Rent To Buy

bobbicee

I'm struggling to sell my house. It's been on the market for nearly two years and we've dropped the price by 100k in that time. Still nothing. The trouble with it seems to be its age and listing. It's 400 years old and grade II listed, meaning there is little scope for buyers to improve to their desire. There are lots of rooms and they can't be knocked into one because of the beams. Last month, my wife got a new job that comes with a rent free house, albeit one that incorporates this fact into her salary. A friend (who is struggling to get a mortgage together - new to the country with little credit history but is a high earner) approached us recently to offer to rent our house with a view to buying in three years time. They want to put down £1000 in escrow (as commitment to purchase, offering to pay a % of the escrow if they can't find a mortgage in that time), pay in rent what our mortgage + council tax would be and then deduct what they've spent from the value at the end of three years. Trouble is they want to fix the value now and we're not 100% sure my wife even wants to be in the new job for that long. The value we could get by renting normally would be 3x what they're offering but we'd have to spend 10k to get the house up to scratch to do that. Plus, our mortgage deal will end in 18months and we'd be paying twice the monthly amount, which our friend is reluctant to match. Rent to buy is new territory for us. Should we bite their hand off or wait for a buyer?

zarf2007

bobbicee wrote: »

I'm struggling to sell my house. It's been on the market for nearly two years and we've dropped the price by 100k in that time. Still nothing. The trouble with it seems to be its age and listing. It's 400 years old and grade II listed, meaning there is little scope for buyers to improve to their desire. There are lots of rooms and they can't be knocked into one because of the beams. Last month, my wife got a new job that comes with a rent free house, albeit one that incorporates this fact into her salary. A friend (who is struggling to get a mortgage together - new to the country with little credit history but is a high earner) approached us recently to offer to rent our house with a view to buying in three years time. They want to put down £1000 in escrow (as commitment to purchase, offering to pay a % of the escrow if they can't find a mortgage in that time), pay in rent what our mortgage + council tax would be and then deduct what they've spent from the value at the end of three years. Trouble is they want to fix the value now and we're not 100% sure my wife even wants to be in the new job for that long. The value we could get by renting normally would be 3x what they're offering but we'd have to spend 10k to get the house up to scratch to do that. Plus, our mortgage deal will end in 18months and we'd be paying twice the monthly amount, which our friend is reluctant to match. Rent to buy is new territory for us. Should we bite their hand off or wait for a buyer?

I'd wait for a new buyer. Your 'friend' seems to have identified the fact that you are in a bind and is exploiting it for their own ends, avoid.

[Deleted User]

This is not a good deal for you.., why are you even considering it? You know at the very least, you will spend a couple of years with an income from your house that is a lot less than the mortgage.

When thinking of this 'deal' don't use the label 'friends'. This is not a deal made by people deserving of the name 'friends'.

Pixie5740

If you do this you'll have all the legal responsibilities of being a landlord in which case you may as well get a tenant in who will pay full market rent and who isn't a friend or family (never let to someone you wouldn't be happy to evict).

If you want to sell them I think you need to be really honest and reassess the asking price of your home. Anything will sell if the price is right.

AnotherJoe

bobbicee wrote: »

I'm struggling to sell my house. It's been on the market for nearly two years and we've dropped the price by 100k in that time. Still nothing.

Then your "price" is fanciful and the house is not worth what you think it is. The fact that you need to spend ten thousand pounds "to get it up to scratch" is perhaps also a clue as to why it's not selling, that's a non trivial sum indicating more than a lick of paint and new wallpaper needed :eek:

I would spend the ten thousand or more to fix it up properly (don't do a bodge job) and maybe you'll get back some of that hundred thousand you dropped the price by? Then I'd sell it or rent it at full price.

Dan-Dan

Post the right move link

theartfullodger

Never rent to friends or family: Only rent to someone you are happy to evict in the full glare of family row, pub argument, local paper & TV coverage.

By all means rent it out, but only to to normal market-rate tenant: And don;t assume you will always make money ...

Mahsroh

Don't also forget that as soon as you rent it out you'll have to notify your lender who will put you on a consent to lease Mortgage which will also certainly have higher interest rates than you're currently paying.

As you're on a fixed deal i'd say you'll struggle to do this any other way, unless you pay the early repayment charges to ditch your fix and go elsewhere for a buy to let. But even then, depending on your LTV, you may struggle to get a deal as good as a residential mortgage, so not sure you'd be able to make this pay.

Then there are income tax implications etc etc. I'd suggest it'd be much better to reduce to the price of your property in an attempt to sell it.

MortgageMamma

I agree with everyone else, this is a bad deal for you your friend is dangling the invisible carrot.

1, 1000 in escrow for a high earner is less than most people pay on a rental deposit + one month in advance + agent vetting fees

2. You will be responsible for all the repairs and everything else that comes with being a landlord at YOUR cost

3. There is a possibility that your friend won't buy in three years time, could disrespect the property and with it being listed that could leave you with fines/trouble

your friend gets

1. a status home that he can brag is listed
2. lower than market value rent and free repairs
3. the freedom to leave the agreement without penalty at any time
4. to buy a listed building significantly under value in 3 years time

In the meantime, this will prevent buyers from making offers as you would have to take it off the market so you are trapped renting the employers accommodation, your wife is trapped in a job and you could have to take legal action to get your original home back.

Its a really bad idea. However, I once rented a grade II listed farmhouse built in 1704. It was slightly tired and dated at the time but there was a fight to rent it and I ended up paying £200 pcm about market value (this was in 2008, the rent was 950 a month). Speak to some reputable letting agents, you could raise money to "do it up" and a deposit for another home and try and look at a let to buy arrangement.

The key here is to involve professionals who will make sure you get it right first time and don't walk into a financial disaster

MM

bobbicee

When we first listed the property for sale, we actually went with the lowest valuation out of three estate agents because we didn't want a fanciful value. We received an offer last summer on our lowered value (80k less than original listing) but the buyer pulled out because of trouble obtaining a mortgage. We remortgaged ourselves recently and we are now on the market for the exact value quoted in that survey, so I feel we are being realistic. Zoopla has us 150k over our current price. Incidentally, the 10k quoted was for re-wiring the whole house up to the standard for a certificate. The finish is old fashioned, yes, but not deteriorating and the feedback has indicated this.

bobbicee

As a new user, I can't post links, but if you enter GU28 9EL into the Rightmove search bar (with 'this postcode only') selected, you'll find us.