How to split rental income

a0349237

My friend and I intend to buy a house. My friend will put 2 k for the deposit and I will put 200 k for the deposit and buying costs. My friend intends to pay mortgage contribution of 0.5 k per month, and I intend to pay mortgage contribution of 1 k per month. We will be benefiting from 1 k rental income per month. 

How do we split the rental income on Month 1?

KatrinaWaves

Homework is complicated these days! 

Anyway if your mortgage is £1500 and your income is £1000 I suggest you both pay £250 into the mortgage account a month! 

oldbikebloke

since you are not married to each other you can split it in any proportion you want, just make sure you declare the same split on your respective tax returns 

Socajam

Unless, it's equal deposits, I would not venture into anything like this.
If you have 200K buy your own rental property and you will save yourself a lot of headache.

[Deleted User]

a0349237 said:

My friend and I intend to buy a house. My friend will put 2 k for the deposit and I will put 200 k for the deposit and buying costs. My friend intends to pay mortgage contribution of 0.5 k per month, and I intend to pay mortgage contribution of 1 k per month. We will be benefiting from 1 k rental income per month. 

How do we split the rental income on Month 1?

I don't really see the purpose of this venture and I certainly don't see the point of doing it jointly.  If you have 200k to invest in property and have done the research to demonstrate that BTL is the best investment vehicle for you why would you want the headache of investing with someone who only has 2k to put in?  Just buy somewhere yourself.

Surely the mortgage payments won't be 1.5k a month.  Usually BTL mortgages are on an interest only basis which helps with cash flow.

JGB1955

If the mortgage is £1,500 per month and the rental income is £1,000 how are you going to make a profit?

Sachs

This is such a comically bad financial arrangement you are entering in to it seems pointless to even try but here goes:

On day 1 you will have contributed £200k capital and your friend £2k and therefore you could expect 99% of the rental income.
Its complicated because you then have a mortgage cost of £1,500 per month but we do not know what the value of the mortgage is, whether it is interest only or whether its a joint and severally liable debt or you are each taking out individual mortgages (if thats even possible). Lets, for arguments sake, say its an interest only mortgage for £600,000 at 3%. Therefore the total contribution to the property is £802k. You have put in £200k and are servicing £400k worth of debt. Your friend has put in £2k and is servicing £200k worth of debt.

Therefore you are due 600/802*100 = 75% of the income.
Your friend is due 202/802*100 = 25% of the income.

The caveat is that i made those numbers up and that even if I hadn't you are risking considerably more than your friend, and it is in fact your capital that is making the whole deal possible. Even in the situation above you should still seek to own more than 75% of the property even if you split the income proportionally. However convincing your friend to pay £500 a month for a £250 a month return might be challenging.

csgohan4

never mix friends and money, how much is friendship worth, as above, your friend is contributing so little to the purchase it will complicate things,  Also it's  making a loss, where's the profit? A business is suppose to have a profit. 

Hasbeen

a0349237 said:

My friend and I intend to buy a house. My friend will put 2 k for the deposit and I will put 200 k for the deposit and buying costs. My friend intends to pay mortgage contribution of 0.5 k per month, and I intend to pay mortgage contribution of 1 k per month. We will be benefiting from 1 k rental income per month. 

How do we split the rental income on Month 1?

Your post makes no sense at all.
What rental income? You are not benefiting from anything?

kazwookie

Don't do it.

What happens when you and your friend fall out, and you will some years down the line.........................

Marvel1

Much easier to do it alone, you are paying £200K and he is only putting in £2K!