Renting a property to purchase - potential pitfalls

k3lvc

Relative has found their forever home - currently used as AirB&B but development is enforcing the 'no holiday rental' clause so property is on the market.
Relative has a property to sell which was under offer during lockdown but fell through last week - viewings over the weekend and a 2nd viewing tonight so hopefully back on track
Vendor will not accept offer until relatives property is sold despite her placing it with vendors agent to show commitment
Vendor has instructed their agent to find a 6mth tenant and continue with sale process
Given the costs involved what risks are there in relative offering to take up this tenancy whilst progressing with sale of her property and potential purchase of this one ? 

macman

The risk is that presumably the vendor cannot be bound to sell the property to your relly even after she has disposed of her own. She is then stuck with a 6m AST on a property that she is unable to buy. There is risk to both parties though. Either could choose not to proceed, encounter financial difficulties, or even die.

hazyjo

Absolutely right they won't accept an offer until your relative's property is sold. It's usually the way it works. Not always, but most of us wouldn't take someone seriously if they're not proceedable.

Can your relatives afford both rent and presumably a mortgage and bills for their own house for up to 6 months if that's what it takes?

AdrianC

k3lvc said:

Relative has a property to sell which was under offer during lockdown but fell through last week - viewings over the weekend and a 2nd viewing tonight so hopefully back on track
Vendor will not accept offer until relatives property is sold despite her placing it with vendors agent to show commitment

Absolutely normal to be reluctant to accept an offer from a buyer who is not proceedable because the downward chain isn't complete. Even when they do find a buyer, will their downward chain be complete? It could potentially be a year or more before the chain is completed and everybody's ready to start the conveyancing...

Vendor has instructed their agent to find a 6mth tenant and continue with sale process
Given the costs involved what risks are there in relative offering to take up this tenancy whilst progressing with sale of her property and potential purchase of this one ? 

No risk whatsoever, except for their liability for paying the rent on top of their current mortgage, and for paying two lots of council tax for the two properties they're occupying...

k3lvc

Thanks so far - fully understand the vendors issue and wouldn't expect anything else. Finance isn't an issue (other than not enough liquid cash to buy the new one outright) - no mortgage on current property and the rental for 6mths is likely to be the cost of a good holiday which she won't be able to take in current circumstances

MovingForwards

If there is no mortgage on the current property relative owns, why not go for a mortgage on the new property and then sell the old property. Relative would need a deposit etc to buy the new one.

AskAsk

why would she want to rent that house for 6 months?  is it because she thinks that is she rents it, the vendor will eventually sell it to her and no one else?

eddddy

k3lvc said:

Given the costs involved what risks are there in relative offering to take up this tenancy whilst progressing with sale of her property and potential purchase of this one ? 

The risks include...

• The relative signs the 6 month tenancy agreement - then the vendors change their minds about selling, or decide to sell to somebody else

• The relative signs the 6 month tenancy agreement - then later on, searches or survey show up problems meaning your relative doesn't want to buy the new property anymore

• The relative signs the 6 month tenancy agreement - then is unable to sell their current place, or has to accept an offer for much less than they expected (and maybe they can no longer afford the new place).

k3lvc

MovingForwards said:

If there is no mortgage on the current property relative owns, why not go for a mortgage on the new property and then sell the old property. Relative would need a deposit etc to buy the new one.

Too old/not enough monthly income for mortgage

k3lvc

eddddy said:

k3lvc said:

Given the costs involved what risks are there in relative offering to take up this tenancy whilst progressing with sale of her property and potential purchase of this one ? 

The risks include...

• The relative signs the 6 month tenancy agreement - then the vendors change their minds about selling, or decide to sell to somebody else

Good point - understand all based on trust

• The relative signs the 6 month tenancy agreement - then later on, searches or survey show up problems meaning your relative doesn't want to buy the new property anymore

Limited risk - part of an established 'good' apartment block and already had discussions with other trusted residents/committee

• The relative signs the 6 month tenancy agreement - then is unable to sell their current place, or has to accept an offer for much less than they expected (and maybe they can no longer afford the new place).

Current issue is cashflow rather than affordability - 6mths should be enough time to release other assets even if property doesn't sell

Those were the sort of things I was looking for - thanks