BTL - Would you sell your property to a tenant?

[caelite]

Hey

Looking to gauge thoughts based on what a family member has asked me. He has been in a rental property for just over 6months & has had a change in financial circumstance. It was his intention to buy when this circumstance came through. For various reasons he has become emotionally attached to the rental that he has picked up short term & is considering offering his landlord an offer to buy.

Landlords situation as far as I can grasp is non-local with a small portfolio who bought the property blind (and based on the price it was online for, got a bargain), only major work they have funded is a new boiler to meet gas safety.

Relatives intention is to offer the value the property was previously advertised, plus the value of the boiler fitting & a moderate amount additional (~5% of value) to make the deal worthwhile.

Property value is below threshold of stamp duty. Tenant would be cash buyer. Just looking to gauge general opinions on here as to whether his train of thought would be considered reasonable as I have no experience to advise myself.

Caelite

[BoRED S2upid]

If he bought it at auction the hammer price isn’t what he paid is it. There would have been fees, stamp duty, solicitors fees etc... so I’m not sure his offer is close to where it needs to be even if the landlord wanted to sell which he may not. Probably better to look at similar houses on the street as s starting point and then offer 5 or 10% less for a quick sale.

[anonymous-user]

caelite said:

Hey

Relatives intention is to offer the value the property was previously advertised, plus the value of the boiler fitting & a moderate amount additional (~5% of value) to make the deal worthwhile.

This is unlikely to be enough to make it worthwhile for the owner. Finding somewhere decent for an investment takes lots of time, and there are other fees not reflected in your calc.

I'd start by asking if he is interested in selling, without mentioning any prices. If the owner is open to selling, I think you will find he knows exactly what it is worth (to him). So meeting his expectation would be your starting point for a discussion.

[Mr Pointy]

I'd say no chance at that price. Work out what return the LL is getting on his investment & ask yourself if he can use the cash to get a better return elsewhere. It's unlikley as otherwise he'd be doing it already.

It's said you make the money when you buy & the LL has done this by buying cheap. There's no incentive for him to sell cheap unless his personal circumstances take a dive so to prise it out of his hands you'd probably have to overpay. The best you can do is tell him you'd be interested if he ever wanted to sell.

[markiii]

it might be below the SD threshold for him, but as a second property the landlord will pay at least 3% SD on a property to replace it.

Unless hes lucky and the landlord wants out of BTL I can't see it personally

I wouldn't

[deckster]

Forming an emotional attachment to a pile of bricks and mortar that you've lived in for six months is nuts. If the landlord is willing to sell for a good price then great, but at the end of the day it's just a house. The country's full of them.

[Sarnie]

Your brother needs to ask himself "Why would the LL sell it to me?".

It's been bought as a long term investment, not to flip and make a quick profit, otherwise he would have done that.

An off barely above what you think he paid and/or below market value isn't going to be an attractive business proposition for someone who is doing this for financial gain. On that, a strong offer may force his hand to cash in and buy something else....but a meagre offer for a property recently purchased and tenanted is unlikely to float his boat......especially when he knows he has a tenant who loves the property and unlikely to leave anytime soon

[rfisher]

I sold my BTL to my tenant.

He started at a silly low price and we negotiated up to an acceptable price over a period of a few weeks.

No estate agent fees.

No viewings.

No issue with getting tenants out to sell the property.

No CGT (which was one of the main reasons for selling, as CGT would have become an issue within a few years), and no more fecking phone calls at stupid o'clock from the 'management' agency when a tap started dripping or the patio door got a bit stiff.

What's not to like?

BTL is not where it's at any more - glad I'm out of it.

[troika]

Too much sunk cost for the LL I’m afraid, it’s not just a question of market value. Unless the LL wants to exit the market, no chance.

[dazwalsh]

troika said:

Too much sunk cost for the LL I’m afraid, it’s not just a question of market value. Unless the LL wants to exit the market, no chance.

This, and not just cost as in money, time and graft too. I buy properties in a shocking state of repair and i'm very proud of the finished product, yet from the offers ive had to buy the houses that tenants are in, its always been too low despite being near enough "market value". that and CGT will eat into any gain anyways.

[Gary C]

if you dont know what its worth, get a local estate agent for a value with no intention to list, costs a few quid but easy to setup. Then knock off what you think would make a good deal then take it to the landlord, might say yes, not lost anything so why not.

[red_slr]

Personally, unless you know the LL well I would approach the matter quite carefully.

Could lead to all sorts of fallings out, which in the end probably wont be worth the hassle.

[Welshbeef]

It’s also likely he bought it with a BTL mortgage which comes with fees and Early termination charges.

[chow pan toon]

Normally in here everyone is keen on a cheeky offer. I'd give it a go, worst he can say is no.

[caelite]

Aye cheers for the feedback, obviously more to it than he is considering. The guy has been through a lot in life recently & just wants to settle down for a few years, I think it is more the thought of not moving again which is spurring his thinking rather than the bricks & mortar themselves. I'll feedback to him some of the advice given. As always guys it is appreciated, never know he might get lucky & the LL will need to tighten purse strings on accounts of the new budget.

[lukefreeman]

Can only turn around and say no.

Expect to pay 5% over market value though, to sweeten the deal/offset the 3% stamp duty to buy a replacement.

[NewbishDelight]

caelite said:

Aye cheers for the feedback, obviously more to it than he is considering. The guy has been through a lot in life recently & just wants to settle down for a few years, I think it is more the thought of not moving again which is spurring his thinking rather than the bricks & mortar themselves. I'll feedback to him some of the advice given. As always guys it is appreciated, never know he might get lucky & the LL will need to tighten purse strings on accounts of the new budget.

It's worth a try.

I would very happily sell my flat to its tenant - but I would want market rate plus some, since to replace it I would have to invest in the expense (and as important, the time) to buy somewhere to replace it.

[Gary C]

red_slr said:

Personally, unless you know the LL well I would approach the matter quite carefully.

Could lead to all sorts of fallings out, which in the end probably wont be worth the hassle.

Cant see why anyone should fall out. Ok, the landlord might now think the tenant is looking to move and be preparing to look for a new tenant but lets face it, things are so tilted to the tenants favour, thats not going to really affect things for a good while.

Just float the idea as an off chance, no stress, im not wanting to move anytime soon sort of chat. They might just be looking to offload it, you never know.

My sons partners house was being rented and the tenant wanted to buy, they were looking to sell and it would have been ideal (if it wasnt for the fact that the woman in question was a loony, and the agent was shagging here and it was him that was actually wanting to buy it and using the tenant to play silly buggers in an effort to drive down the price, but thats another story )

[dogz]

You will have to significantly over pay unless the landlord is thinking of selling which he might be if its not in his local catchment area

As has been mentioned he will have sunk cash into the property on various fees (Solicitor, Mortgage, Valuation, stamp duty etc.), he knows the property and what costs it might incur, he has a tenant in who is paying him rent.

Why would he take a low ball offer and have to pay all the fees again when buying another house, plus taking on a whole host of risk incase he ends up buying a lemon plus having to pay fees to unwind a mortgage and solicitors fees to sell

Starting with where he bought and adding on the cost of a boiler is just stupid. You will need to look what the property is worth and offer a reasonable amount

I tend to buy distressed sales which are repos or other similar circumstances - they are often in bad repair once you scratch away. I do them up to a decent standard which in some cases can cost upwards of £15k - £20k. Offering me what I paid plus a small premium when similar houses are going for significantly more would make me think you are trying to take me for a fool

I recently had a tenant ask me if I would sell as they liked the house - I said no and they are still in and have signed up for another 12 months

[untakenname]

OP, what part of the country is the flat located?
I was asked if I wanted to buy the house I was renting this summer but I declined due to falling prices (ones actually selling in my area are now below 2014 prices), my gf really wanted it but was thinking with her heart and not her head.

If the tenant is a first time buyer with no chain then it would be silly to buy before Brexit kicks in, even more so with a flat as Section 24 begins to ramp.