Stop wasting your- rent - set up housing Co-operative

mohawk

Average expected rental yield on the private landlord rental market currently is 6%

Therefore purchase price of 2/3 bedroom home in south east at £200 000 rented at 6% gross rental yield is £12000 p.a. (£1000 pm)

100% funds of £200 000 borrowed at 3.5% costs £7000 p.a.

Rental of £12000 p.a. less £7000p.a. leaves a margin of £5000.

Ergo this shows it works & when detailed figures worked out on spreadsheet, it shows if these exact figures plus an annual increase in rent of 3% is maintained each year the purchase price of £200 000 would be paid off in as little as 18 years.

That is an annual average of £8000 being paid off the loan over a 20 year period (just for the sake of simplifying the maths & allowing a bit more leeway anyway)

But of course all the figures change a little each year. Looking backwards there has been a large increase in the capital value of property. But let's ditch that looking ahead and just say the best property will do is increase in line with average inflation of just 4% (it's sure to be higher though)

That means the property will be worth more than double in twenty years (£400 000 and some ) meaning that an average of about £20000 is being accrued each year. In simple terms this illustrates all rent paid could be returned. In practice the co-op will want to build up capital so will not necessarily return all the rent, but it may do. It’s a let’s play it by ear on a year by year basis.

And actually this kind of thing is already in operation in the UK. There is a builder in the North somewhere offering a rent to buy scheme (but not as generous as I intend) and research throws up all sorts of examples that already exist in their different forms.

So perhaps if people could concentrate a bit more on the team work to make this function and spend less effort on being negative and spitefully abusive, something like this could grow like a mushroom and make life better for all those tenants and first times buyers who can’t get mortgages etc.

But I’m not holding my breath.

Which makes me think I might be just forced to do it all by myself with a limited company & me the sole shareholder. That way I can do what I like. So I can then dictate to tenants that they will be forced to accept a significant portion of their rent back as worked out under a set of rules organised entirely by me.

And, I could also force them to join a co-op which I could set up as well, but then that would obviously mean I would not control that co-op, but that wouldn’t matter because that would be in addition to the limited company. And I wouldn’t need to control the co-op either.

So, there you have it.

A really absurd idea that can really, really work but the majority of people are quite unable to grasp.

suelizab

''So perhaps if people could concentrate a bit more on the team work to make this function and spend less effort on being negative and spitefully abusive,''

This isn't team work talk . And there is no team . weird

Running_Horse

Talking about one of my short tempered colleagues, a manager at work recently said "how does he function in the real world?".

This may be the best idea since sliced bread and I have already said go for it, but unless you can curb the insults and tantrums aimed at those who disagree or raise the slightest query, I doubt it will ever get off the ground.

On a moral level, if I had spent several years saving a deposit and suddenly found myself competing against a company buying houses in bulk with the intention of helping people like myself, I might be a little perplexed and angry.

Pixie5740

A gross rentel yield of 6% is ok but probably not worth the hassle unless you're going for capital gains. Capital gains are a gamble as nobody has a crystal ball telling them exactly what's lies in store for the UK's housing market.

Who is going to lend this co-op £200,000 i.e. 100% of the purchase price at a rate of 3.5%? The crowdsurfing fund you mentioned earlier, Landbuyers won't and none of the financial institutions will so where will the money come from?

Out of this 6% gross rental yield will come loan repayments, insurance, maintenance & repairs, income tax to name but a few, so the net yield sounds like it's going to be the square root of f**k all. Will there be any contingency in place to cover losses if a tenant can't/won't pay their rent?

It sounds like you're banking on capital gains so let's suppose you're right (since there's no cast iron guarantee house prices will rise) and a £200,000 property bought today is worth £400,000 in 20 years time. How do you get the money back out? Would you sell the property that's been the tenants home for the last 20 years?

I'd be interested to see the model of this rent-to-buy scheme offered by the builder in the North. The threads we've had on this board about rent-to-buy schemes suggest that the models offered are an absolute rip off.

I understand your desire to help people get on the housing market but how you plan on achieving this doesn't appear to work so yes, it looks like you'll have to go it alone. Then you'll be free to dictate to people until your heart's content.

jjlandlord

mohawk wrote: »

Which makes me think I might be just forced to do it all by myself with a limited company & me the sole shareholder. That way I can do what I like. So I can then dictate to tenants that they will be forced to accept a significant portion of their rent back as worked out under a set of rules organised entirely by me.

mohawk wrote: »

And, I could also force them to join a co-op which I could set up as well, but then that would obviously mean I would not control that co-op, but that wouldn’t matter because that would be in addition to the limited company.

We need a "hall of fame" section to display gems like these ones.
The background could be unicorns pooping rainbows and LSD.

booksurr

mohawk wrote: »

100% funds of £200 000 borrowed at 3.5% costs £7000 p.a.

so where is the 100% coming from - you keep ignoring that aspect

a legal entity be it a co-op or company will struggle to borrow at 3.5%. A real person certainly can, but not 100% of the cost of a property
the banks won't look at you for that sort of rate
peer to peer lending to businesses will be >6%
your crowd funder will only lend 70%

you have also again failed to explain the security demanded by the lender

mohawk wrote: »

Rental of £12000 p.a. less £7000p.a. leaves a margin of £5000.

Ergo this shows it works & when detailed figures worked out on spreadsheet, it shows if these exact figures plus an annual increase in rent of 3% is maintained each year the purchase price of £200 000 would be paid off in as little as 18 years.

That is an annual average of £8000 being paid off the loan over a 20 year period (just for the sake of simplifying the maths & allowing a bit more leeway anyway)

your maths is correct, however 12,000 pa rent is a market rate rent, so your occupants would choose you because they buy into the concept rather than because you offer low rent. Although I agree that you can certainly sell that concept to them so it will not be an issue

mohawk wrote: »

That means the property will be worth more than double in twenty years (£400 000 and some ) meaning that an average of about £20000 is being accrued each year. In simple terms this illustrates all rent paid could be returned.

in simple terms it illustrates that your asset has indeed appreciated but there remains difficulty in accessing cash

so your 2/3 bed house in the SE is occupied by:
a) one family who rent it. They now want their rent back as they are moving out , after 10 years they have paid 120,000 in rent. You have 50,000 in cash from your margin (assuming of course that you have not spent a penny of it on all the myriad of costs associated with your enterprise. You have a 58% (£70,000) shortfall - so:
i) sell up, or
ii) refinance on the basis the LTV will now be well under 100% so the loan should be cheap, or
iii) have a business model where the tenant gets back only a small portion of the rent paid?

b) 2/3 bed house occupied by singles on a house share basis. One person wants to leave after 5 years because they are moving on in life. Obviously 2 people are not going to pay £1,000 pcm rent each but let us say you approach it as a typical HMO LL would and let it at say a premium of 600 pcm each. You will still have a shortfall, but may be much closer to being able to fund it without perpetuating the debt position, and therefore eventually you will indeed by loan free.

mohawk wrote: »

So perhaps if people could concentrate a bit more on the team work to make this function and spend less effort on being negative and spitefully abusive, something like this could grow like a mushroom and make life better for all those tenants and first times buyers who can’t get mortgages etc.

But I’m not holding my breath.

congratulations it appears you have learned from your earlier posts and almost made it to the end of one without descending to insults

mohawk wrote: »

A really absurd idea that can really, really work but the majority of people are quite unable to grasp.

no one doubts your imagination but there are a lot of experienced LL and tenants on these boards who upon reading your high handed posting style concentrate on that rather than your message

the fact you finish with, in essence, "I'll do it my way and S O D the rest of you" suggests someone totally unable to have a 2 way conversation and therefore as the dictator running a social landlord (which is what you will be, albeit not one requiring registration) you won't win popularity contests so your ongoing success will depend only on your ability to fulfil your financial promises because your reputation as a LL will be low

antrobus

mohawk wrote: »

Average expected rental yield on the private landlord rental market currently is 6%

Therefore purchase price of 2/3 bedroom home in south east at £200 000 rented at 6% gross rental yield is £12000 p.a. (£1000 pm)

100% funds of £200 000 borrowed at 3.5% costs £7000 p.a.

Rental of £12000 p.a. less £7000p.a. leaves a margin of £5000.
....

Actually, borrowing £200,000 at 3.5% equates to a repayment of £1,000 a month. So rental=mortgage repayment and you have no spare cash for anything else.

P.S. Getting a 100% mortgage will be hard enough, getting a 100% interest-only mortgage will be a degree or two higher on the impossibility scale.

mohawk wrote: »

...Ergo this shows it works & when detailed figures worked out on spreadsheet, it shows if these exact figures plus an annual increase in rent of 3% is maintained each year the purchase price of £200 000 would be paid off in as little as 18 years.....

Well yes, if you assume that rents increase at a compound rate of x% aand house prices increase at a compound rate of y%, of course it will all work out in the end.

mohawk wrote: »

...Which makes me think I might be just forced to do it all by myself with a limited company & me the sole shareholder. That way I can do what I like. So I can then dictate to tenants that they will be forced to accept a significant portion of their rent back as worked out under a set of rules organised entirely by me.....

Priceless.

Dictatorship is always the last refuge of the pseudo-radical.

mohawk

antrobus ( & others)

It's rather quaint that I'm being accused of bad behaviour as well as talking rubbish, not having my facts right, generally setting up a hopeless scam or whatever & all the rest of it, while all my comments are attempts at fending off all this abuse directed at me and any negative comments I make are all in absolutely direct response to troll behaviour & sarcastic abuse etc.

All that is OK for you trolls, but woe betide me if I respond defensively to such revolting bad behaviour.

A lot of your ill judged comments seem also to be based on either you not reading what I have said or you inventing imaginary suppositions to beat me up with.

One of the latest examples being antrobus here rubbishing me for saying that paying lenders 3.5% interest on a £200 000 loan would cost £1000 a month or £1200 a year when it self evidently would amount to £7000 a year leaving £5000 of the rent to be used to either reduce the loan or to set aside for running expenses.

And then further rubbishing me for mentioning that it might be appropriate to keep rents at whatever the current market level is, possibly a modest average 3% annual increase in rent in line with merely guessed inflation, a low & cautious guess too.

It would be good management to keep rents at the same level as the rest of the market to help make sure there was plenty of cash available to guarantee the smooth running of the co-op and to be able to repay all loans as fast as possible, or expand the whole process - whatever was appropriate at the time.

But with the exception of allowing lower levels of rent to those tenants who needed or preferred that option to building up a lump sum.

But none of you have grasped the simple fact that all I was attempting to do was float the idea only of setting up a housing co-op with the intention of using the wealth accumulated for the benefit of the members who are tenants.

Normally landlord use this profit for themselves and this being a co-op would be owned by all the members who would all be their own landlord.

There are all sorts of details to decide about making this work, but this discussion was supposed to be just about the generalities of how people could become their own landlords and further benefit by moving towards ownership without ever having to have a mortgage or lump sum.

The simple fact is that this is quite possible because it is already being done by others.

And I quoted the Landbay site as an example of how a crowdfunding site inviting people to make small loans in return for an interest rate of 3.5% is up and running and using the loaned money to offer mortgages to buy to let landlords only.

Of course these mortgages have to have a deposit from the buy to let landlord and of course the loans are secured by a mortgage and so on and there are safeguards to the lender.

My co-op crowdfunding site would be doing everything more or less as landbay but NOT passing on the money to lend to private landlords.

The money would be spent entirely by the crowdfunding site, owned by the housing co-op or part of it rather. It is the case that all the loans anyone made would be fully secured by the equity in the property and the appropriate legal arrangements made to organise all the equity to make it available for the exclusive purpose of being available as security for any loans from members of the public.

So, in the case of this co-op, the lenders would have a much better, and much higher degree of security than holding mortgages over properties owned by private landlords, some of whom might be very bad at managing their properties and are very likely to go bust and cause endless expenses & problems.

antrobus

mohawk wrote: »

.....One of the latest examples being antrobus here rubbishing me for saying that paying lenders 3.5% interest on a £200 000 loan would cost £1000 a month or £1200 a year when it self evidently would amount to £7000 a year leaving £5000 of the rent to be used to either reduce the loan or to set aside for running expenses. ....

The MoneySavingsExpert 'Ultimate Mortgage Calculator' says that a £200k mortgage at 3.5% would have a repayment of £1,001 a month.

http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator

mohawk wrote: »

......, but this discussion was supposed to be just about the generalities of how people could become their own landlords and further benefit by moving towards ownership without ever having to have a mortgage or lump sum. ....

mohawk wrote: »

..Of course these mortgages have to have a deposit from the buy to let landlord and of course the loans are secured by a mortgage and so on and there are safeguards to the lender........

If the co-op members can't raise the 'lump sum' but you need to have a 'deposit' to get a mortgage, how are you going to raise the money for the deposit?

mohawk wrote: »

....My co-op crowdfunding site would be doing everything more or less as landbay but NOT passing on the money to lend to private landlords. .......

If you're going to launch your own "co-op crowdfunding site" you're going to need capital for that as well. And get FCA authorisation.

Pixie5740

mohawk wrote: »

But none of you have grasped the simple fact that all I was attempting to do was float the idea only of setting up a housing co-op with the intention of using the wealth accumulated for the benefit of the members who are tenants.

We have grasped WHAT you want to do, it's the HOW that's the problem.