Buying into a Property and Considerations

chrissiehamilton

A friend for 30 years has asked if I would be interested in buying into a property she owns as she needs the money to help complete her next purchase.

It was valued at £400k with a mortgage of £300k. Its currently rented out and she is happy to continue to manage it for the next 5 years at which time we agreed to sell if market conditions are favourable.

She has said that I can have a half share for £50k plus assuming half the mortgage, but as there is a mortgage it would be some form of loan agreement drafted.

I have asked about the lease, charges, sinking fund and contingencies of an early sale

What other things should I/We be weary of here or questions I need to ask?

gettingtheresometime

Do you want to keep this person as a friend?


If so, then don't.

eddddy

chrissiehamilton wrote: »

What other things should I/We be weary of here or questions I need to ask?

Your and your friend's exit strategies. How do you and/or your friend decide when to sell? What if one wants to sell but not the other?

Also, decisions about the property. One person wants a new kitchen and carpets to achieve higher monthly rental, the other doesn't - because they don't have the ready cash. (Presumably you would each have to contribute 50% of the cost.)

chrissiehamilton wrote: »

She has said that I can have a half share for £50k plus assuming half the mortgage, but as there is a mortgage it would be some form of loan agreement drafted.

So I guess that you will want a charge on the property.

Pixie5740

You wouldn't be named on the deeds if you go ahead with this so you won't be the legal owner of the property. I'm not sure from the scenario you describe if you could be a beneficial owner of the property because if you aren't then you won't be entitled to any of the rental income.

maisie_cat

No, just no, I owned a property with somebody, they lived there and the other room was rented out to cover my half of the mortgage.
The lodgers kept moving out because she made their lives miserable, so I told her we needed to sell. She told me it was on the market, I was 200 miles away. When I phoned the estate agent the property wasn't on the market! It took 6 months to sell while I was paying half the mortgage.
When we sold I found out she hadn't paid her half of the mortgage for 8 months.
Never again, even with somebody you've known for 25 years as in my case

davidmcn

If you're merely a lender with a second charge, then bear in mind that the first chargeholder gets the first bite at the cherry if either of you repossesses - any current equity would get eaten into by their arrears / costs etc.

cybervic

Make sure the valuation is accurate, you don't want to pay more than it's worth. Ask to see her account if she's owned it for a while. Ask about future charges/repairs, are you paying her for managing the place?

As Eddy mention above, agreeing in future plan, exit strategy and decision making are very important before you realised you have different mindset on how it should be run.

30 years of friendship is no guarantee for a successful business relationship. Treat it like a real business and get every agreement clarified and writing so that you can minimise conflicts in future.

foxy-stoat

You mean, she wants to borrow £50K cash and for you to pay half the mortgage for her as well?

The only way this is going to work is if you are added to the mortgage, she signs the transfer of equity to you.

Buy premium bonds with your 50K instead, your money will be much saver.