casual arrangement tend to forget.

All of them are considerations for ANYONE becoming a landlord and a hundred other really important questions. OP, I suggest you start here.

Going into business with a friend is always fraught with risk, especially if you want to keep them as a friend.

Even if there is a water-tight contract in place, it still won't prevent the emotion in such a situation (between friends) from taking over.

My personal advice for the OP is for your friend to do their own thing and you do your own thing - but that's just my opinion - feel free to ignore it.

TrickyDicky70

StuC75 wrote: »

Is the shared equity referring to your business arrangement, or how the friend bought the property?

Looks like basically looking to remortgage into joint names as a Buy To Let..

What kind of equity do your friend have in the property, How much of a lump sum do you have to buy into this? as assume you would have to pay something to the friend..

Theres quite a lot of 'what ifs' to consider..

The shared equity refers to the prospective business arrangement. The friend, at present, is the sole owner of the property.

I have about £35k. The rationale behind combining our efforts is that it will result in a much lower monthly mortgage repayment, so attaining the 125% rent figure suggested should be comfortably achievable. Also, we are already clued up on the area (I myself lived there in the past) and believe it represents a reasonably sensible step into BTL.

This plan is anything but concrete, I just wanted some feedback from those who know a great deal more than I, so all repsonses so far have been extremely helpful. Many thanks all.

somethingcorporate

I still strongly favour you doing your own thing then you don't have to consult someone else when you want to make a decision.

If you cannot afford it now then wait until you can, being impatient and jumping in headfirst will result in a lot of compromises.