Sale and Rent Back

PasturesNew

Anything that is not "the norm" will most likely lose you money.

Avoid anything that's not a regular route to obtaining money.

Sell the house and move, or borrow money from a low interest/reputable source.... anything else will "cost you/lose you money".

Anything "not the norm" is marketed at "the desperate" and they know they have you over a barrel and, long-term, you are most likely to be disillusioned about how you ended up 10 years down the line.

seasite

GDB2222 wrote: »

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.

We learned that a SRB investor wouldn't be able to mortgage the property, because the regulations don't allow short ASTs. So we try to find a cash buyer who doesn't want a mortgage - just a nice property investment with permanent, immediate rent income (and in this case no initial renovation costs).
Regarding your calculation:
Value: £200k => rent has to be £850
The house value we had calculated, and which our agent confirmed and listed it for
is about £290k. => The rent would need to be about £1,200 then?
But without a mortgage there would be no need to service debt and the rent could be lower.

Herzlos

But then a cash buyer doesn't need to worry about the BTL regulations.

These companies are only in it to make money, so where do you see them getting the money to make it worth while, versus just buying an empty house and putting it on the rental market?

GDB2222

seasite wrote: »

We learned that a SRB investor wouldn't be able to mortgage the property, because the regulations don't allow short ASTs. So we try to find a cash buyer who doesn't want a mortgage - just a nice property investment with permanent, immediate rent income (and in this case no initial renovation costs).
Regarding your calculation:
Value: £200k => rent has to be £850
The house value we had calculated, and which our agent confirmed and listed it for
is about £290k. => The rent would need to be about £1,200 then?
But without a mortgage there would be no need to service debt and the rent could be lower.

What you are really saying is that your house is not suitable as a BTL investment, as the rental yield at market value is only 3.5%. However, don't take my word for it. Get a quote. You may find that they offer big, then gazunder you when it comes to exchanging contracts, though.


"But without a mortgage there would be no need to service debt and the rent could be lower."
Hmm. SRB investors are not known for their charity, I'm afraid.

seasite

GDB2222 wrote: »

What you are really saying is that your house is not suitable as a BTL investment, as the rental yield at market value is only 3.5%.

3.5%? How did you calculate?

theEnd

Can you remortgage or get a business loan.
Otherwise sounds like a really bad idea to me.

GDB2222

seasite wrote: »

3.5%? How did you calculate?

Annual rent = 12 x £850 = 10,200

House value = £290,000

Yield = 10200/290000 = 3.5%

Even if you are prepared to offer a higher rent, I doubt that that will help, because the investor will have to consider what he can get if you move out for any reason.

seasite

GDB2222 wrote: »

Yield = 10200/290000 = 3.5%

I see, I calculated Yield = 1200 × 12/290000 = 5%.

So only regulated cash buyers can offer SRB. The question is how to find such firms/buyers?


We are aware the conditions may be disadvantageous, but we would like to get SRB offers and then decide by ourselves.

GDB2222

seasite wrote: »

I see, I calculated Yield = 1200 × 12/290000 = 5%.

So only regulated cash buyers can offer SRB. The question is how to find such firms/buyers?


We are aware the conditions may be disadvantageous, but we would like to get SRB offers and then decide by ourselves.

Good luck with finding a firm, as I think the FCA has chased most/all of them away, and do be careful. For example:

http://www.nationalpropertybuyers.co.uk/sellrentback.htm

The website claims to be FSA regulated, and yet looking them up on the FCA register at https://register.fca.org.uk you get:

Status: No longer authorised (Reference number: 525465) This is a firm that can no longer provide regulated products and services, but was previously authorised by the PRA and/or FCA


Of course, any firm that still claims to be FSA regulated is fishy, as the FCA took over years ago.

silvercar

I still think equity release, or a secured business loan would be better than risking your home.

A business loan, with you offering a personal guarantee (secured on your home if necessary) would give you money for your business and the security of owning your home.

Or take on a business partner to invest in the business.