Sale and Rent Back

seasite

Hi,

Last year we had put our house on the market (detached bungalow, Torbay/Devon, 2 bedrooms, open plan with sea view and large new conservatory) to release equity for funding our business. Originally we intended selling the house and moving somewhere else, but since we couldn't find a suitable and affordable alternative nearby, we now strongly consider staying!

We are fully aware of the problems associated with "Sale and Rent Back". We learned that apart from private buyers only very few regulated firms are active, and that we will get less money for the house than by a normal sale, but this may still be the best option for us - if we would get a sincere and reasonable offer.

Since, as mentioned, an important reason for selling our house is releasing equity for our business, we can't afford losing too much by the sale. From internet forums we've learned that often 85% are paid on SRB, and sometimes more according to the status of the property. In our case, the property has been completely renovated recently (we invested about £42,000 during the last few years), so no further investments or works are required.

Can anyone recommend interested private buyers or a reputable firm, and do you possibly know what they can and cannot do regarding SRB (e.g. Assured Tenancy with fixed term, option of repurchase at a later point in time...)? Or how could we find such buyers?

We will be ideal tenants and keep everything in good order and condition. As mentioned above, we invested a lot of money in the house and love the outcome very much.

Many thanks!

bobbymotors

honestly, it sounds like a poor idea all round. avoid if you can.

GreatApe

have you tried all other ways of raising business finance before you think of this. Personally I would suggest strongly not to do sale and rent back because at some point you will want to buy a home again and you will have to pay stamp duty and legals all over again.

if a business needed me to sell my main home then I would not consider the business at all especially considering the fact that most businesses fail and fail quite badly.

silvercar

Equity release may be a better bet as you will retain ownership of your home. It may be possible, depending on your age.

Look at one family lifetime mortgages as an example.

GDB2222

seasite wrote: »

Hi,

Last year we had put our house on the market (detached bungalow, Torbay/Devon, 2 bedrooms, open plan with sea view and large new conservatory) to release equity for funding our business. Originally we intended selling the house and moving somewhere else, but since we couldn't find a suitable and affordable alternative nearby, we now strongly consider staying!

We are fully aware of the problems associated with "Sale and Rent Back". We learned that apart from private buyers only very few regulated firms are active, and that we will get less money for the house than by a normal sale, but this may still be the best option for us - if we would get a sincere and reasonable offer.

Since, as mentioned, an important reason for selling our house is releasing equity for our business, we can't afford losing too much by the sale. From internet forums we've learned that often 85% are paid on SRB, and sometimes more according to the status of the property. In our case, the property has been completely renovated recently (we invested about £42,000 during the last few years), so no further investments or works are required.

Can anyone recommend interested private buyers or a reputable firm, and do you possibly know what they can and cannot do regarding SRB (e.g. Assured Tenancy with fixed term, option of repurchase at a later point in time...)? Or how could we find such buyers?

We will be ideal tenants and keep everything in good order and condition. As mentioned above, we invested a lot of money in the house and love the outcome very much.

Many thanks!

Hi, it sounds like a lovely home, but is it suitable as a BTL investment? What would the rental yield be?

seven-day-weekend

I understand too that the 'rent back' is just a normal Assured Shorthold Tenancy, which means that they can give you notice for no reason after the initial fixed term (which may not be more than six months).

If it were me, I would not risk my home. I would try to raise capital some other way.

GDB2222

seven-day-weekend wrote: »

I understand too that the 'rent back' is just a normal Assured Shorthold Tenancy, which means that they can give you notice for no reason after the initial fixed term (which may not be more than six months).

If it were me, I would not risk my home. I would try to raise capital some other way.

So, the SRB firm pays only 85%, and they grant a six months tenancy. After the six months, they end the tenancy and sell the property, keeping the 15% discount, less any expenses. That's a tidy profit if they can keep the punters flocking in.

seasite

GDB2222 wrote: »

Hi, it sounds like a lovely home, but is it suitable as a BTL investment? What would the rental yield be?

Hi, the rent for comparable houses in the area on the market is between £750 and £950, however these may not have sea view.

seasite

seven-day-weekend wrote: »

I understand too that the 'rent back' is just a normal Assured Shorthold Tenancy, which means that they can give you notice for no reason after the initial fixed term (which may not be more than six months).

Hi, We would never accept such an AST! This was the reason why SRB is now regulated by the FCA, and there is now a minimum of 5 years fixed term tenancy.

Herzlos

If you've got enough equity in the house to raise cash by selling it, aren't you better with a remortgage? That way the house is still 100% yours.

GDB2222

seasite wrote: »

Hi, the rent for comparable houses in the area on the market is between £750 and £950, however these may not have sea view.

That's the rent, but it means nothing without knowing the house value - which you didn't mention. BTL investors tend to want a yield of at least 5%. They will most likely be mortgaging the property, and they'll need the income coming in to service their debt. So, if the market rent is say £850 pm, that will only work for an investor if the house value is around £200k or less.

There were some real crooks in the SRB business. So I'm very pleased the FCA is regulating it.