Buying a house in a group

joseph9a

Hi there,

I do not own any property at the moment and it seems as if I will never be in a position to buy. I was thinking today and was wondering this is possible. All of this is hypothetical and I do not know if there are any rules I would need to abide by.

Let's say I found a group of people say 20 people and we all wanted to buy a property for £100,000 in this case lets say it is a holiday home. All people would invest £5,000 each and let's say the property is rented out to guests for 32 weeks of the year and each of the owners gets 1 week a year for their holiday.

Would it be possible to pay an agency to look after the property, and all repairs and cleaning costs etc deducted from the rental fees. And then hopefully at the end of the year a very small profit could be made by each owner.

Say £1,000 profit each and a 1 week holiday. I know it may seem far fetched but if I did know 20 people who had the cash to invest could I technically do this?

I know there is no guarantee that the property will be rented all of the time it is available and let's say it was not rented at all at which point the agencies fees would be divided by 20 amongst the owners.

The main reason I am interested in this is I would like to have an assets which would hold its value.

Also if one of the owners wanted to sell the current owners get first refusal so the other 19 owners could be offered a nineteenth of the 5% up for sale. Let's say of the 19 other owners 10 of them were interested in the extra 5% share they wold all be entitled to buy 0.5% extra each.

Sounds complicated but could it be done?

Thanks

Joe

TBagpuss

You could form a partnership or company to own a property, but i doubt you'd find a holiday cottage in a desirable area for £100K. Also, 20 owners having a week each only leaves 32 weeks a year to rent it out.

even if you can agree on which weeks everyone has, and can rent it out for all the other weeks (both unlikely) you are not going to make £20k profit.

You'd need to pay for things like cleaning and washing bedding etc if you were doing a holiday let, as well as agents fees, advertising etc.

So, techinically, yes you could do it, practically, you'd need to do your research. You'd also bee to get legal advise to draw up agreements about how the shared ownership would work, what happens when someone wants to sell their share, and how you decide who gets the nice summer weeks for their holiday and who gets a wet week in November.Or whether you prioritise the best weeks for renters, and ypu all have the 'slack' weeks for your own holidays.

Senior_Paper_Monitor

.... and the great majority of lenders refuse 'investment clubs' and many of the refuse limited companied - and very few do holiday let properties anyway.

This is complicated commercial finance - forget it.

good_advice

Hello Joseph, can' Really help but i do know of a person that rents out this way = agent fee 30%, VAT 20%, Molly maids in at every change over. Owner has to pay house bills = tv licence, gas and electric, gardner and more...

self employed so have to set bills against tax

landlords need house insurance

Bills when things need replacing or repair

Just some idea's for you to consider.

joseph9a

TBagpuss wrote: »

You could form a partnership or company to own a property, but i doubt you'd find a holiday cottage in a desirable area for £100K. Also, 20 owners having a week each only leaves 32 weeks a year to rent it out.

even if you can agree on which weeks everyone has, and can rent it out for all the other weeks (both unlikely) you are not going to make £20k profit.

You'd need to pay for things like cleaning and washing bedding etc if you were doing a holiday let, as well as agents fees, advertising etc.

So, techinically, yes you could do it, practically, you'd need to do your research. You'd also bee to get legal advise to draw up agreements about how the shared ownership would work, what happens when someone wants to sell their share, and how you decide who gets the nice summer weeks for their holiday and who gets a wet week in November.Or whether you prioritise the best weeks for renters, and ypu all have the 'slack' weeks for your own holidays.

In this hypothetical case I would do as you said peak times would be for renters and off peak for owners. And like a fair system could be put in place such as picking numbers out of a hat or something like guessing the first lottery number the closer you are the higher on the list you are to pick your dates.

Might sound daft but as I say it is hypothetical

Contessa

Sounds a bit like the dreaded timeshare? or holiday bond?

G_M

Frankly, for an investment of £5000 it sounds like a huge financial risk, a lot of hassle, potentialfor endless arguments and...

just not worth it. Stick your £5K into a property investment unit trust -ideally within an ISA wrapper.

lincroft1710

Contessa wrote: »

Sounds a bit like the dreaded timeshare? or holiday bond?

I was thinking exactly the same.

googler

It might be classed as an unregistered 'collective investment scheme' by the successors to the FSA, and hence be illegal.

real1314

Senior_Paper_Monitor wrote: »

.... and the great majority of lenders refuse 'investment clubs' and many of the refuse limited companied - and very few do holiday let properties anyway.

This is complicated commercial finance - forget it.

The OPs hypothetical set up doesn't need a lender to agree to anything. 20 people with £5k investment pays the £100k purchase price.

The rental return is a bit too high though. A standard rental for a £100k property might be £5-6k pa; so the 20 investors have to covers costs - gas checks, letting agents, repairs, flooring replacements; could easily be £1-2k pa. That would leave maybe £4k pa, which would be £800 each from £5k.
But, the value of property would potentially hedge against inflation over the long term and might beat inflation (there's also a chance it might at times lose against inflation).

At a bit of a guess, you'd be looking at £200k for anything with holiday let potential, but you might get 50% better rates but less than full usage (depending on seasonality) but also higher costs.

I've no idea about the regulation about such a scheme, but it's good to see someone thinking about strategies to better themselves / their situation, even if they might prove too difficult to arrange. :cool: