Help please complicated issue

charlie.1234

Info invalid

Brock_and_Roll

Lots of issues here I suspect, not least a potential Deprivation of Assets issue - if you buy the place for 80k i.e. massively undervalue this is likely to be spotted should he ever required means tested support e.g. residential care.

Surely, by far the simplest solution would be to sell the property to an investor who would pay the current market price, adjusted for the 11 years low rent issue?

charlie.1234

Thanks for your reply. He has other assets that so that would never be a problem for to pay for care will never be an issue. If we were to sell to an investor we will lose around 25% so say 200k if we buy it then he gets the cash he needs short term and we dont loose money on the property..

charlie.1234

Another way I suspect is for him to gift us the property and we take out a mortgage on the property and give him the money that way?

lottie3000

My husband and I purchased a property below market value off of a relative, we needed to take an insurance policy out incase they became insolvent.

JimmyTheWig

charlie.1234 wrote: »

He has other assets that so that would never be a problem for to pay for care will never be an issue.

Then why the need to raise money from this property?

charlie.1234

I dont think the reasons why are of any importance. The issue here is whether someone will give us a mortgage on a property with tenants that have 11 years left on their tenancy..

Lungboy

Can't you just evict them with an s21?

kingstreet

All kinds of issues here.

No owned residence.

£400 a month rent means mortgage of under £70k.

Lenders unhappy/unwilling to lend on secure tenancy.

I'd say take this to a broker now and see if this is vaguely possible. I have my doubts...

JimmyTheWig

Well, yes, it's up to you if you tell us your reasons or not.
I just thought that seemed like a simpler solution to the problem.

Brock_and_Roll

Alas the OP has deleted the info from the original email, but as a investment banker (boo!) the sums were interesting. I got a spreadsheet out and crunched some numbers.

Assumptions: Rent for 11 years = £450pm, market value of property (without tenant) = £450k. Investors borrowing rate 3.5%.

So hypothetically, if an investor bought the property today for £450k, and assuming for investment simplicity that the shortfall of the rent over the mortgage interest is added to the balance as negative amoritisation, by my calculations, after 11 years the theoretical balance on the loan would be £589k i.e. £139k more than the purchase price.

So if you then consider that for 11 years an investor would have to forgoe the positive yield that he would have got on another BTL investment, the 25% / £200k explained by the OP looks entirely reasonable.

However, the OP will not "lose" this money if the property is sold - it is already lost and was lost the day the £450pm tenancy was agreed.

Even if the OP is able to get a mortgage against the property, in investment & cash terms the OP is not really in any better position after 11 years than would be the case if the property was sold today and the proceeds invested in another investment property.