If you were a tenant would you do this

ChirpyChicken

steve866 said:

In answer to your original question - yes I would consider this if I was in your tenants shoes due to lack of other options.

However if I understand correctly you want to:

-charge higher than market rent 
-value the property at above market rates
-exclude yourself from your landlord responsibilities in paying upkeep
-he loses everything put in to date if he moves out prior to paying the full £80k

To me I wouldn’t discuss this as ‘helping him out’ it seems like a business arrangement with good terms for you.

Could he not get a mortgage with you providing a discount as the deposit? Or just generally set it up with a private mortgage with you putting a charge against the property’s 

I would say its good for both parties, its a risk yes for him but the reward is there, carrot and stick
No he couldnt

ChirpyChicken

saajan_12 said:

ChirpyChicken said:

TheJP said:

Emmia said:

TheJP said:

What if the tenant wants to sell up after 5 years, what then? How do you split the equity, fees etc.

Surely if it's effectively a gift, the current landlord would have no interest in the property once it's been transferred. The current tenant (future owner) could sell it, or in the normal course of things it would be inherited by someone when the current tenant/future owner dies

The OP has said the tenant would pay him £80k in monthly 'rent' payments which is about 11 years. What im asking is what if after 5 years the tenant wants to leave the agreement. Does the OP have to sell the house and then figure out what to give the tenant as equity, what if the value in the house has risen considerably will the tenants equity? To me this just sounds like a nightmare.

No and ive figured this out thanks to a posters input and worked out how i am going to do this and set this out
The tenant would as part of the agreement  simply pay an increased rent over the period and then at the end of the period the house would be gifted.
They would gain no equity should they leave in the meantime

To be clear is this increased vs the current amount or vs the market rate? What if in 5 years time, the market rent is £750 ? 

There has always been a ceiling in the area in question and the rent will be fixed at that price for the entire term.

Herzlos

My concern is that whilst it's a good deal for him eventually, in the short term it's a really bad deal for him.

He gets to pay more in rent and is on the hook for maintenance costs, but if he moves out before the end he loses all of it.  For someone who is in a more volatile situation, or not a good long term thinker it's a hard sell.
Same with the (presumably) fixed rent; if it's above market now then it looks like a bad deal even if means it'll be below market for most of the 10 year term. 

Does he want to eventually own it? Can be afford the increased costs and handle the increased management?

Can you transfer ownership to him in increments of something like 25%, with his share of the maintenance being equivalent?

user1977

What are you going to do if there's a repair he can't afford?

monkey-fingers

Herzlos said:

My concern is that whilst it's a good deal for him eventually, in the short term it's a really bad deal for him.

He gets to pay more in rent and is on the hook for maintenance costs, but if he moves out before the end he loses all of it.  For someone who is in a more volatile situation, or not a good long term thinker it's a hard sell.
Same with the (presumably) fixed rent; if it's above market now then it looks like a bad deal even if means it'll be below market for most of the 10 year term. 

Does he want to eventually own it? Can be afford the increased costs and handle the increased management?

Can you transfer ownership to him in increments of something like 25%, with his share of the maintenance being equivalent?

I would suggest going one further - transferring the property over and putting a charge on it.

ChirpyChicken

Herzlos said:

My concern is that whilst it's a good deal for him eventually, in the short term it's a really bad deal for him.

He gets to pay more in rent and is on the hook for maintenance costs, but if he moves out before the end he loses all of it.  For someone who is in a more volatile situation, or not a good long term thinker it's a hard sell.
Same with the (presumably) fixed rent; if it's above market now then it looks like a bad deal even if means it'll be below market for most of the 10 year term. 

Does he want to eventually own it? Can be afford the increased costs and handle the increased management?

Can you transfer ownership to him in increments of something like 25%, with his share of the maintenance being equivalent?

He 100 % wants to own it . I dont see why he cant afford. Yes it has its risks but thats the rub of it
Your last point is worth thinking about 

ChirpyChicken

monkey-fingers said:

Herzlos said:

My concern is that whilst it's a good deal for him eventually, in the short term it's a really bad deal for him.

He gets to pay more in rent and is on the hook for maintenance costs, but if he moves out before the end he loses all of it.  For someone who is in a more volatile situation, or not a good long term thinker it's a hard sell.
Same with the (presumably) fixed rent; if it's above market now then it looks like a bad deal even if means it'll be below market for most of the 10 year term. 

Does he want to eventually own it? Can be afford the increased costs and handle the increased management?

Can you transfer ownership to him in increments of something like 25%, with his share of the maintenance being equivalent?

I would suggest going one further - transferring the property over and putting a charge on it.

Thanks but that isnt a route I would go down

steve866

ChirpyChicken said:

steve866 said:

In answer to your original question - yes I would consider this if I was in your tenants shoes due to lack of other options.

However if I understand correctly you want to:

-charge higher than market rent 
-value the property at above market rates
-exclude yourself from your landlord responsibilities in paying upkeep
-he loses everything put in to date if he moves out prior to paying the full £80k

To me I wouldn’t discuss this as ‘helping him out’ it seems like a business arrangement with good terms for you.

Could he not get a mortgage with you providing a discount as the deposit? Or just generally set it up with a private mortgage with you putting a charge against the property’s 

I would say its good for both parties, its a risk yes for him but the reward is there, carrot and stick
No he couldnt

Personally I’d just keep the situation and a landlord / tenant then gift the house to him if he stays long enough (or agree to do it with a few more years rent for example). You might also feel differently when the time comes. 

motorman99

OP
See you in a year when it all goes wrong…..and it will.
its the worst idea ever.

ChirpyChicken

Thank you everyone for the constructive feedback much appreciated.